Previous Quarterly Editions
Expropriation Risk: 57 58 58 54 ▼Political Violence Risk:48 48 48 48 ►Terrorism Risk:34 34 34 32 ►Exchange Transfer and Trade Sanction Risk: 55 55 55 55 ►Sovereign Default Risk:56 55 56 56 ►
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Protest intensity to date* 2022 2023 Medium MediumUnrest risk in 2024**Cost of living: HighAnti-austerity: Medium
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Kazakhstan’s gross external debt stood at US$161 billion as of April 2023, up by 0.6% from January and an equivalent of approximately 70% of GDP. Private sector debt, estimated at US$130.7 billion, accounts for the bulk of the current debt load. Public debt amounts to US$15.7 billion and so does the total debt of banks and government-controlled entities. Government-guaranteed external debt is a modest US$2.4 billion.
Loans from non-residents represent 75.4% of Kazakhstan’s overall external liabilities, while debt securities held by non-resident investors account for 9.2%. In terms of maturity, almost 90% of the debt is repayable after one year, which, on the one hand, minimizes the risk of a near- or medium-term liquidity crisis but, on the other, makes later repayments highly contingent on eventual swings in global macroeconomic conditions.
In early 2023, the Higher Auditors’ Chamber highlighted a sustained negative trend in the growth of debt repayments as a share of government revenue, to reach 30% in 2023. In the third and fourth quarters of 2023, total repayments are expected to be US$23 billion, compared with a US$25.3 billion forecast for the entire year 2024.
Overall, Kazakhstan’s debt situation remains manageable in the short and medium terms, but it is not without risk in the longer term, especially to the extent that many debt-laden large corporations in the private sector are de factor under state control. This is somewhat mitigated by the fact that a sizeable part of private-sector debt is represented by foreign direct investments with long exit timelines. The largest source of default risk remains eventual political instability on a scale greater than in January 2022, when the country was rocked by unprecedented but still short-lived civil unrest.
The unrest of January 2022 saw President Kassym-Jomart Tokayev seize the reins of power from his predecessor, Nursultan Nazarbayev, who, in a mostly ceremonial role, continued to control large chunks of the Kazakh economy.
In the aftermath of the unrest, the government seized extensive assets from figures linked to the Nazarbayev family, including the former president’s nephew, and forced members of the elite to contribute large sums of money to an ostensibly charitable fund. More such expropriations of assets from Nazarbayev allies are likely.
The government continues to maintain that foreign investors will not be affected by these internal developments — and the president has made several visits to Europe to court new investors, most recently to Germany in September. In March 2023, the Kazakh Ministry of Ecology lodged a US$5.1 billion environmental lawsuit against North Caspian Operating Company, the foreign-controlled operator of the giant Kashagan oilfield. In June, a local court largely threw it out.
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With inflation having a serious impact on socioeconomic stability, the government remains extremely concerned about the possibility of further popular unrest.
To pre-empt the risk of destabilization, the authorities are providing extensive support to the economy and households, and the security services are actively pursuing opposition figures. While the suppression of civil society may mitigate some risk of unrest, it also makes the incidence and nature of popular anger far more unpredictable and chaotic. As a result, any local grievance or political scandal has the potential to trigger mass protests.
The low turnout in the legislative elections, held in March 2023, seemed to suggest that the overwhelming mood among the population was one of apathy; however, given the events of January 2022, the government cannot depend on apathy to protect it from unrest.
Following the January 2022 unrest, the government claimed that “foreign terrorists” were involved in stoking the violence seen in the city of Almaty. While there is a strong chance that foreign nationals were recruited to participate in those events, no evidence suggests that these figures were members of radical extremist groups, such as Islamic State or Al-Qaida, nor that their intervention in January was motivated by Islamist ideology.
While the Kazakh security services will remain vigilant to any threat of Islamic extremism, any incidents of radicalization are likely to be rare and isolated.
The Kazakh tenge is ostensibly in free float and typically moves with the price of oil and other key currencies, particularly the U.S. dollar and the Russian ruble. Despite the price of Brent crude increasing by approximately US$20 a barrel, to almost US$95 a barrel, between mid-June and late September, the tenge has weakened, instead. This is largely a consequence of increased demand for foreign currency to pay for growing imports.
In August 2023, the government suspended the mandatory sale of 30% of foreign currency earnings by exporters through 2024; however, were the tenge to weaken further significantly, this measure could be reinstated ahead of schedule.
With the onset of Russia’s invasion of Ukraine in February 2022, Kazakhstan and other neighbors of Russia have been subject to greater scrutiny from Western governments seeking evidence of sanctions violations. With Kazakhstan’s deep economic ties and long land border with Russia, individual Kazakh companies could possibly be involved in sanctions-busting, creating the risk of limited sanctions against Kazakh targets.
The government continues to insist that it will not allow Russia to circumvent sanctions via Kazakh territory or using Kazakh-based intermediaries. President Tokayev reiterated this message on his official visit to Germany in September 2023.
The Kazakh economy has gone through several dislocations in recent years, including the end of the commodity super cycle (2014 – 2015), a banking crisis (2015 – 2017), the COVID-19 pandemic (2020 – 2021) and the still-ongoing dislocation around the Russian war in Ukraine.
Kazakhstan’s gross international reserves have declined from US$36.8 billion in January to US$33.6 in August. They are composed of gold (58%) and a basket of freely convertible foreign currencies (42%). The Kazakh central bank is aiming to reduce the share of gold to about 50% by the end of 2023, following a decline from as much as 68% in early 2022.
Kazakhstan also has access to ample foreign currency reserves accumulated in its National Fund, which is financed by taxes paid by the oil and gas industry. In August 2023, these reserves stood at nearly US$60 billion, up from US$55.7 billion in January. The fund is regularly tapped to cover budget deficits, although a presidential decree issued in September restricted conditions for allocation of monies from it.
Despite continued macroeconomic headwinds, the risk of sovereign default remains low. In March 2023, Standards & Poor’s upgraded Kazakhstan’s macroeconomic outlook from “negative” to “stable” while maintaining its sovereign credit rating at BBB–. Two months later, Fitch reaffirmed its stable outlook with a BBB– long-term rating. Similarly, in July 2023, Moody’s reaffirmed its 2021 Baa2 rating with a stable outlook.
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