Kazakhs plan $1B in Eurobonds to help plug budget gap

January 29. Universal Newswires

Kazakhs plan $1B in Eurobonds to help plug budget gapKazakhstan plans to issue $1 billion of sovereign Eurobonds by end-June to finance the 2013 national budget deficit, Finance Minister Bolat Zhamishev said on Tuesday.

Zhamishev told a cabinet meeting now is probably the best moment to make the move because international interest rates are at record lows.

The government reckons that 150 billion tenge ($996 million) of bonds will help plug the fiscal gap and establish a benchmark for Kazakh firms that aim to raise cash later this year.

The bonds will have a five-year maturity term.

“Taking into account low interest rates [abroad] and the country’s stable macroeconomic situation, we consider it possible to launch sovereign Eurobonds in the first half of 2013 to finance the budget deficit and set a benchmark for Kazakh issuers,” the Reuters news agency quoted Zhamishev as saying.

The Eurobond issue will raise Kazakhstan’s sovereign debt to $5.8 billion, or a shade under one-quarter of the government’s total borrowings.

Kazakhstan’s budgetary gap was estimated to be $6.5 billion in late 2012, with an increase of an additional $1.35 billion to $7.85 billion, or 3.1 percent of gross domestic product (GDP).

Zhamishev said international rates are at a historic low due to Europe’s debt woes coupled with fears of a second wave of the global financial crisis. He said Kazakhstan should take the opportunity to borrow cheaply on foreign markets by offering the bonds that will be attractive to investors who are interested in stable economies.

Fitch ratings agency has given Kazakhstan a BBB+ long-term foreign currency issuer rating with a stable outlook, indicating the country is a good bet for investors.

Central Asia’s largest economy is powering along with growth in gross domestic product of 5 percent, with a mainstay of support from its massive hydrocarbons industry whose output is mainly sold abroad.

The country last issued Eurobonds between 1996 and 2000 and managed to pay them off in 2007, just ahead of the global financial crunch. Astana has fluctuated over issuing Eurobonds in recent years, scrapping plans in 2010 for a launch in favor of Islamic bond sale.