S&P Affirms Kazakhstan’s Credit Rating with Stable Outlook Amid Fiscal Pressures

By Nathan Abbington

Cover Image Attribute: The skyline of Astana, Kazakhstan / Source: Canva

On February 22, S&P Global Ratings affirmed Kazakhstan’s long-term sovereign credit rating at 'BBB-' and its short-term rating at 'A-3', maintaining a stable outlook despite persistent fiscal challenges. The rating agency’s decision to maintain Kazakhstan’s credit rating comes at a time when the nation faces significant fiscal pressures. 
According to the S&P, Kazakhstan’s general government deficit widened to 4.3% of GDP in 2024, surpassing the official estimate of 2.7%. This gap stems from S&P’s methodology, which excludes transfers from the National Fund of the Republic of Kazakhstan (NFRK)—the country’s sovereign wealth fund based on oil & gas exports—when calculating revenues. In 2024, weaker oil prices, widespread tax exemptions, and suboptimal budgetary forecasting led to revenue shortfalls, prompting the government to rely heavily on NFRK transfers.

“To compensate for tax-revenue shortfalls, the National Fund of Kazakhstan provided one-time exceptional transfers to the government, channeled through dividends from Samruk-Kazyna [a separate sovereign wealth fund which oversees state-owned assets and investments]. This was in addition to the guaranteed and targeted transfers in the budget,” S&P noted in its report.

Despite these fiscal strains, S&P remains optimistic about Kazakhstan’s trajectory. The stable outlook hinges on expectations that planned governance and economic reforms, coupled with the country’s substantial asset buffers, will mitigate the risks posed by prolonged fiscal deficits and rising government interest costs. Kazakhstan’s strong fiscal and external balance sheets—bolstered by NFRK assets—provide a critical cushion against external shocks, such as commodity price volatility or geopolitical disruptions.

As far as Kazakhstan’s economy is concerned, it is forecasted to grow by 4.9% in 2025, up slightly from 2024, mainly driven by the hydrocarbon sector. This industry remains a cornerstone of the economy, contributing nearly 20% of GDP, over 30% of general government revenue, and more than 50% of exports. While this reliance fuels growth, it also exposes Kazakhstan to significant risks, particularly given the volatility of oil prices and geopolitical tensions affecting its primary export route, the Caspian Pipeline Consortium (CPC).

“Fluctuating oil prices continue to pose significant risks to fiscal stability, a concern compounded by the geopolitical complexities surrounding Kazakhstan’s primary oil export route through the CPC,” S&P emphasized.

The CPC, which transports most of Kazakhstan’s oil exports through Russia to global markets, has faced disruptions in recent years due to technical issues and geopolitical frictions. This export route is crucial for Kazakhstan's economy, as it provides access to global markets for its oil. Any escalation in these tensions could undermine investor confidence and hinder economic growth, posing a downside risk to S&P’s stable outlook.

A key factor in S&P’s assessment is Kazakhstan’s commitment to reducing its dependence on NFRK transfers. The government has outlined plans to introduce stricter fiscal rules starting in 2026, including additional limits on using NFRK funds. These measures aim to address high spending needs and weak revenue collection, which have strained the budget in recent years.

“Kazakhstan’s fiscal path over the medium term will hinge on how effectively fiscal rules are implemented,” S&P stated. Successful execution of these reforms could enhance fiscal discipline and reduce vulnerability to oil price swings and strengthen the country’s credit profile over time, instilling hope for a more stable economic future.

The NFRK remains a vital asset valued at approximately $60 billion as of late 2024. However, its role as a budgetary backstop has raised concerns about long-term sustainability, notably as withdrawals have outpaced contributions in recent years. The planned reforms signal a shift toward more conservative fiscal management, which S&P views as essential to maintaining a stable outlook.

The ripple effects of S&P’s decision are already visible in Kazakhstan’s financial sector. Halyk Bank, one of the country’s largest lenders, recently saw its long-term issuer credit rating upgraded by S&P to 'BBB-/A-3' from 'BB+/B', aligning it with the sovereign rating. This upgrade reflects the bank’s solid liquidity, stable deposit base (representing about one-third of Kazakhstan’s market share), and effective risk management.

Umut Shayakhmetova, CEO of Halyk Bank, hailed the upgrade as a milestone. “The new rating is a nod to the market’s trust in Halyk Bank, making it the first bank in Kazakhstan to achieve an investment-grade rating from all three major credit rating agencies,” she said.

While the stable outlook is encouraging, S&P has cautioned that certain risks may lead to a downgrade. A significant escalation in geopolitical tensions—particularly those affecting the CPC or broader relations with neighboring Russia—could disrupt oil exports and erode investor confidence. Similarly, failure to implement effective fiscal reforms or a prolonged decline in oil prices could exacerbate fiscal deficits and weaken Kazakhstan’s creditworthiness.

The rating agency also noted the need for improved budgetary forecasting and revenue collection. Addressing these structural weaknesses will be critical to ensuring that Kazakhstan can sustain its current rating over the long term.

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