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Gold/Mining/Energy : Steppe Gold (SPE:V) -- Ignore unavailable to you. Want to Upgrade?

To: brian krause who wrote (596)	1/31/1998 10:37:00 PM
From: John Menzies	Read Replies (2) \| Respond to of 1248

**KAZAKH TX RATING INCREASED TO BB NEW YORK, Jan. 27 /PRNewswire/ -- Kazakhstan long-term foreign currency rating is upgraded to 'BB' from 'BB-' by Fitch IBCA. The rating applies to senior unsecured sovereign debt issues. In addition, Fitch IBCA affirms Kazakhstan's short-term foreign currency rating at 'B' and assigns a long-term local currency rating of 'BBB-'. Kazakhstan has experienced similar problems to the other former Soviet republics in moving to a market economy. Output fell by some 40 per cent in the early 1990s and the currency lost most of its value. But gdp has now grown for a second year, perhaps by more than 2 per cent in 1997. Oil production rose by 12 per cent last year and natural gas by 24 per cent. This raises confidence that, absent a collapse of world energy prices, there will be a significant rise in export receipts by 2001 as more pipeline capacity becomes available. Construction of other pipelines and the development of the possibly huge oil reserves under the Caspian Sea should ensure continuing growth of export receipts over the following ten years. Kazakhstanis' confidence in their currency, the tenge, is at last improving. Inflation had been brought down to just over 11 per cent by December 1997, as against an official projection at the beginning of the year of 17-1/2 per cent. The exchange rate has been stabilized and inflation should continue to fall. People are showing greater willingness to hold tenge banknotes and bank deposits. The banking system remains small but it is being put on to a sounder footing: over 100 banks have been closed during the last three years and those remaining are due to meet Basle requirements by 2000. The securities market is undeveloped and may be unready for the worthy but ambitious Chilean-style pension scheme being launched in 1998. Like neighboring transition economies, Kazakhstan has not found it easy to collect taxes, but collections did improve in the second half of last year. All central government and pension fund arrears have now been cleared. In addition, central government tax-offset arrangements have been terminated and those at local government level significantly reduced. Nonetheless, tax receipts were still under 12 per cent of gdp in 1997, and the budget deficit would have exceeded 7 per cent of gdp were it not for substantial privatization receipts. The government, under the control of a strong president, is following a serious reform program. All except a handful of the largest enterprises are now privatized, though sales of the remaining state enterprises are being slowed. Yet many of the people have yet to see much benefit from the move to a market economy as the performance of much of the economy, including agriculture, remains poor. There is still a large stock of inter-enterprise arrears and, while in many cases there may be no realistic prospect of payment, bankruptcy procedures are proving slow. Terminally sick firms need to be closed and more new businesses created. That said, the country's natural resources are large in relation to its population and the government has encouraged foreign investors to come in and help revitalize and develop the extraction industries. Foreign direct investment per capita has been the highest in the CIS. Although Kazakhstan's external debt has been growing, it remains low relative to gdp and to export receipts. If exports grow as expected, servicing the current level of debt should not present a problem, despite the lack of impact of reform on much of the economy.