The credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra (hereinafter, the Region) is based on high regional economic indicators, the high liquidity of the Region’s budget, and low debt load.
The Region is located in the Ural Federal District. It is an administrative subject of the Russian Federation and at the same time is part of the Tyumen Region.1 The Region’s population is 1.7 mln (1% of Russia’s population). The Region’s GRP amounted to RUB 3.4 tln in 2020. According to the Region’s assessments, its GRP will be RUB 3.9 tln in 2021.
1Part of the income tax revenues collected in the Region goes to the Tyumen Region’s budget (its size is regulated by the contract between the Tyumen Region and the Region and amounts to 29.5%).
Key rating assessment factors
Low debt load and high budget liquidity. The Region’s debt portfolio is composed entirely of bonds with maturities before 2024. According to ACRA’s estimates, the Region’s debt to current revenues ratio will grow by 10 pps to 14% by the end of 2021, which will still be assessed as a low debt load. As of June 1, 2021, the budget’s account balances (including deposits) exceeded total debt as of the same date by almost six times and average monthly budget expenses for the last 12 months by almost three times. The Region has enough accumulated liquidity both for debt payments this year and for financing the 2021 budget deficit.
The Region is a federal budget donor, producing more than 40% of Russian oil. The sectoral structure of the Region’s GRP is stable and the contribution of natural resources to this indicator exceeds 70%. In four months of 2021, 91% of taxes and charges collected in the Region were sent to the federal budget and only 9% went to the Region’s consolidated budget. At the same time, the Region’s tax revenues amounted to 13% of the federal budget’s total tax revenues for four months of 2021. The Region ranked third in GRP per capita among Russian regions in 2019. In 2017−2020, the ratio of averaged2 wages to the averaged regional subsistence minimum grew steadily (from 4.3x to 4.6x), and the Region’s unemployment rate (according to the ILO’s methodology) is significantly lower than the national average.
2 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
High budget self-sufficiency. Over the first six months of 2021, the Region’s total revenues declined by 21% compared to the indicator for the same period in 2020. However, the Region’s conservative budget policy allows it to execute the budget with a small intermediate deficit at 0.7% of tax and non-tax revenues (TNTR).
According to the current version of the Region’s Budget Law3, in 2021, the total budget revenues may decrease by 14% compared to 2020 (mainly due to a decrease in corporate income tax revenues by 26%). In this regard, the budget deficit will be about RUB 50 bln (24% of TNTR), which is expected to be 60% covered by account balances and 40% covered by debt financing.
In 2017–2021, the averaged share of TNTR will amount to 93% of total revenues (excluding subventions).
The flexibility of budget expenses is moderately high. The averaged ratio of capital expenses to total budget expenses excluding subventions will be 14% for 2021, while the share of capital expenses financed by the Region with its own funds will be about 98%.
The averaged ratio of current operations to current revenues will be about 6% for 2017−2021, which indicates that current revenues can cover current expenses.
3 Law of the Khanty-Mansiysk Autonomous Okrug–Ugra dated November 26, 2020 No. 106-oz “On the budget of the Khanty-Mansiysk Autonomous Okrug–Ugra for 2021 and planned period of 2022 and 2023” (adopted by the Duma of the Khanty-Mansiysk Autonomous Okrug–Ugra on November 26, 2020).
Key assumptions
- Maintaining countercyclical budget policy in terms of expense planning;
- 14% decline in total revenues in 2021 compared to 2020;
- 1% growth in total expenditures in 2021 compared to 2020;
- Financing this year’s budget deficit mainly with account balances.
Potential outlook or rating change factors
The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
- Growth rates of current revenues lagging behind dynamics of current expenses;
- Significant decrease in budget liquidity;
- Increase in debt load over 30% of current revenues;
- Significant changes in inter-budget relations in Russia.
Issue ratings
Khanty-Mansiysk Autonomous Okrug-Ugra, 35001 (ISIN RU000A0JX215), maturity date: December 18, 2023, issue volume: RUB 6 bln — ААА(RU);
Khanty-Mansiysk Autonomous Okrug-Ugra, 35002 (ISIN RU000A0ZYKW4), maturity date: December 17, 2024, issue volume: RUB 7 bln — ААА(RU).
Rationale. In ACRA’s opinion, the bonds listed above are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra.
Regulatory disclosure
The credit ratings of the Khanty-Mansiysk Autonomous Okrug-Ugra and the bonds (RU000A0JX215, RU000A0ZYKW4) issued by the Khanty-Mansiysk Autonomous Okrug-Ugra have been assigned under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments on the National Scale for the Russian Federation was also applied to assign the credit ratings to the above issues.
The credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra and the credit ratings of the bonds (RU000A0JX215, RU000A0ZYKW4) issued by the Khanty-Mansiysk Autonomous Okrug-Ugra were first published by ACRA on September 26, 2017, September 28, 2017, and December 15, 2017, respectively. The credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra and its outlook, as well as the credit ratings of the bonds (RU000A0JX215, RU000A0ZYKW4) issued by the Khanty-Mansiysk Autonomous Okrug-Ugra are expected to be revised within 182 days following the publication date of this press release as per the Calendar of planned sovereign credit rating revisions and publications.
The credit ratings were assigned based on data provided by the Khanty-Mansiysk Autonomous Okrug-Ugra, information from publicly available sources (the Ministry of Finance, the Federal State Statistics Service, and the Federal Tax Service), and ACRA’s own databases. The credit ratings are solicited and the Government of the Khanty-Mansiysk Autonomous Okrug-Ugra participated in the rating process.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to the Government of the Khanty-Mansiysk Autonomous Okrug-Ugra. No conflicts of interest were discovered in the course of credit rating process.
