REPUBLIC OF KAZAKHSTAN L-T FC RATINGS LOWERED TO "BBB-"; OFF WATCH; OUTLOOK STABLE

/Standard & Poor's, London, October 8, 07/ - Standard & Poor's Ratings Services said today it lowered its long-term foreign currency sovereign credit ratings on the Republic of Kazakhstan to 'BBB-' from 'BBB', and its long- and short-term local currency sovereign credit ratings on the Republic to 'BBB/A- 3' from 'BBB+/A-2'. At the same time, the ratings were removed from CreditWatch, where they were placed with negative implications on Oct. 2, 2007. In addition, Standard & Poor's affirmed its 'A-3' short-term foreign currency sovereign credit ratings, and its 'kzAAA' national scale rating, on Kazakhstan, and lowered its transfer and convertibility assessment on the sovereign to 'BBB' from 'BBB+'. The outlook on the Republic's long-term ratings is stable. Due to government ownership, Standard & Poor's has also lowered the counterparty credit ratings on the Development Bank of Kazakhstan (DBK) to 'BBB-' from 'BBB'. At the same time, Standard & Poor's removed the ratings from CreditWatch, where they were placed with negative implications on Oct. 2, 2007. In addition, the 'A-3' short-term foreign and local currency counterparty credit ratings on DBK were affirmed. The outlook is stable. "The rating downgrades reflect funding problems in the Kazakh financial system," said Standard & Poor's credit analyst Luc Marchand. "Since July, falling domestic depositor confidence and difficulties in rolling over maturing international syndicated loans and cross-border interbank deposits have forced Kazakh banks to obtain short-term funding from the National Bank of Kazakhstan (NBK, the central bank) to support their liquidity." To date, this support has totaled about Kazakhstani tenge (KZT) 1.3 trillion, which is equal to roughly three-quarters of the nation's monetary base. As a consequence, NBK's international reserves have fallen by about $5.0 billion to $18.4 billion, domestic interbank deposit rates have risen to 9% from 6%, and domestic credit growth (which had been rising at 50% year-on-year) has sharply decelerated. "Although we expect continued pressure on international reserves as banks roll over less than 100% of their maturing external debt and the NBK remains committed to maintaining confidence in the tenge, we do not expect the National Fund to be used for quasi-fiscal activity," added Mr. Marchand. "We also expect energy prices to be supportive for investment in the productive sectors of the economy. That said, the ratings would come under renewed pressure should the policy response prove inadequate to prevent a broader erosion of public confidence. Such an erosion would deepen the problems with the banks and cause more lasting damage to the real economy." Ratings list To From Republic of Kazakhstan ------------------------------------------------------------------------------- Long-term foreign currency sovereign credit BBB-/ BBB/ Watch ratings on the Republic of Kazakhstan Stable/A-3 Negative/A-3 -------------------------------------------- ------------ ------------------- Short-term local currency sovereign BBB/ Stable BBB+/ Watch credit ratings on the Republic of Kazakhstan /A-3 Negative/A-2 -------------------------------------------- ------------ ------------------- Transfer and convertibility assessment BBB BBB+ on the sovereign -------------------------------------------- ------------ ------------------- Development Bank of Kazakhstan ------------------------------------------------------------------------------- The counterparty credit ratings BBB-/ Stable BBB/ Watch Negative /A-3 /A-3 ------------------------------------------------------------------------------- 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 [2007-10-09]