S&P Raises Kazakhstan's Credit Rating: What This Means for the Country and Investors

The international rating agency S&P Global Ratings has upgraded Kazakhstan’s long-term sovereign rating from BBB− to BBB, maintaining a stable outlook. Kazakhstan had already held a BBB rating prior to 2016, but the agency downgraded it, citing a deterioration in economic growth prospects and a decline in current account receipts.

S&P last affirmed Kazakhstan’s rating in February of this year, and since then has significantly improved its outlook for Kazakhstan’s economy and public finances. The GDP growth forecast for 2026 has been raised from 4.1% to 5.1%, while the projected budget deficit has been lowered from 3.6% to 1.9% of GDP. Further-term outlooks have also improved: for 2027–2029, the agency now expects a deficit of about 1% of GDP, compared with the 1.6–2.4% projected in the February forecast. At the same time, the estimate for public debt at the end of 2026 has been lowered from 27% to 22.6% of GDP.

The forecast for the external balance has changed even more dramatically. In February, S&P projected a current account deficit of 4.4% of GDP in 2026; now, it forecasts a deficit of just 0.1%. This is largely due to a sharp change in oil market conditions: at the beginning of the year, the agency assumed a Brent price of about $60 per barrel for 2026; now, it is $110. However, a decline is expected thereafter—to $80 in 2027 and to $65 in the following two years—which could result, in particular, in a renewed increase in the current account deficit next year to 2.3%, and then to 3.7%.

According to the official forecast, Kazakhstan’s national debt will amount to 46.5 trillion tenge by the end of 2026, of which 39.3 trillion will be government debt. The 2026 budget allocates 4.46 trillion tenge for servicing the government debt.

Studies by the IMF and the U.S. National Bureau of Economic Research (NBER) show that a one-notch upgrade within investment grade results in a reduction in borrowing costs of between 0.1 and 0.45 percentage points.

Coupon rates on bonds already issued are generally fixed and do not change following a rating upgrade. Savings arise only when new debt is issued or existing debt is refinanced. Furthermore, according to data from the Ministry of Finance of the Republic of Kazakhstan, more than 70% of the debt consists of loans raised on the domestic market. Here, yields are much more heavily influenced by inflation and the National Bank’s monetary policy than by a change in a single rating agency’s assessment.

“Indeed, this is a minor change in the credit rating; S&P has simply caught up with the other agencies, which had already assigned a BBB rating. In other words, Kazakhstan’s median sovereign rating has, in essence, remained unchanged. There won’t be significant savings, as the rating will only affect new issuances. Earlier media reports indicated that Kazakhstan would issue up to $2 billion in foreign-currency bonds in 2026. “In other words, with yields falling by 10–30 basis points, the savings in the first year will amount to $2–6 million,” says Freedom Broker analyst Daniyar Orazbayev.

We can expect an upgrade in the ratings of government-related entities as well. According to the National Bank, the public sector’s external debt—as broadly defined, including state-owned companies and banks—totals approximately $25.6 billion. If, following a gradual refinancing, the cost of this debt decreases by 10–30 basis points, the maximum annual savings could amount to approximately $26–77 million.

However, in the early years, the impact will be significantly smaller: based on the schedule
for external debt repayments, it can be roughly estimated at $10–30 million annually.

However, a rating upgrade in this case is not a foregone conclusion, and such a decision depends on the specific business characteristics of each individual company. For example, regarding the national fund “Samruk-Kazyna,” S&P explicitly statedthat it equates its rating with Kazakhstan’s sovereign rating, as it considers the likelihood of extraordinary government support to be virtually certain. However, in June, the national fund announced that it had terminated its relationship with S&P Global Ratings on its own initiative, and S&P withdrew the Fund’s ratings.

One of the first candidates for a change in its rating is the Development Bank of Kazakhstan. S&P currently rates it at BBB− with a positive outlook, and the agency explicitly links the bank’s creditworthiness to the country’s rating. The situation is similar for the state-owned Damu Development Fund: its rating is BBB−, and previous changes to its outlook have followed those of the sovereign rating. Nevertheless, in this case as well, any change would be limited to a movement within the same rating category.

A more significant development could be an upgrade of QazaqGaz’s rating from BB+ to BBB−. Even before Kazakhstan’s rating was upgraded, S&P had included the company on its “rising stars” list — issuers capable of transitioning from the speculative to the investment grade category. The agency also explicitly stated that an upgrade of the sovereign rating is a prerequisite for a further upgrade of QazaqGaz’s rating.

S&P upgraded its outlook for Kazakhstan to “positive” back in August 2025, meaning the market had about a year to price in the likelihood of an upgrade.

IMF studies show that changes in sovereign ratings often lag behind market movements: investors react in advance to changes in fundamentals and rating outlooks. In such cases, the subsequent rating change itself may not lead to a statistically significant additional revaluation of the debt.

For Kazakhstan, the impact of S&P’s latest move is further mitigated by the fact that Moody’s upgraded the country’s rating to Baa1 back in 2024, while Fitch has maintained a BBB rating for nearly 15 years. To some extent, the current upgrade can be viewed as a safeguard: for example, some MSCI indices take into account either the average of the three ratings or the worst of the two.

Finally, the market currently expects, with a relatively high degree of probability, that the Fed will raise interest rates at the next meeting of the Federal Open Market Committee (FOMC). And the cost of most global borrowing is calculated as a function of this rate—and in the case of a rating upgrade, we are not talking about an absolute decrease, but merely a narrowing of the spread between the instrument’s yield and that of U.S. Treasury securities (“Treasuries”). “A standard 25-basis-point rate hike by the Fed could easily offset the effect [of a rating upgrade]. Nevertheless, it is worth noting that, for example, a rise in oil prices—which could also result from a Fed rate hike—simultaneously serves as a positive factor for Kazakhstan’s government debt,” says Daniyar Orazbaev.

This article was AI-translated and verified by a human editor