Moody’s downgrades Kazakhstan to Baa3

Moody's Investors Service said it downgraded the issuer and senior unsecured ratings of the Government of Kazakhstan to Baa3 from Baa2 and assigned a negative outlook.

The medium-term note program rating was also downgraded to provisional Baa3 from provisional Baa2.

Moody’s said the key drivers of the downgrade are: (a) Kazakhstan's fiscal and economic strength have deteriorated due to the recent structural shift in oil prices; and (b) banking sector risks have increased due to the general slowdown in the economy and the currency depreciation, weakening many banks' solvency metrics, particularly those with a higher exposure to legacy problem loans and foreign currency loans.

The negative outlook reflects ongoing pressure on the banking sector's solvency, which also constrains the growth outlook and poses financial and fiscal risks.

This action closes the review initiated on March 4 when Moody's placed the ratings on review for downgrade.

In addition, Kazakhstan's local-currency bond and deposits country ceilings were lowered to Baa1 from A3, the foreign-currency bond ceiling was lowered to Baa2/P-2 from Baa1/P-2 and the foreign-currency deposit ceiling remains unchanged at Baa3/P-3.

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