Publication: Monitor Volume: 3 Issue: 170

Eurobond issues totaling up to $500 million are likely to be issued by the Kazakhstani government and two of Kazakhstan’s leading banks by the end of the year. While these issues reflect the deepening of Kazakhstan’s financial system and the government’s progress in reducing inflation, budget strains persist.

The floating of the Kazakhstani government’s second Eurobond issue, worth $250-300 million, was slated to began on September 15, with J.P. Morgan playing the role of lead manager for these five-year notes. According to Finance Ministry officials, 40 percent of these notes are to be sold on U.S. capital markets, while 20 percent are to be sold in Asia. Coming on the heels of the $200 issue floated in December, 1996, Kazakhstan’s most recent official Eurobond issue underscores the progress made in reducing inflation: consumer prices were rising at a 14 percent annual rate at mid-year, well below the 60 percent and 29 percent increases recorded in 1995 and 1996, respectively. This puts Kazakh inflation roughly on par with that in Russia and Ukraine, countries that have also issued Eurobonds this year.

In addition to this issuance of official debt, two of Kazakstan’s largest financial institutions also plan to issue Eurobonds by the end of the year. (Kazakhstani agencies, September 9-10) The National Bank of Kazakhstan (NBK), the country’s largest bank and one that functions as the state bank and is the descendent of the former state savings bank, expects to float a $100 million issue in mid-October, for which the lead manager is to be Lehman Brothers. The U.S. investment bank is currently helping the NBK to obtain an international credit rating from Moody’s, which it hopes will be on par with the government’s BB- rating. Kazkommerzbank, which is one of Kazakhstan’s largest commercial banks and is partly owned by Germany’s Commerz Bank, expects to issue $100 million in Euronotes by the end of the year.

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