ASTANA —S&P Global Ratings affirmed Kazakhstan’s long-term sovereign credit rating at ‘BBB-’ and short-term rating at ‘A-3’, maintaining a positive outlook on the long-term ratings on Feb. 20. The transfer and convertibility assessment remains at ‘BBB’, while the national scale rating was affirmed at ‘kzAAA’. According to the S&P press release, the positive outlook reflects expectations that Kazakhstan will continue fiscal consolidation over the next two to three years while preserving substantial liquid asset buffers. Stricter fiscal rules and efforts to broaden the non-oil tax base are expected to underpin this process.
S&P Global Ratings. Photo credit: Shutterstock
Outlook and potential rating changes
S&P noted it could revise the outlook to stable if authorities reverse measures aimed at improving tax collection and diversifying revenues, or if new budget rules fail to prevent a further decline in government liquid assets. A downgrade could also follow a sharp and prolonged drop in oil revenues, including if the Caspian Pipeline Consortium (CPC) pipeline becomes unavailable for an extended period, leading to a meaningful rise in net government debt. Weaker external liquidity, driven by persistent current account deficits, could also pressure the ratings.
As for the upside scenario, S&P noted it could raise the ratings if fiscal buffers strengthen through sustained expenditure control and support for non-oil revenues, provided the government’s interest burden stabilizes at moderate levels.
Fiscal consolidation and oil risks
S&P said the affirmation reflects its view that Kazakhstan’s new medium-term budget may help curb persistent fiscal deficits and allow renewed asset accumulation in the National Fund of Kazakhstan (NFK), despite a weaker outlook for oil production due to disruptions in early 2026.
The new tax code, approved in July 2025, introduced higher value-added and personal income taxes, streamlined tax administration, and tighter expenditure controls. These measures are expected to narrow the fiscal deficit to 1.5%–2.5% of gross domestic product (GDP) over the next three years, from 3.7% in 2025. Government liquid assets, primarily NFK external investments, are projected to remain above 20% of GDP in the medium term, helping contain net debt at 7%–8% of GDP by 2028–2029.
Kazakhstan’s hydrocarbon sector continues to account for nearly 20% of GDP, more than 30% of government revenue, and over half of exports. Security risks remain elevated, as around 80% of oil exports flow through Russian infrastructure, notably the CPC pipeline. Drone attacks on CPC facilities in February and November 2025 underscored these vulnerabilities. Still, S&P expects oil output to decline only marginally, by about 4%, in 2026, as damaged facilities were restored relatively quickly. Further disruptions, in its base case, would be short-lived.
Alternative routes, including the Baku-Tbilisi-Ceyhan pipeline along the Middle Corridor and the Kazakhstan-China oil pipeline (KCP), provide diversification, but S&P cautioned they are “unlikely to absorb more than 20% of the country’s exports,” and would involve “higher costs and logistical challenges, as well as substantial additional infrastructure investment.”
At the same time, S&P noted that “relations with Russia remain important for Kazakhstan,” given trade links and the shared border. Imports from Russia now account for about 29% of total imports, down from over 40% before the war in Ukraine, while exports to Russia make up roughly 10% of total exports.
Kazakhstan remains a member of the Eurasian Economic Union and the Collective Security Treaty Organization. However, S&P emphasized that the country “has affirmed its policy of neutrality,” reiterating its commitment to territorial integrity, including that of Ukraine. The agency added: “We view the immediate risk of secondary sanctions as relatively low.”
Economic growth, inflation, and external position
Economic growth is projected to slow from an estimated 6.5% in 2025 to about 4% in 2026–2028, reflecting lower oil output, tighter credit conditions, and higher taxes. However, growth is expected to remain at or above 4% in the medium term.
Inflation remains a persistent challenge. S&P predicts headline inflation to stay elevated through 2026 and possibly 2027 before easing by 2028–2029, supported by tight monetary policy, narrower deficits, and slower consumer lending growth. High inflation and interest rates have pushed the government’s interest-to-revenue ratio above 10% over 2025–2028, compared with 5% in 2019.
The agency forecasts that lower spending growth and broader taxation will reduce the fiscal deficit to an average of 2.3% of GDP over 2026–2029, down from 3.7% in 2025. However, lower oil prices, assumed at $60 per barrel in 2026 and $65 in 2027–2029, are expected to weigh on fiscal performance.
Kazakhstan’s liquid assets are projected to stabilize at 20%–21% of GDP over the next four years. The NFK’s foreign assets reached $63.9 billion in 2025, supported by strong investment income. Meanwhile, gross foreign currency reserves climbed to $65.4 billion by the end of 2025, largely due to favorable gold prices. About 72% of reserves are held in gold, exposing the external position to valuation swings if prices decline. Despite wider current account deficits, projected at 4.4% of GDP in 2026, S&P expects gross external financing needs to remain below 100% of current account receipts and reserves.
Structural reforms and investment plans
S&P noted that Kazakhstan continues to pursue governance and administrative reforms under President Kassym-Jomart Tokayev, including tighter coordination between the government and the National Bank of Kazakhstan (NBK) and broader digitalization efforts.
The government is implementing a large investment program to diversify the economy beyond hydrocarbons, focusing on processing raw materials and on infrastructure development. Investment is expected to remain high at around 30% of GDP over the next few years.
Kazakhstan also plans to construct several nuclear power plants to address long-term electricity demand. The first plant, to be built by Russia’s Rosatom, is expected to be completed in 2035–2036, while a second facility is likely to be constructed by China National Nuclear Corp. Each station is estimated to cost $14 billion–$15 billion.
Banking sector and monetary policy
S&P views Kazakhstan’s banking sector as resilient, citing adequate capital buffers, solid liquidity, and a high share of core customer deposits. Strengthened regulatory oversight and macroprudential measures are expected to slow consumer lending growth from the 18%–20% observed in 2025.
In October 2025, the NBK raised its policy rate by 150 basis points to 18% in response to inflationary pressures. S&P expects the tenge to gradually weaken after recent appreciation, particularly if interest rates begin to decline toward the end of 2026.
Overall, S&P said substantial fiscal buffers, a strong net external creditor position, and ongoing reforms support Kazakhstan’s sovereign ratings. At the same time, vulnerabilities stem from oil dependence, geopolitical risks linked to export routes, and elevated inflation and debt-servicing costs.
