AKIPRESS.COM - Moody's Investors Service affirmed the government of Kazakhstan's Baa3 foreign and local currency issuer and foreign currency senior unsecured ratings, respectively, as well as the (P)Baa3 senior unsecured MTN rating, Moody's said Wednesday.
Concurrently, the rating outlook has been revised from negative to stable.
The change in the outlook and affirmation of the Baa3 ratings are underpinned by Moody's assessment that the adjustment of Kazakhstan's economy, public finances and banking system to structurally lower oil prices has significantly advanced, leaving the sovereign's credit metrics consistent with a Baa3 rating. In particular:
1) Kazakhstan's effective policy response to the global oil price shock, driven by countercyclical government spending and increased exchange rate flexibility, has supported the economy and bolsters prospects of future shock absorption capacity;
2) Its very strong fiscal position has only slightly eroded during the oil shock despite higher foreign-currency debt costs and recapitalization of some banks, thereby providing flexibility and ample financial resources to manage potential further contingent liability risks; and
3) Recent government actions to strengthen and recapitalize the banking system help address banks' solvency risks. However, moving forward, still weak asset quality, remaining high deposit dollarization and higher concentration in the banking system signal ongoing contingent liability risk to the sovereign.
Kazakhstan's long-term local currency bond and deposit ceilings remain unchanged at Baa1. The foreign currency long- and short-term bond and deposit ceilings also remain unchanged at Baa2/P-2 and Baa3/P-3, respectively.