Fitch downgrades Kazakhstan, bonds

Fitch Ratings said it downgraded Kazakhstan's long-term foreign currency issuer default rating to BBB from BBB+ and local currency issuer default rating to BBB from A-.

The outlooks are stable.

The issue rating on Kazakhstan's senior unsecured foreign currency bonds was also downgraded to BBB from BBB+.

The country ceiling was revised to BBB+ from A- and the short-term foreign-currency issuer default rating affirmed at F2.

Off-balance sheet spending, in response to low oil prices, has resulted in Fitch's broader measure of the budget deficit widening sharply to 5% of GDP in 2015, compared with a surplus of 3.5% over the previous five years, as the government funded infrastructure investment out of the NFRK (National Oil Fund) and supported troubled state-owned enterprises.

Fitch said it expects the budget deficit to narrow to 4.2% of GDP in 2016, above the BBB median of 2.6%, largely due to lower planned off-balance sheet spending. Downside risks arise from state support for banks as well as state-owned enterprises.

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