Moody’s revises up Kazakhstan’s credit outlook to positive

Aug 16. Reuters. NEW YORK

Moody's revises up Kazakhstan's credit outlook to positiveMoody’s Investors Service revised Kazakhstan’s sovereign credit outlook to positive from stable on Friday, citing improved debt dynamics in the nation’s banking sector.

The credit rating was raised to Baa2, near the lower end of investment grade status.

“The main factor underlying Moody’s assignment of a positive rating outlook is the reduced risk to the sovereign balance sheet from contingent liabilities in the banking sector,” the firm said in a statement.

“The reduced risk to the sovereign arises from the decline in the banking sector’s recapitalization needs following the debt restructurings of a number of Kazakh banks, the sector’s recapitalization and deleveraging since the start of the crisis in 2007,” Moody’s said.

Both Standard & Poor’s and Fitch Ratings have Kazakhstan’s credit rating one notch higher, at BBB-plus with a stable outlook.

Kazakhstan is Central Asia’s largest economy. The International Monetary Fund expects the energy-dominant economy to grow 5.2 percent in 2013. However, the IMF said the country must do more to resolve its large stock of non-performing loans.

Moody’s also cited improvement in Kazakhstan’s external liquidity position, given the national oil fund more than doubled in recent years to $64 billion in July from $30 billion at the end of 2010.

Banking sector liabilities, the firm said, have declined to $8.8 billion in May of this year from a peak of $45.5 billion in October 2007.

The government stepped in to shore up the nation’s banks in the wake of the financial crisis, which laid bare the overextension of credit and the rise in non-performing loan portfolios.

Kazakhstan has one of the lowest public debt ratios in the emerging markets. It plans to issue up to $1 billion in sovereign debt, with the aim of creating a benchmark for corporate borrowers. The deal is expected to come in September of this year.