Kazakhstan May Sell Euro Debt as New Benchmark for Companies

  • Finance minister says legislation on sukuk being completed
  • Government plans to sell stakes in more than 200 companies

Kazakhstan is looking at widening its debt offerings and plans to sell shares in more than 200 companies to cut its role in the economy by half as it seeks to attract foreign investment to stimulate growth hit by falling oil prices and a currency crisis.

The government may sell debt in euros and will consider various maturities as guidelines for corporate issuers, Finance Minister Bakhyt Sultanov said in an interview in London.

“We will continue to diversify and create a full curve,” Sultanov said on Wednesday. “We are completing legislation to issue sovereign sukuk and we will look at euros,” he said, referring to Islamic bonds but declining to elaborate on the time of a possible sale.

The central Asian nation, which sold a record $4 billion of bonds in July in 10-year and 30-year notes, plans to cut the state’s role in the economy by selling stakes in companies over the next two to three years. President Nursultan Nazarbayev who returned for a fifth term after a landslide win in April, met investors in the U.K. and France this week.

Kazakhstan is seeking to attract investment and sell assets as it faces what Nazarbayev called a “real crisis” after oil prices fell by half and the tenge plunged against the dollar in an August free-float. Daniyar Akishev was named central bank governor on Monday to replace Kairat Kelimbetov, who cut the national currency loose under the pressure of devaluations in Russia and China, Kazakhstan’s neighbors and main trading partners.

‘Needs Time’

The tenge “needs time to find its balance,” Sultanov said, declining to comment on its fair value or whether another devaluation is possible. Kelimbetov devalued the currency twice in his two-year tenure and spent 6 percent of reserves attempting to stabilize it after shifting to a free float.

The currency, which lost more than a third of its value in the past three months, slumped as much as 5.3 percent to 303.70 against the dollar on Thursday. The tenge pared declines to trade 4 percent weaker at 299.5 as of 10:33 p.m. in Almaty. It’s the world’s second-worst performer this year after Zambia’s kwacha. The yield on Kazakh dollar bonds due in 2024 climbed six basis points to 4.57 percent.

The biggest oil producer in the former Soviet Union after Russia, Kazakhstan is facing a 3 percent budget deficit this year, with economic growth set to slow to 1.3 percent from an average of 5.5 percent since 2007, according to a Bloomberg survey. Sultanov expects the fiscal gap to narrow to 1.6 percent next year and about 1 percent by 2020.

Smaller Role

The government wants to cut its role in the economy to 30 percent from about 70 percent over the next 18 months, Sultanov said. It’s drafted a list of 60 major companies and about 170 smaller entities it will offer to both domestic and international investors.

Kazakhstan’s sovereign wealth fund Samruk-Kazyna wants to stage five initial public offerings in 2017-2019, Deputy Chief Executive Officer Dauren Erdebay said in an interview in London on Tuesday. The fund plans to sell stakes of no less than 25 percent in companies including KazMunaiGaz National Co., uranium producer Kazatomprom and railway monopoly Kazakhstan Temir Zholy. It’s also considering selling stakes in telephone monopoly Kazakhtelecom and Air Astana.

The government hasn’t yet made a decision on selling its 40 percent stake in miner Eurasian Resources Group following a recent restructuring, Sultanov said.

Separately, in December Kazakhstan plans to auction 200 deposits of gold and non-ferrous metals for exploration to domestic and international investors, Minister of Investment and Development Asset Issekeshev said in an interview in London on Wednesday.

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