Fitch Ratings has reaffirmed Kazakhstan’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘BBB’, maintaining a Stable Outlook, as of November 17, 2023. This rating reflects Kazakhstan’s robust fiscal and external balance sheets, which have demonstrated resilience to external shocks, and the financing flexibility provided by accumulated oil revenue savings.
The rating also acknowledges the country’s high dependence on commodities, with crude and oil condensates contributing to 42% of fiscal revenues and 55% of exports, and accounting for 17% of GDP. This dependence exposes the economy to external shocks. The expansion of the Tengiz oil field, which has been delayed until at least the end of 2024, is expected to add 12 mn tons to annual production, a 44% capacity increase.
Geopolitical risks are also present, with up to 80% of Kazakh crude exported through the Russia-transiting Caspian Pipeline Consortium (CPC) pipeline. Despite disruptions in 2022, operations in 2023 have been stable, and heightened disruption is not considered a base case as bilateral relations appear to have stabilised.
The impact of new fiscal rules designed to restrict expenditure growth and limit transfers from the National Fund for the Republic of Kazakhstan (NFRK) to the budget is uncertain. These rules aim to grow NFRK assets to $100 bn by 2030, but their effectiveness is untested and may be challenged in a low oil-price environment or when social policy objectives necessitate increased budget spending.
Despite low public debt levels, at 24.1% of GDP as of the second half of 2023, and a solid external balance sheet, the current account deficit has widened to 4.6% of GDP in the first half of 2023. However, the deficit is expected to moderate as oil production increases.
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