The credit rating of the Tyumen Region (hereinafter, the Region) is based on the strong indicators of the regional economy, the Region’s minimal debt load and high budget liquidity. The rating is supported by a highly flexible budget with a large share of capital expenditures funded internally.
The Tyumen Region is located in the Ural Federal District. The Region includes the Khanty-Mansiysk Autonomous Okrug-Yugra (KhMAO-Yugra) and the Yamalo-Nenets Autonomous Okrug (YaNAO), which are also full-fledged subjects of the Russian Federation. The Region’s population is 1.5 million (1% of the population of the Russian Federation), not including the population of the autonomous okrugs. According to the Regions' estimates, its gross regional product (GRP), excluding the autonomous okrugs, might reach RUB 1,357 bln in 2021. Annually, the share of GRP has been estimated at 1.3% of the total GRP for all regions of the Russian Federation.
KEY ASSESSMENT FACTORS
High budget self-sufficiency and high flexibility of budget expenditures. The averaged1 (for 2018–2022) ratio of Region's current operations balance to current revenues will amount to 16%, while the averaged modified budget deficit to current revenue ratio will be slightly negative This indicates that the Region's current revenues are sufficient to cover its current expenditures, but to finance capital expenditures, the Region has to borrow or use accumulated liquidity.
Budget expenditures are highly flexible: the share of capital expenditures in total expenditures (excluding subventions) averaged for 2018–2022 will amount to 24%. The Region finances internally over 90% of its capital expenditures, which, in ACRA's opinion, is an additional reserve for cost reduction.
The share of internal revenues in the total budget revenues (excluding subventions) is high since, when averaged for the period from 2018 to 2022, the share is expected to equal 95%.
According to the Region's budget law for the current year, the corporate profit tax revenues are expected to decrease by 25% in 2022 versus 2021, which will result in a 20% decline in tax and non-tax revenues (TNTR). In 2021, there was a 75% increase in profit tax revenues, which resulted in a 48% increase in the Region's revenues and an 11% surplus of TNTR on the back of a 7% increase in expenditures. The sharpest increase in revenues was observed in the oil-refining sector.
Minimal debt load. In 2021, the ratio of the Region's debt to current revenues reached a minimum of 0.4%; the debt included budget loans and guarantees.
The share of short-term debt does not affect the debt profile assessment due to the low debt load.
During 2022–2023, the Region may receive some infrastructure budget loans for up to RUB 6.5 bln, and it will also take part in the infrastructure construction program carried out by JSC "DOM.RF" (ACRA rating: AAA(RU), outlook Stable). For these purposes, the Region has issued a RUB 647.6 mln guarantee. The principal's obligations secured by the guarantee have not arisen as of the date of publication.
Judging by the parameters of the Region's budget, the debt load will increase in 2022 to 18% of current revenues due to the need to cover the planned deficit. This will not affect the Region's credit rating because the debt load will remain low.
The debt servicing costs are minimal and not burdensome for the regional budget.
The ratio of Region's debt to GRP is sustainably low.
The volume of accumulated liquidity is many times greater than liabilities. The Region holds a large volume of funds in its budget accounts and deposits, which, as of January 1, 2022, was several times higher than the total debt and up to five times higher than the Region’s monthly average expenditures in 2021.
The Region's socioeconomic indicators are high. The Region's GRP per capita is high, and the average of this indicator exceeded the national average by 1.3x in 2016–2019.
In 2017–2020, the averaged wage to averaged regional subsistence minimum ratio grew sustainably and exceeded 4x in 2020, while the unemployment rate calculated as per ILO methodology was lower than the national average.
The regional economy benefits from the hydrocarbon production and processing sectors, which generate most of the tax revenues. Another significant share of tax revenues is contributed by companies from the public sector, R&D, construction, wholesale, and land and pipeline transport sectors.
There is an agreement between the public authorities of the Tyumen Region and the autonomous okrugs, which regulates regional social, infrastructure and investment programs and is intended to benefit the entire population of the Region, including residents of KhMAO-Yugra and YaNAO. According to this agreement, 29.5% of profit tax revenues collected in KhMAO-Yugra and YaNAO are transferred to the Region's budget to fund the abovementioned programs. The agreement will remain in force until December 31, 2025.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
KEY ASSUMPTIONS
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Reducing capital expenditures in the event of reduced budget revenues.
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Debt load growing up to 18% of current expenditures in 2022.
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Maintaining the agreement between the public authorities of the Tyumen Region and the autonomous okrugs and retaining the current distribution proportion of profit tax revenues collected in KhMAO-Yugra and YaNAO.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the credit rating will most likely remain unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
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Change in the budget expenditure management policy in favor of increasing current expenditures;
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Decrease in liquidity below monthly budget expenditures;
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Substantial change in the inter-budget relations in the Russian Federation.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has 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 credit rating of the Tyumen Region was published by ACRA for the first time on November 21, 2017. The credit rating of the Tyumen Region and its outlook re expected to be revised within 182 days following the publication date of this press release in compliance with the Calendar of sovereign credit rating revisions and publications.
The credit rating was assigned based on the data provided by the Tyumen Region, information from publicly available sources (the Ministry of Finance, the Federal State Statistics Service, and the Federal Tax Service), as well as ACRA’s own databases. The credit rating is solicited and the Government of the Tyumen Region participated in the rating process.
In assigning the credit rating, 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 Tyumen Region. No conflicts of interest were identified in the course of credit rating assignment.
