Kazakh finance minister sees no Eurobond issue in 2011

Kazakhstan, which is benefiting from high global prices of its commodity exports, has no plans to issue a Eurobond this year and will focus on cutting its budget deficit, the country's finance minister told Reuters. Central Asia's largest economy and oil producer, Kazakhstan expects its gross domestic product (GDP) to grow by 7 percent for a second consecutive year in 2011, continuing its recovery after a modest 1.2 percent expansion at the peak of the financial crisis in 2009.
Robust growth is fuelled by strong prices for its crude oil, industrial metals and wheat exports. "We have revised our Eurobond plans, and now Eurobonds are not on the agenda," Finance Minister Bolat Zhamishev said in an interview on the sidelines of the annual meeting of the European Bank for Reconstruction and Development hosted by Kazakhstan.
"In conditions when there is no objective reason to borrow, we will focus on reducing the budget deficit," he said. "Let's put it this way - within three years we will slash the budget deficit to a level of 1.3 percent of GDP."
Kazakhstan's budget deficit is targeted at 2.9 percent of GDP this year, down from 4.0 percent in 2010. "We steadily cut the deficit, and our policy is to keep state debt at a low level," Zhamishev said. "Because, as we felt during the crisis and as other nations experienced this, this debt accumulates very fast. Then you have to work very hard to cut it to a low level." Kazakhstan's state debt guaranteed by the government currently stands at 10.4 percent of GDP, Zhamishev said. The country's GDP reached almost $150 billion last year.
The Finance Ministry had planned to issue Kazakhstan's first Eurobond in a decade last year, aiming to borrow at least $500 million on international markets. But the plan was scrapped in July last year after the government won approval from the World Bank for $1 billion of budget support. Zhamishev told Reuters on Thursday that Kazakhstan was considering issuing a sovereign sukuk worth at least $500 million. Zhamishev said the first sukuk issue would fix a benchmark. He again declined to give the size and timing of the issue.