S&P has affirmed Kazakhstan's credit rating but warns of potential risks.
The analytical center Halyk Finance commented on the conclusion of the international rating agency S&P Global Ratings, which confirmed Kazakhstan's sovereign rating at BBB- with a stable outlook, as reported by inbusiness.kz.
Despite ongoing fiscal pressures and rising costs of servicing public debt, the agency's decision is justified by the relatively high expected economic growth in 2025 (4.9%) and the resilience of international reserves.
The S&P rating could be upgraded in the future if the country witnesses structural reforms that stimulate non-oil economic growth, as well as a sustainable increase in non-oil tax revenues and stabilization of net debt. The main risks that could worsen the outlook, according to S&P, include continued use of expansionary fiscal policy and falling oil prices, which could exacerbate the budget deficit, reduce liquid assets, and increase interest expenses on public debt servicing. Additionally, prolonged disruptions in the operations of the Caspian Pipeline Consortium (CPC) will inevitably lead to a decrease in oil exports, which could also negatively impact the outlook.
The agency reiterated that, despite efforts to diversify, the country's high dependence on the raw materials sector—accounting for 20% of GDP, over 30% of budget revenues, and more than half of export earnings—continues to pose significant vulnerability for Kazakhstan's assets. Furthermore, the primary resilience of fiscal and external balances was established during the high commodity prices prior to 2014. Consequently, external liquid assets are expected to exceed external debt in the coming years.
According to the agency, budgetary pressure persists due to weak revenue collection while maintaining high government expenditures. Therefore, withdrawals of direct and indirect transfers from the National Fund (NF) will continue to cover the budget deficit. If the planned additional restrictions on the use of NF assets are not implemented in 2026, net public debt could reach 12% of GDP compared to nearly zero levels in 2022. While domestic borrowing in tenge to finance the budget deficit contributes to the development of the capital market, servicing costs for this debt are rising, expected to reach an average of 10% of budget revenues between 2025-2028.
According to S&P Global Ratings, efforts to increase tax revenues should help reduce the budget deficit—in this regard, a new Tax Code is being prepared, which will likely include an increase in VAT, a reduction in the VAT threshold, differentiation of corporate income tax rates depending on the economic sector, and the digitalization of tax collections. Additionally, plans are underway to strengthen budgetary rules for withdrawals from the NF in 2026, and possibly, restrictions on withdrawals will apply not only to guaranteed but also to targeted transfers.
This year, S&P Global Ratings expects economic growth of 4.9%—higher than other international institutions (International Monetary Fund – 4.6%, World Bank – 4.7%) and closer to the more optimistic assessments of Kazakh experts. The main driver of growth will be an increase in oil production due to the launch of the future expansion project at the Tengiz field in the second half of the year. Our forecast is more optimistic at 5.3% by the end of 2025, based on additional growth sources, including the continued implementation of large infrastructure projects, growth in the manufacturing sector driven by raw materials, high levels of budget spending, and transfers from the National Fund.
In the medium term, by 2026, growth is expected to slow significantly to 3.6%, the agency notes, influenced by S&P analysts' expectations of a rapid reduction in government spending, which will, in turn, affect domestic demand and investments.
The agency believes that monetary policy continues to tighten as the National Bank reduces its involvement in government subsidized financing programs and successfully combats inflation. Meanwhile, annual inflation, which reached 8.6% by the end of 2025, still represents a relatively high figure, driven by rising utility tariffs, increasing government expenditures, and a sharp depreciation of the tenge. However, S&P expects the tenge to stabilize in 2025 after last year's depreciation due to a strong US dollar and a weakening Russian ruble.
Thus, S&P once again confirmed Kazakhstan's sovereign rating at BBB- with a stable outlook, primarily supported by accumulated international reserves that mitigate risks from external shocks and budgetary imbalances. At the same time, the economy's high dependence on the oil sector continues to pose significant risks for export revenues in the event of disruptions in CPC operations or falling oil prices. Challenges remain in the budget system, where high government expenditures coincide with weak tax collection, leading to increased withdrawals from the NF. To improve the rating in the future, structural reforms aimed at diversifying the economy and growing the non-oil sector must be implemented in the country. Additionally, tax administration should be improved, and current budgetary rules should be strengthened to ensure parliamentary oversight not only of guaranteed transfers from the NF but also of targeted ones.