Kazakhstan’s debt focus turns domestic as bond buyback an option

NEW YORK. KAZINFORM Kazakhstan will increasingly look to cover the budget deficit by raising capital at home as it faces a more protracted downturn and a slower recovery, its finance minister said.

The government may opt against borrowing another $1 billion from the World Bank in 2017 after tapping the same amount from the lender in the second half of this year, Bakhyt Sultanov said in an interview on Wednesday in the capital, Astana. It’s already absorbed a $1 billion loan from the Asian Development Bank in the first four months of 2016 and plans to borrow as much as 400 billion tenge ($1.2 billion) on the domestic market this year, according to the finance minister.

“There’s always the option of buying back bonds of the Republic of Kazakhstan -- considering that the cost of servicing debt has grown,” Sultanov said. “But markets are now behaving adequately in relation to Kazakh risks.”

The second-largest energy producer in the former Soviet Union has responded to the crash in oil prices by devaluing the tenge as its public finances swung into deficit. Kazakhstan’s sovereign credit grade was downgraded three times in three months, with Fitch Ratings in April forecasting that the budget will stay in the red in 2016 after five years of surpluses before 2015.

The central Asian nation sold a record $4 billion of bonds last July in 10-year and 30-year notes, coming back to the international market after raising $2.5 billion the previous October. The yield on Kazakh dollar bonds due in 2024 fell three basis points to 4.23 percent on Wednesday, compared with this year’s high of 5.05 percent in January, Bloomberg reports.
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