On September 16, Standard and Poor’s (S&P) lowered its long-term foreign-currency-issuer credit rating for Kazakhstan to B plus from BB minus and its long-term local currency rating from BB plus to BB minus. The agency explained the downgrade by reference to the slowdown in growth of the global economy, the weakness of world commodity prices and the severity of the financial crisis in Russia–Kazakhstan’s key trading partner–combined with lackluster privatization results and with lower levels of foreign direct investment in Kazakhstan itself. Even though S&P revised Kazakhstan’s outlook from “negative” to “stable” thanks to the country’s overall macroeconomic stability, the agency expressed concern about the country’s rising budget deficit (Standard and Poor’s Credit Wire, September 16).
Kazakhstani economists called the downgrade unjustified. The National Bank is preparing a response to the agency’s decision. Most Kazakhstani economists blamed the world crisis, rather than any internal economic policy mistakes, for lower budget revenues and the stall in blue chip privatization. They cited Kazakhstan’s monetary stability (including gold and hard currency reserves worth around US$2 billion), the stability of the tenge and the fact that inflation is expected to fall to 8 percent this year from last year’s 11.2 percent. Grigory Marchenko, head of Deutsche Bank Securities Kazakhstan, blamed the international media and investment community for a lack of “objective economic information on Kazakhstan” (Reuters, September 18).
S&P’s downgrade comes only a few days after several promising developments for the country’s budget. On the revenue side, the government signed on September 14 a number of major contracts with various Japanese companies and U.S. Phillips Petroleum (see the Monitor, September 15). On September 17, Saudi Arabia’s Central Asia Investment Company announced its intention to invest US$25 million in Kazakhstan (Russian agencies, September 17). On the expenditure side, the Finance Ministry declared its intention to cut budget spending this year by 60 billion tenge (US$750 million), instead of a 45 billion tenge reduction announced in August (Kazakhstanskaya pravda [Almaty], September 11). — SC
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