REPUBLIC OF KAZAKHSTAN AND GOVT SUBS ON WATCH NEG PENDING EXTERNAL FINANCING RISK ASSESSMENT

/Standard & Poor's, London, October 2, 07/ - Standard & Poor's Ratings Services said today it placed the Republic of Kazakhstan's 'BBB/A-3' sovereign foreign currency ratings and 'BBB+/A-2' sovereign local currency ratings on CreditWatch with negative implications. "The CreditWatch placement follows growing concern about the more adverse international financial environment, which affects Kazakhstan through the very substantial external financing needs of the domestic banking system," said Standard & Poor's credit analyst Luc Marchand. Net external debt of the financial system rose from 15% of current account receipts at year-end 2003 to a projected 58% at year-end 2007, financing an unprecedented domestic credit boom. "Tighter liquidity conditions will contribute to an expected significant slowdown of credit growth, reducing the overall speed at which the Kazakh economy expands and potentially compromising asset quality in the future," added Mr. Marchand. As the repricing of risk in international financial markets persists and intensifies, Kazakhstan's banks are among the most vulnerable institutions in Eastern Europe and the CIS. To the extent that banking institutions' refinancing risks rise, this will affect sovereign creditworthiness through the eventual budgetary realization of contingent liabilities and the further decline in foreign exchange reserves. Standard & Poor's will request and analyze additional information from the Kazakh authorities to complete its assessment of the refinancing and fiscal risks. Due to their tight relationships with the Kazakh government, which are a key supporting factor in their respective ratings, Standard & Poor's has also placed the ratings of the following Kazakh-based institutions on CreditWatch with negative implications: Development Bank of Kazakhstan ('BBB/Watch Neg/A-3'); Kazpost (JSC) (BB+/Watch Neg/-); Kazakh Agrarian Credit Corp. (BBB-/Watch Neg/A-3); and Mortgage Guarantee Fund of Kazakhstan (JSC) (BB/Watch Neg/-). Standard & Poor's expects to resolve all CreditWatch actions by Oct. 9, 2007. Given the government's strong balance-sheet position, an adjustment in the long-term ratings is unlikely to exceed one notch. Primary Credit Analyst: Luc Marchand, London, (44) 20-7176-7111; luc_marchand@standardandpoors.com Secondary Credit Analysts: Ben Faulks, London, (44) 20-7176-7108; ben_faulks@standardandpoors.com Moritz Kraemer, Frankfurt, (49) 69-33-99-9249; moritz_kraemer@standardandpoors.com Additional Contact: Sovereign Ratings; SovereignLondon@standardandpoors.com [2007-10-03]