Kazakhstan Achieves Highest-Ever Moody’s Rating: Baa1 with Stable Outlook

ASTANA, KAZAKHSTAN / ACCESSWIRE / September 10, 2024 / On September 9, the international rating agency Moody's upgraded the Kazakh government's long-term local and foreign currency issuer ratings to Baa1 from Baa2 and revised the outlook to stable from positive.

According to Moody's report, the upgrade is driven by its assessment that ongoing improvements to Kazakhstan's institutional and policy framework, along with sustained progress in economic diversification away from hydrocarbons, have enhanced and will continue to enhance the country's resilience to external shocks. These developments strengthen Kazakhstan's credit profile, aligning it with peers at the Baa1 level.

"Given the continued commitment to economic and institutional reforms, we expect these improvements to be sustained, further enhancing credit resilience," Moody's stated in its release.

The rating agency noted that the stable outlook reflects balanced risks. On the upside, ongoing institutional and economic reforms may increase Kazakhstan's attractiveness as an investment destination and accelerate economic diversification beyond current expectations. This would, in turn, strengthen the country's credit profile further by increasing economic growth potential and diversifying growth drivers.

Following constitutional and electoral reforms over 2022-23 that reduced presidential power, broadened political representation and improved civic engagement, the government continued to push through reforms to improve transparency and governance while anti-corruption efforts persist. Advancement on efforts to address social issues that had arisen during the January 2022 unrest - such as improving education access and broadening gasification - also speaks to greater accountability.

"We expect ongoing reforms to enhance transparency and governance," Moody's noted.

On the downside, significant deterioration in regional geopolitics and the potential for secondary sanctions remain key risks.

The re-emergence of domestic political risks, which could negatively impact the government's institutional effectiveness or reform agenda, or a resurgence of social unrest, which could deter foreign investment and harm long-term economic prospects, would likely exert downward pressure on the rating.

Kazakhstan's local and foreign currency country ceilings were also raised to A2 and A3 from A3 and Baa1, respectively. The two-notch gap between the local currency ceiling and the sovereign rating reflects the economy's exposure to a key revenue source and the relatively large domestic footprint of the government through its holding companies, balanced against the country's stable external position due to its net creditor status and increasingly predictable and transparent policies.

Moody's also noted the one-notch gap between the foreign currency ceiling and the local currency ceiling, attributing it to Kazakhstan's commitment to flexible exchange rates and open capital accounts. The country's large pool of foreign assets further reduces the risk of transfer and convertibility restrictions.

Developments in the transportation and logistics sector continue to be key drivers of growth and diversification, with rapid growth in cargo transit activity across the Trans-Caspian International Trade Route.

Meanwhile, the government is advancing efforts to improve the business climate and attract investments. In its National Investment Policy, the government has outlined several measures aimed at fostering a favorable ecosystem, including tax and non-tax benefits, reducing bureaucratic barriers, and revising outdated legislation. A National Digital Investment Platform, managed by the Investment Committee within the Ministry of Foreign Affairs, has also been created and is expected to launch by the end of the year. This platform will help investors identify challenges and expedite administrative processes related to their investments.

Moody's expects Kazakhstan's economic and diversification prospects to remain strong, particularly in comparison to similarly-rated hydrocarbon producers. If ongoing institutional and economic reforms are sustained, the resulting improvements in the business environment will further strengthen Kazakhstan's economic competitiveness.

Media Details
Company Name : Ministry of Foreign Affairs of Kazakhstan
Mail: press@mfa.kz
City & Country: Astana, Kazakhstan
Website: https://www.gov.kz/memleket/entities/mfa?lang=en

SOURCE: Ministry of Foreign Affairs of Kazakhstan



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