#1October 2020 Strictly Private and Confidential REPUBLIC OF KAZAKHSTAN Investor Presentation#2Disclaimer IMPORTANT: You must read the following before continuing. The following applies to this document, the oral presentation of the information in this document by the Republic of Kazakhstan("Kazakhstan"), represented by the Ministry of Finance of the Republic of Kazakhstan acting upon the authorisation of the Government of the Republic of Kazakhstan, or any person on behalf of Kazakhstan, and any question-and-answer session that follows the oral presentation (collectively, the "Information"). In accessing the Information, you agree to be bound by the following terms and conditions. The Information may not be reproduced, redistributed, published or passed on to any other person, directly or indirectly, in whole or in part, for any purpose. This document may not be removed from the premises. If this document has been received in error it must be returned immediately to Kazakhstan. 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Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Securities have been subject to a product approval process, which has determined that such Securities are: (i) compatible with an end target market of investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Target Market Assessment"). For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Securities.#31 Key Credit Highlights Effective decision-making and institutional depth showcased by rapid implementation of supportive measures to limit the impact of COVID-19 Solid growth track record supported by structural reforms to encourage economic diversification and improve the domestic investment environment GAZAQSTAN Substantial accumulation of government financial assets driven by prudent fiscal policy and careful stewardship of the country's rich natural resource base Robust external balance sheet, fiscal buffers and low debt underpin macroeconmic resilience and enable the government to sustain its longer-term development goals Commitment to implementation of reforms to strengthen the banking sector, uncover problems and bolster the regulatory and supervisory regime#4Credit Strength Recognised by Credit Rating Agencies Kazakhstan is one of the very few countries globally that has maintained a positive rating outlook, notwithstanding the impact of the twin oil price and COVID-19 shocks, against the wave of sovereign downgrades and negative outlooks since early 2020, this highlights the country's fundamental credit strengths and economic resilience. Kazakhstan's rating history Baa1/BBB+ Baa2/BBB Baa3/BBB- Ba1/BB+ Ba2/BB Ba3/BB- B1/B+ 1996 1997 1998 1999 2000 2001 2002 2003 Moody's 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 S&P Fitch Moody's assigned Kazakhstan a positive outlook Aug 2019 2018 2019 2020 Selected highlights Moody's "Kazakhstan's credit profile is supported by a very low level of public debt, very high debt affordability, and sizeable fiscal reserves held in foreign-currency assets, which provide a significant buffer against external shocks such as the coronavirus outbreak" Moody's Investor Services - August 20, 2020 S&P "The government's strong balance sheet, built primarily on the budgetary surpluses of the latest I period of high commodity prices that ended in late 2014 and accumulated in the National Fund of the Republic of Kazakhstan (NFRK), support our ratings on Kazakhstan." Standard & Poor's - September 4, 2020 Fitch "Kazakhstan's 'BBB' IDRS balance strong fiscal and external balance sheets underpinned by accumulated oil fiscal revenues [..]. Public debt remains low and external and fiscal buffers robust despite the oil price and coronavirus shocks." Fitch Ratings - August 21, 2020 Source: Fitch Ratings, Moody's Investor Services, S&P 2#5Table of Contents 1. COVID-19 Response 2. Broad Reform Momentum 3. Economic Growth & External Finances 4. Prudent Fiscal Performance 5. Banking Sector, Monetary and Exchange Rate Policies Appendix 3 5 8 13 19 22#6DAY BLA 1. COVID-19 Response#7COVID-19 Response Measures The government's supportive measures to limit the impact of the crisis showcase the effectiveness of decision-making as well as demonstrate the resilience of the economy. Government has been swift and effective in responding to the crisis March 13th First cases of COVID-19 identified in Kazakhstan. All public events suspended. March 23rd KZT4.4tn (US$10bn) anti-crisis package announced, excluding tax reliefs and local support measures. April 29th June 15th March 11th WHO characterizes COVID-19 as a pandemic March 16th-31st State of emergency declared. Kazakhstan went into strict lockdown, closing the borders and suspending domestic travel. Up to 70% of public and private sector employees were transferred to remote work, with the exception of life support enterprises, security, law and order, and mass media. Schools and universities switched to online learning. First social cash payments in the amount of KZT 42,500 (c. US$100) per person assigned to 4.3mn citizens, in connection with the loss of income during the lockdown. April 20th Three infection hospitals were built in the three largest cities. May 11th - 25th Additional grace period on principal amount and interest at least for 90 days for SMEs affected by the pandemic situation from Jun 16 till Sep 15 2020. End of the state of emergency on 11 May and gradual lifting of lockdown measures across the country, including re-opening of public transportation, shops, restaurants etc. July 5th August 17th - 31st Gradual lifting of lockdown measures, including re- opening of public places on working days. The second lockdown introduced across the whole country after spike in daily cases of COVID. Lockdown measures are less severe than the ones during March-May. The Spread of the Virus has been Contained (COVID-19 daily cases) 12,000 10,000 8,000 6,000 4,000 2,000 0 13-Mar 13-Apr 13-May 13-Jun 13-Jul 13-Aug 13-Sep 13-Oct Source: WHO, Public Sources, Government of Kazakhstan 3 The Government is Well Positioned to Contain The Crisis Kazakhstan entered the crisis in a strong position, with low government debt reflecting its strong track record of fiscal prudence and good macroeconomic fundamentals. It has more fiscal space and is better positioned to withstand the global shocks than most of its peers ° The government and NBK have taken proactive and well-targeted measures to mitigate the impact of the shocks on the local economy. Measures announced in April include a KZT 5.9tn fiscal package and programmes of preferential lending to SMEs, excluding temporary prudential regulation relief to support business lending, easing banks' capital and liquidity, postponement of loan repayments for SMEs and general public and households During the second revision the government redrafted its 2020 Budget by increasing oil price assumption from $20/barrel to $40/barrel. For the medium term (2021-2025), a more conservative oil price at $ 35 per barrel was taken.#8COVID Response measures Kazakhstan has unveiled a wide set of measures to curb the impact of the coronavirus. These measures were proactive and well-targeted. Fiscal Measures A temporary VAT reduction for agricultural and food products Zero custom duties on essential imports Business owners exempted from property tax and land tax until December 31st 2020 Self-employed individuals exempted from personal income tax until December 31st 2020 Oil refineries exempted from excise tax on exported gasoline and diesel fuel until December 31st 2020 SMEs allowed to defer all taxes and other obligatory payments until June 1st 2020 The deadline for tax declaration submission was postponed to September 30th 2020 The penalty accrual on unfulfilled tax obligations was ceased until August 15th 2020 Monetary and Economic Measures Employment Roadmap program is expected to help find jobs for over 250,000 people: KZT1tn allocated to support employment NBK in cooperation with the Agency for Regulation and Development of Financial Markets initiated a program of concessional lending to support SMEs' working capital, the amount will reach KZT 800bn The Government made amendments to the existing "Economy of Simple Things" lending support program by increasing the financing up to KZT1tn Farmers got access to loans with the total amount of KZT70bn at 5% via the "Ken Dala" program and KZT170bn at 6% via the "Economy of Simple Things" program available through National Holding Kazagro. In addition, farmers were able to finance their operations through forward contracts (under their future harvest). Also, diesel and other fuel types were under off-take for the next sowing season Under the state program "Nurly Zher", additional support measures in the amount of KZT 390 bn were taken to stimulate the construction and purchase of affordable housing Business entities received access to low-interest loans under the rescue package Measures to Ensure Financial Stability The Agency for Regulation and Development of the Financial Market implemented measures to ensure the financial stability of the banking sector, and reduce the debt burden of the population and businesses: B Temporary credit burden relief for borrowers A 90-day credit payment deferral for citizens and SMEs Countercylical regulatory measures Support of banks' capital and liquidity in order to maintain lending to the economy Proactive and Forward-looking supervisory approach based on AQR and stress-testing results Emphasize improvement of processes and policies and formulate Recovery and Resolution Plans under different scenarios Source: National Bank of Kazakhstan, Ministry of National Economy 4#9DAY BLA 2. Broad Reform Momentum#10Key Historic and Recent Milestones Recent decades have seen a systematic approach to the expansion of government capabilities and development efforts. 5 Jan 2015 Kazakhstan becomes a member of Eurasian Economic Union May 2015 Adoption of Nation plan Strategy 2050 "100 concrete steps" Aug 2015 National currency tenge shifted to free- floating exchange rate regime Kazakhstan switched to inflation targeting regime 2018 Astana International Financial Centre established Completed merger of Kazkommerzbank and Halyk Bank Kazatom prom sold 15% of company's shares through IPO New Tax Code adopted Kazakhstan chaired the UN Security Council for the first time 2020 As part of COVID-19 anti-crisis measures, government approved a support package worth US$13.5bn (8% of GDP) The President, in his State of the Nation Address, announced significant upcoming reforms in public administration c.$1bn IPO of Kaspi.kz, largest fintech IPO in EMEA in 2020 Dec 1991 Nursultan Nov 1997 Nazarbayev elected as the First President of the Republic of Kazakhstan May 1997 Concept of reforming the pension system was adopted NCS PSA agreement signed between Oct 2008 Establishment of JSC Samruk- Kazyna international consortium Kazakhstan and to later discover Kashagan oil field FPSA agreement signed between Kazakhstan and international consortium to operate the second largest oil producing field Karachaganak Dec 2012 Adoption of Development Oct 1997 Kazakhstan-2030 Development | Strategy adopted Apr 1993 JV Tengizchevroil Aug 2000 Establishment of the National Fund of the Republic of Kazakhstan (NFRK) 2012 Establishment of Problem Loans Fund Jul 2015 Kazakhstan becomes a member of WTO ("TCO") is established between Kazakhstan and international consortium to operate Tengiz (largest oil production in Kazakhstan) and Korolevskoye oil fields Nov 1999 Kazakhstan Deposit Insurance Fund established Jan 2010 Kazakhstan enters into customs union with Russia and Belarus Apr 2015 Adoption of Infrastructure development Programme Nurly Zhol for 2015-2019 2017 Kazakhstan hosted EXPO- 2017 2019 The first President Nursultan Nazarbayev announced his resignation Kassym-Jomart Tokayev, previously Chairman of the Senate, is elected President of the Republic of Kazakhstan Completed Asset Quality Review of top 14 banks#11Recent Reforms Kazakhstan has been implementing a wide range of reforms to enhance the local business environment, incentivise private sector investment and strengthen institutions. Monetary policy, banking and financial market development Establishment of an independent regulator (Agency for Regulation and Development of the Financial Market) to ensure an appropriate level of protection of the rights and legitimate interests of consumers of financial services (2019) NBK started publishing data on conversions and transfers of the National Fund on a monthly basis to ensure greater transparency (2020) A joint Action Plan for the inclusion of government securities in international indices was developed (2020) NBK coordinated the volumes of purchases and sales of foreign currency by companies in the quasi-public sector in order to minimize the impact on the foreign exchange market (2020) Implementation of the Delivery versus Payment system for NBK notes and government bonds to improve international settlement line between the Central Securities Depository and Clearstream (August 2020) A special collegial body in the NBK - Monetary Policy Committee - will be created to make decisions on the base rate to improve the implementation of monetary policy(starting work from January 2021) 0 • Structural reforms Agency on strategic planning and reforms established, which reports directly to the President State Programme for Industrial and Innovative Development 2020-2025 Infrastructure development programme Nurly- Zhol 2020-2025 Kazakhstan Business Roadmap 2025 Comprehensive Privatization Plan (92.8% complete) Supporting the SME sector and substituting imports: implementation of subsidized financing programme Economy of Simple Things Other reforms Public procurement Updated law on state procurement and ongoing development of single procurement regulation for both state agencies and quasi-sovereign companies Management of SOES Improvements of policies and standards on information disclosure in the light of ongoing privatization and IPOs in particular Optimization of structures of National Holdings: planned consolidation of KazAgro Holding and Baiterek Fiscal Policy Reforms Small enterprises exempt from taxes and tax audits during 2020-2023 Source: Source: National Bank of Kazakhstan, Ministry of National Economy 6#12State-of-Nation Address In his state-of-nation address (September 2020), President Kassym-Jomart Tokayev outlined seven areas of focus for the nation's economic recovery. Fair distribution of wealth and duties The leading role of private entrepreneurship, fair competition 1 2 The opening of markets for a new generation of entrepreneurs, growth of productivity The increase of complexity and operability of the economy 3 Key Objectives I. Strategic Investment Agreement: Expanded legislative package of measures of state support for large investors in priority sectors, including ensuring the stability of maintaining current terms and conditions for investors. Changes and additions to the Strategic Development Plan of the Republic of Kazakhstan until 2025, providing for: II. • 4 • • • increase in manufacturing production volumes by 1.5 times; • reconstruction and provision for 24 thousand km of republican roads; increase in the share of SMEs in GDP to 35% and the number of people employed in SMEs to 4 million people; ensuring 100% coverage of children under 6 years of age with preschool education and upbringing; complete equipping of state medical organizations with the necessary equipment; renovation of hospitals' key bed capacity and replacement of outdated infrastructure; 7 Human capital development, investments in a new form of education, Well-reasoned decisions by the state with greater accountability to the public 5 A green economy and environmental protection 7 BAZARSTAN 6 • bringing life expectancy to 75 years III. Development and approval of the concept of low-carbon development of Kazakhstan until 2050, including measures for "green growth" and deep decarbonization of the national economy IV. Elaboration of a new concept for the development of local self-governance, providing for: strengthening control over the process of approval of local budgets, including mechanisms for passing public expertise, as well as the use of online surveys for socially significant expenses aimed at infrastructure and social initiatives; strengthening the financial capabilities of local self-governance by expanding property rights and increasing the income of rural districts, the next stage in the development of "public participation budgets"#13DAY BLA 3. Economic Growth & External Finances#14Strong Record of Economic Resilience and Growth Kazakhstan has a strong growth track record demonstrating a higher degree of resilience vis-a-vis peers in the face of the twin shocks stemming from the COVID-19 pandemic and the oil price crash. Real GDP Growth and Nominal GDP (KZT tn, %) GDP Per Capita and Unemployment (US$, %) 69.5 10,510 9,813 9,813 61.8 9,248 54.4 7,715 47.0 40.9 5.1% 4.5% 4.1% 4.1% 4.9% 4.9% 4.9% 4.8% 1.2% 2015 1.1% 2016 2017 2018 2019 2015 Nominal GDP Real GDP Growth Rate 2016 GDP per Capita 2017 2018 2019 Unemployment Rate GDP Breakdown by Expenditure Component (% of GDP) 4.0% 3.3% 8.0% 11.7% 27.9% 27.9% 26.4% 25.3% 8.6% 27.0% 11.6% 11.7% 10.5% 8.3% 9.3% 52.6% 53.4% 51.4% 51.0% 51.3% Real GDP Growth Projection vs BBB Rated Peers (%, 2020F1) (1.7%) (4.9%) (5.4%) (6.7%) (8.0%) 2019 (10.8%) Kazakhstan BBB/Baa3/BBB- Mexico BBB-/Baa1/BBB Russia Philippines BBB/Baa3/BBB- BBB/Baa2/BBB+ Morocco BBB-/Ba1/BBB- BBB Median 2015 2016 2017 2018 ■Public Consumption ■Gross Domestic Investment ■Priavte Consumption ■Non-profit Consumption ■Net Exports Source: Ministry of National Economy Committee on Statistics, unless otherwise stated. Note: ¹Fitch Sovereign Data Comparator September 2020 8#15Natural resource endowment: Energy sector still key source of growth Kazakhstan's growth is underpinned by its strong resource endowment with some of the world's largest proven reserves of mineral deposits. Hydrocarbon Resources Kazakhstan's Oil Production (Million Tonnes, % of Production) (% of Global, 2019) Reserves Production Kazakhstan 1.7% 2.0% Oil 77% 79% 81% 80% 80% 82% Europe & CIS 9.2% 18.9% 86.2 90.4 90.5 79.5 78.0 Kazakhstan 1.3% 0.6% Natural Gas 44.8 Europe & CIS 34.0% 27.1% Kazakhstan 2.4% 1.4% Coal Europe & CIS 2015 2016 2017 2018 2019 1H 2020 30.5% 14.1% Production Exports (% of Production) Substantial Mineral Deposits Share of Extractive Sector Production (2019) (%, 2019) World ranking of proven reserves World ranking in production Share of world production³ Uranium #2 #1 41.7% Gold #14 #11 3.0% Chromium #1 #4 15.2% Lead #8 #9 2.0% Zinc #6 #10 2.3% Manganese #10 #14 0.7% Copper #19 #10 3.4% Source: BP Statistical Review of World Energy, USGS Mineral Commodity Summaries, Ministry of National Economy Committee on Statistics 6 Natural Gas 2% Coal and lignite 2% Other mining 2% Technical services 5% Metal ores 12% Crude oil 77% ■Crude oil ■Natural Gas ■ Metal ores ■Coal and lignite ■ Technical services ■ Other mining#16Focus On Diversifying the Economy Continued economic diversification has underpinned Kazakhstan's resilience in the current crisis and reforms remain a key priority for the government. Growth Rates by Sector (Real GDP Growth) 14% 14% 10% 9% 8% 7% 7% 6% 6% 6% 6% 5% 3% 3% 14% 8% 8% 5% 6% 4% 4% 9% Agriculture Industry Construction Trade Transport and Storage Real Estate Professional Activities Education Administration Finance Communication 2018 2019 GDP Contribution by sector (% of GDP, 2019) Real GDP By Mining and Non-Mining (KZT tn ) 2.7% 70 3.2% Mining 4.0% 60 ■ Manufacturing 4.4% ■Trade 50 14.5% ■Transport and Storage 40 4.4% ■Real Estate 30 11.4% Construction 5.5% 20 ■ Agriculture 7.5% ■ Professional Activities 10 17.0% ■ Administration and public services 8.0% 0 ■ Finance 2001 ■ Education Source: Ministry of National Economy 10 2003 2005 2007 2009 2011 2013 2015 2017 2019 ■Mining Activities (Including Hydrocarbons) ■Non-Mining Activities#17External Balances to Continue Improving Kazakhstan has a strong external position with a long track record of withstanding exogenous shocks while its ongoing shift to a more diversified economic base will enhance its resilience. Current Account Net FDI Inflow by Economic Activity (US$ Mn) (% of GDP) 20% 12,000 15% 9,000 10% 6,000 5% (0.1%) (3.3%) (3.1%) 3,000 0% (5.9%) (4.0%) 0 -5% -3,000 -10% -6,000 -15% -20% Other 2015 Goods Primary Income Current Account Balance 2016 2017 2018 Services 2019 Secondary Income Trade Balance (% of GDP) 24.3% 28.4% 25.8% 18.0% 19.1% 33.4% 32.0% 18.3% 19.1% 22.0% 14.3% 10.0% 10.0% 6.3% 2015 6.7% 2016 Exports 2017 Imports 2018 2019 Trade Balance 2015 2016 ■Information And Communication ■Construction And Real Estate Activities Manufacturing 2017 2018 2019 ■Financial And Insurance Activities Trade, Transportation And Storage Utilities* ■Mining And Quarrying Agriculture and Food* Breakdown of Current Account Receipts (US$ mn. 2019) 2,513 2,314 7,774 57,740 ■Merchandise Exports ■Services Exports ■Primary Income ■Secondary Income Source: National Bank of Kazakhstan Note: *Agriculture and Food includes Agriculture, Forestry and Fishing and Accommodation and Food Service Activities, Utilities includes Electricity, Gas, Steam and Air Conditioning Supply and Water Supply; Sewerage, Waste Management And Remediation Activities 11#18Robust foreign asset buffers make Kazakhstan an outlier among peers The substantial fiscal and external buffers built through prudent management of the natural resource endowment distinguish Kazakhstan from its regional and rating peers, providing a cushion against exogenous shocks. Total Foreign Assets (US$ Bn, % of GDP) 91.3 Sovereign Net Foreign Assets vs BBB Rated Peers (% of GDP, 2019¹) 90.9 89.3 88.9 90.7 91.1 44.2% 63.4 61.2 58.3 58.0 61.7 57.3 66.2% 53.6% 55.0% 49.5% 49.6% 49.1% 27.9 29.7 31.0 30.9 29.0 33.8 2015 2016 2017 FX Reserves 2018 National Fund 2019 -% of GDP 3Q 2020 Composition of Market Value of the National Fund (US$ 57.3 bn) (% of Total) 24% Savings Portfolio US$54.2bn 3% 4% 69% Cash and MMI ■ Bonds ■ Stocks ■ Gold Source: National Bank of Kazakhstan, unless otherwise stated Note: ¹Fitch Sovereign Data Comparator September 2020 12 30.6% 12.1% 7.1% 1.7% (2.4%) Kazakhstan Mexico BBB/Baa3/BBB- Russia Philippines Morocco BBB Median BBB-/Baa1/BBB BBB/Baa3/BBB- BBB/Baa2/BBB+ BBB-/Ba1/BBB- Stabilizing Portfolio US$3.1bn 14% 86% Cash and MMI ■ Bonds#19DAY BLA 4. Prudent Fiscal Performance#20Fiscal Performance Kazakhstan has a conservative budgeting approach. A counter-cyclical rule will be introduced into the Budget Code by the end of 2020, as a reflection of Kazakhstan's fiscal discipline and prudence. Kazakhstan Public Finance Structure Consolidated Budget (% of GDP) Consolidated Budget 31.9% 33.5% 29.8% 28.6% 27.2% 28.1% 26.1% 26.7% 28.0% 27.9% 29.3% 28.5% State Budget + Revenues and Expenditures of National Fund (2.5%) (0.9%) (2.1%) (1.3%) (1.4%) (5.0%) Republic Budget + Local Budgets 2015 2016 2017 2018 2019 2020 Budget Revenue Expenditure ◆ Balance State Budget (% of GDP) Note: 2020 Budget compared to 2019 GDP Republican Budget (% of GDP) 26.2% 28.2% 25.5% 25.3% 26.1% 23.0% 31.8% 26.8% 25.1% 22.8% 23.7% 21.5% 19.7% 19.9% 17.7% 17.1% 16.6% 16.3% 16.5% 16.1% 15.1% 15.2% 14.2% 14.0% (2.5%) (0.9%) (2.1%) (1.3%) (1.4%) (5.0%) (2.4%) (0.8%) (2.0%) (1.1%) (1.3%) (3.7%) 2015 2016 2017 2018 2019 2020 Budget 2015 Revenue ■ Expenditure Balance 2016 2017 2018 2019 2020 Budget Revenue Expenditure Balance Note: 2020 Budget compared to 2019 GDP Source: Ministry of Finance 13 Note: 2020 Budget compared to 2019 GDP#21State Budget Kazakhstan benefits form a diversified revenue base, increasingly reliant on tax revenues with less dependence on transfers from the National Fund. Composition of State Budget Revenues (% of GDP) Composition of State Budget Expenditure (% of GDP) 1.1% 1.1% 1.3% 1.2% 1.3% 2.2% 1.7% 1.6% 1.6% 1.4% 1.3% 1.6% 6.9% 8.1% 6.9% 4.4% 4.2% 4.2% 4.2% 4.5% 5.0% 5.6% 6.0% 4.2% 0.7% 0.4% 0.3% 0.4% 0.3% 0.5% 2.2% 2.1% 2.1% 1.9% 1.9% 2.7% 11.0% 11.9% 12.4% 12.5% 13.2% 12.9% 3.3% 3.6% 3.4% 3.2% 3.4% 4.6% 0.7% 1.2% 0.8% 1.0% 1.0% 2015 2016 2017 2018 ■Tax Revenues ■Non-tax revenues 2020 Budget ■Privatisation ■Transfer reciepts 2019 2015 2016 2017 2018 2019 2020 Budget ■Debt Service Note: 2020 Budget compared to 2019 GDP Healthcare ■Transport and communications Note: 2020 Budget compared to 2019 GDP ■ Education ■Social assistance and social security ■House and communal services Key Inflows to and Outflows from the National Fund (KZT tn) 4 3.2 2.9 2.1 1.6 2 1.1 1.2 .0 .0 0 -2 (0.8) (1.7) (0.7) (2.1) (0.4) (1.5) -4 (2.9) (2.6) (2.7) -6 2015 2016 2017 2018 2019 (4.8) 2020 Budget Guaranteed Transfers Targeted Transfers ■Government Contributions Source: Ministry of Finance, unless otherwise stated Note: ¹Fitch Sovereign Data Comparator September 2020 14 Fiscal Balance vs BBB Rated Peers (% of GDP, 2020F1) H (5.9%) (7.1%) Morocco BBB Median BBB-/Ba1/BBB- (4.8%) (5.5%) (5.5%) Kazakhstan Mexico BBB/Baa3/BBB- BBB-/Baa1/BBB (7.5%) Russia Philippines BBB/Baa3/BBB- BBB/Baa2/BBB+#22Government Debt Modest government debt levels, with a developing domestic market. State Budget Financing (% of GDP) 0.4 Total Government Debt (% of GDP) 10.6% 2.4 9.1% 10.3% 9.8% 12.0% 10.1% 2.4 2.5 0.7 1.4 1.5 1.0 (0.2) (0.1) 0.6 0.3 10.6% 9.8% 8.4% 9.1% 8.4% 8.6% 2015 2016 2017 2018 2019 2020 Budget 2015 2016 2017 2018 2019 1H 2020 ■Net External Borrowing ■Net Domestic Borrowing External Debt Internal Debt External and Internal State and Guaranteed Debt Breakdown (US$ Bn, 1H 2020) General Government External Debt 1H 2020 14.9 External Debt Guaranteed by Government 1.6 55% Government Domestic Bonds 20.7 Internal Government Guarantees Total 4 0.5 37.7 56% Internal Debt Source: Ministry of Finance, National Bank of Kazakhstan, unless otherwise stated Note: ¹Fitch Sovereign Data Comparator September 2020 15 Sovereign External Debt vs BBB Rated Peers 44% External Debt (% of CXR, 2020F1) 39.3% 40% 18.9% 15.0% 37.1% 33.7% 31.2% Kazakhstan BBB/Baa3/BBB- Mexico BBB-/Baa1/BBB Russia BBB/Baa3/BBB- BBB/Baa2/BBB+ Philippines Morocco BBB-/Ba1/BBB- BBB Median#23Strong External Balance Sheet and Debt Servicing Capacity External debt a fraction of foreign assets with diverse sources of funding lowering the cost of debt. External Government Debt and Foreign Liquid Assets (US$ bn) 63.4 External Government Debt Sources (US$ bn) 61.2 61.7 58.3 58.0 15.2 14.7 14.9 13.9 13.7 12.7 12.7 H 6.7 6.7 7.9 9.2 9.1 6.7 13.9 13.7 14.7 15.2 2.5 2.5 2.5 1.9 2.4 1.7 4.1 4.0 3.0 3.8 3.7 3.6 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 1H 2020 External Debt ■National Fund Assets ■World Bank ■Other IFIs ■Official Creditors ■Commercial Creditors External Government Debt by Currency (% of Total) 10/ 0.1% 10% 0.170 0.1% 8.3% 16.2% 95.5% 96.0% 96.2% 88.5% 80.9% External Government Debt Amortization Schedule (US$ bn) 61.7 1.4 0.9 1.0 1.6 2.9 3.9 1.6 1.0 1.6 0.9 2015 2016 2017 2018 2019 National Fund 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 USD Euro JPY ■ Other Assets Principal Repayment ■Interest Payments and Charges Source: Ministry of Finance 16 2019#24Developing Domestic Debt Markets Deepening domestic capital markets provide government with a borrowing pool to diversify its funding base. • Kazakhstan's domestic capital markets have been developing steadily over the past few years, with a 20+ CAGR in trading volumes of Government securities over the past 5 years • The government and NBK has enacted several reforms to improve and develop domestic markets, including: • Effective government bonds yield curve supported by regular benchmark issues Government Issued Debt Securities (US$ bn) 16.9 18.5 15.7 16.7 12.8 。 Buy-back of illiquid governments bonds and issuance of benchmark size bonds with the outstanding amount of over US$1 billion equivalent. 12.8 9.6 7.6 9.2 9.0 7.6 o Implementation of DVP through Clearstream 。 Law amendments to introduce multilateral netting in settlement process 1.0 2015 2016 2017 NBK Notes 2018 ■Government Bonds 2019 1Q 2020 Distribution of Government bonds by holders (% of Total, September 2020) Other Securities Market Entities 19% Pension Fund 53% Banks 28% Source: Ministry of Finance, National Bank of Kazakhstan, Stock Exchange 17 Distribution of Government bonds by maturity (% of Total, 2019) <1 Year 4% 1-3 Years 19% >10 Years 39% 3-5 Years 15% 5-10 Years 23%#25Privatisations and Deepening of Financial Markets Kazakhstan has launched two Comprehensive Privatisation Plans (2012-2015 and 2016-2020) to foster private investment and create a dynamic private sector. The ambitious privatisation program has delivered on goals (KZT Bn, 501 entities privatised out of 538 per 2016-2020 Privatisation Plan) 349 192 149 142 120 101 122 93 36 35 45 - AIFC an important step towards integrated financial markets The Astana International Financial Center was developed in the context of the 100 Concrete Steps program to deepen Kazakhstan's financial markets Only one year after its official launch, the AIFC has registered around 200 companies in its jurisdiction. This number has increased since 2012 to 580+ as of October 2020 Several landmarks operations have already taken place on the AIX, including the IPO of Kazatomprom and the issuance of the government's first EUR- denominated Eurobond in November 2018. Additional ones are expected in 2020 and 2021 38 2014 2015 2016 2017 2018 2019 Proceeds Number of entities Major privatization program targets Oil and Gas Transportation air astana Communications ҚАЗАҚТЕЛЕКОМ КазМунайГаз NATIONAL COMРАНУ УАТТЫҚ КОМПАНИЯСЫ Industrial Power sector ҚАЗАҚСТАН ТЕМІР ЖОЛЫ KAZPOST Tau-Ken Samruk NATIONAL MINING COMPANY SAMRUK ENERGY QAZAQAR Source: Samruk Kazyna, Ministry of National Economy 18#26DAY BLA 5. Banking Sector, Monetary and Exchange Rate Policies#2719 National Bank Rate (%) 14% 13% 12% 11% 10% 9% 8% 7% Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Source: National Bank of Kazakhstan Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Monetary and Exchange Rate Policies Kazakhstan's flexible exchange rate acts as a shock absorber for the economy and together with the inflation targeting regime raise policy buffers and support economic resilience. Overview and current situation • • Kazakhstan's free floating exchange rate policy is consistent with its inflation targets. As part of its transition to the inflation targeting regime in September 2015, NBK introduced the base rate to promote price stability. In March 2020, the base rate was increased to 12.0% to prevent the spread of the consequences of the external COVID-19 induced shock to the country's economy and to protect tenge assets. Afterward, the base rate was reduced In April to 9.5% to smoothen the negative consequences of the coronavirus and to support business activity. The base rate was reduced to 9% in July, as inflation has stabilized around 7%. At the last two decisions on September 7 and October 26, 2020, the National Bank left the base rate unchanged. The Tenge in 2020 (US$/KZT, US$) 450 440 430 420 410 400 390 380 370 65 55 45 35 25 22 15 Dec Jan Feb Mar Apr May Jun Jul Aug Sep ⚫USD/KZT Brent (right axis) Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 9% 8% 7% 9.0% ៖៖៖៖ 4% 3% 6% 5% Dec-17 Feb-18 Apr-18 Inflation Rate (CPI, Annual % Average) Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20 Jun-20 Aug-20 7.0%#28Focus on Strengthening the Banking System The banks have robust balance sheets with declining dollarization and loan to deposit ratios, with core funding base consisting of domestic customer deposits. Strengthening Banking Sector • The banking sector's overall resilience to economic shocks has recently improved. Most banks have ample capacity to absorb losses due to good pre-impairment profitability and significant capital buffers. Taking into account Asset Quality Review (AQR) outcomes and all implemented measures, all banks in the scope of the AQR have sufficient CET1 capital to comply with regulatory requirements and cover expected credit loss Kazakhstan has low level of foreign currency denominated debt, mainly tied to exports, eliminating currency and tenor mismatches In the coming months, the Agency for Regulation and Development of Financial Market and NBK will closely monitor the implementation of recovery plans in all participating banks to ensure appropriate and effective measures are being put in place to support the development of identified priority risk management aspects Balance Sheet Structure (%) 99.7% 89.8% 65.4% 60.7% 2015 2016 81.5% 80.8% 82.0% 56.3% 54.5% 55.0% Bank Assets (% of GDP) 61.4% 54.4% 45.5% 42.9% 40.8% 39.6% 2015 2016 2017 2018 2019 Oct-20 Foreign Currency Exposure (%) 69.3% 53.8% 74.2% 47.6% 46.8% 42.7% 42.3% 41.5% 39.9% 51.2% 27.3% 23.5% 17.0% 15.9% 2017 2018 2019 Oct-20 2015 2016 2017 2018 2019 ■Loans to Deposits ■FX Currency Loans (% of Loans) OKT 20 ■FX Currency Deposits (% of Deposits) ■Loans to Assets Source: The Agency for Regulation and Development of Financial Market 20 20#29Improving Loan Portfolio Quality The banking sector was in sound health going into the crisis as indicated by the recent Asset Quality Review and the temporary loosening of banking regulations will help to contain the risk of disruptions. Profitability (%) Capital Adequacy Ratio (%) 25.3% 24.2% 5.6% 5.2% 5.1% 5.2% 21.8% 21.9% 5.1% 4.6% 15.9% 16.3% 4.5% 4.3% 3.9% 4.0% 3.9% 3.9% 10.0% 10.0% 10.0% 8.5% 8.5% 9.0% 2015 2016 2017 2018 2019 01/10/2020 2015 2016 2017 2018 2019 10/1/2020 Capital Adequacy Ratio Regulatory Minimum CAR ratio Net Interest Spread Net Interest Margin Loan Portfolio by Type of Borrower (% of Loan Portfolio, September 2020) Loans to Individuals, 45% SME, 27% Non-Performing Loans and Provisions (% of Loans) 10.6% 10.6% 15.6% 13.5% 12.9% 12.5% 9.3% 8.0% 8.1% 8.4% 7.4% 6.7% Large Corporates, 28% 2015 2016 2017 2018 2019 10/1/2020 NPL Provisions Source: The Agency for Regulation and Development of Financial Market 21 24#30Appendix#31Kazakhstan Well Positioned Compared to Peers On a quantitative basis, Kazakhstan is considerably stronger than peers and the Government is committed to focus on reforms to continue to diversify and strengthen the economic structure, to strengthen governance and institutions. Real GDP Growth (% of GDP, 2019-2022F Average) 2.9% Current Account Balance & Net FDI (% of GDP, 2019-2022F Average) 2.7% 3.1% 2.29% Sovereign Net Foreign Assets (% of GDP, 2019) 44.2% 2.0% 1.8% 1.6% 1.4% 0.3% 30.6% 1.4% 1.0% (0.6%) 0.7% (1.2%) (1.3%) (2.4%) 12.1% 7.1% 1.7% (5.7%) (1.0%) (2.4%) Kazakhstan Mexico Russia Kazakhstan Mexico Russia Philippines Morocco BBB Median ■Net FDI Philippines Morocco BBB Median Current Account Balance Kazakhstan Mexico Russia Philippines Morocco BBB Median 33.7% 37.1% Government Debt (% of GDP, 2019-2022F Average) 55.0% Government External Debt (% of CXR, 2019) 39.3% التيار التيار ال Philippines Morocco Kazakhstan Mexico Philippines Morocco BBB Median (4.1%) BBB Median Fiscal Balance (% of GDP, 2019-2022F Average) (3.3%) (2.1%) (3.6%) (2.1%) (5.3%) Kazakhstan Mexico Russia Philippines Morocco Source: Fitch Sovereign Data Comparator September 2020 22 22