Kazakhstan Upgraded at Fitch to Tie Russia on Foreign Assets

Kazakhstan’s sovereign rating was upgraded one step to BBB at Fitch Ratings as energy exports boosted the central Asian country’s assets denominated in foreign currencies.

Kazakhstan, the second-largest oil producer in the former Soviet Union, had its long-term foreign-currency rating raised from BBB-, with a positive outlook, the assessor said today in a statement. That’s the second-lowest investment grade and equals the rating of neighboring Russia, the world’s largest energy exporter.

“Kazakhstan’s sovereign balance sheet has strengthened, with sovereign net foreign assets affording a growing cushion against revenue shocks, and underpinning the positive outlook,” Charles Seville, a director at Fitch, said in the statement. The country’s budget surplus will be 6 percent to 7 percent of economic output in 2011-13, while the economy will grow 6 percent annually over the period, Fitch said.

Oil producers stand to benefit as prices may remain above $100 a barrel next year. The Kazakh government has used “conservative” forecasts in its budget, which will be in surplus next year with oil at $80 a barrel, Fitch said.

The tenge rose 0.1 percent to 147.89 per dollar, the strongest level since Oct. 28.

Oil Revenue

Net foreign assets may rise to 49 percent of gross domestic product by the end of 2013, from 37 percent at the end of last year, the ratings service said.

“We remain optimistic on Kazakhstan in the coming years,” Julia Tsepliaeva, chief economist for Russia and CIS at BNP Paribas in Moscow, said in an e-mailed note. “Unlike Russia, which drastically increased the government’s expenditure appetite, Kazakhstan channels a bigger part of its oil revenue to the National Fund.”

The fund may grow $10 billion to $15 billion annually in the medium term, while “steady improvements” in the Kazakh banking system “should make the positive story sustainable in general,” she said.

The upgrade follows Standard & Poor’s decision on Nov. 9 to boost Kazakhstan’s foreign-currency debt rating to BBB+, the third-lowest investment grade, pushing it ahead of Russia. S&P said the rating had a stable outlook.

Kazakhstan’s “growth outlook and sovereign balance sheet outlook effectively outweigh risks emanating from the troubled financial sector, which continues to be a rating weakness,” Fitch said.

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