The credit rating of the Tyumen Region (hereinafter, the Region) is based on its developed regional economy, minimal debt load and lack of debt refinancing risks, as well as consistently high budget liquidity. The rating is supported by high budget self-sufficiency with a large share of internally-funded capital expenditures.
The Tyumen Region is located in the Ural Federal District. The Region includes the Khanty-Mansiysk Autonomous Okrug–Yugra (KMAO–Yugra) and the Yamalo-Nenets Autonomous Okrug (YNAO), which are also full-fledged regions of the Russian Federation. The Region’s population is 1.55 mln (1.1% of the population of the Russian Federation), not including the population of the autonomous okrugs. Its gross regional product (GRP), excluding the autonomous okrugs, was RUB 1,166 bln in 2020. According to the Region’s assessments, its GRP may have reached RUB 1,347 bln in 2021. Annually, the share of GRP is estimated at 1.3% of the total GRP for all regions of Russia’s regions.
KEY ASSESSMENT FACTORS
Strong budget profile coupled with need to use accumulated liquidity. The ratio of Region’s current account balance to current revenues averaged 1 for 2019–2023 will amount to around 10%. In ACRA’s opinion, the current account balance may turn negative in 2022 due to significant growth of current expenditures, but the Region will maintain its ability to finance the bulk of current expenditures using current revenues.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
The share of capital expenditures in the Region’s total expenditures (excluding subventions) is assessed as high — it will average more than 22% for 2019–2023. Annually, capital expenditures are more than 90% financed by internal funds, which, in the Agency’s opinion, may serve as an additional reserve amid declining budget expenditures. The averaged share of tax and non-tax revenues (TNTR) in the Region’s revenues over the aforementioned period will amount to 95%.
The ratio of the averaged modified budget deficit to current revenues for 2019–2023 will amount to -13% as per the Region’s current budget law. The projected modified budget deficit for 2022 indicates that the Region will need to use accumulated liquidity to finance capital expenditures.
The Region executed its 2021 budget with a significant surplus (11% of TNTR), which allowed the Region to considerably increase the volume of funds in its accounts. According to the latest version of the Region’s budget law, TNTR is projected to fall by 8% in 2022 compared to last year, largely due to a possible 13% decline in profit tax revenues. The volume of transfers may fall by more than 29%, which when combined will lead to the revenue side of the Region’s budget declining by 10% compared to 2021. The expenditure side of the budget is expected to grow by approximately 41%, with capital expenditures scheduled to almost double by the end of the year. Current budget expenditures will also experience considerable (28%) growth compared to last year, including inter-budget non-capital transfers possibly growing by a third. The anticipated deficit — 43% of TNTR — will be two-thirds financed using accumulated liquidity, while the Region plans to cover the remaining part of the deficit using borrowed funds.
At the end of six months of the current year, the volume of revenues of the regional budget increased by 54% compared to the same period in 2021, with TNTR growing by 59%. In the aforementioned period, profit tax revenues increased by 67%, and transfers grew by 5%. At the same time, the spending part of the budget also grew considerably — by more than 67%. The Region’s intermediate budget surplus as of July 1, 2022 slightly exceeded the surplus for 6M 2021 and amounted to RUB 29.3 bln.
ACRA proceeds from the assumption that during 2022, budget revenues may decrease less significantly than the Region predicts. In addition, the Agency assumes that the Region may not fully execute its capital expenditure plan this year. These two factors will lead to a budget deficit forming below the planned level, which will allow the Region to avoid attracting debt financing.
Minimal debt load and absence of refinancing risks. As of the start of 2022, the Region’s debt amounted to RUB 1.0 bln and was made up of guarantees and budget loans (68% and 32%, respectively). Risks of refinancing obligations are practically absent due to the small size of debt and the significant volume of balances in the Region’s accounts.
As of August 1, 2022, the Region’s debt had increased to RUB 6.1 bln because in 2021 the Region joined the infrastructure budget loan provision project. The volume of funds raised this year amounted to RUB 4.9 bln. In ACRA’s opinion, this borrowing will not have a negative impact on the Region’s debt load because it is long-term and has a balanced repayment schedule (repayment is planned for 2024–2037). In addition to attracting this infrastructure budget loan, the volume of issued guarantees increased slightly. Short-term and medium-term risks for refinancing obligations continue to be insignificant.
As of the end of 2021, the Region’s ratio of debt to current revenues stood at less than 1%. In 2022, this indicator may grow to 15% according to the current version of the budget law due to financing the projected deficit, while the debt burden will continue to be low (according to the Agency’s methodology).
Interest expenses are not burdensome for the Region — the average level of interest expenses for 2019–2023 will not exceed 1% of the Region’s total budget expenditures (excluding subventions).
The ratio of the Region’s averaged debt to GRP will amount to less than 2% should the scenario unfold that is set out in the current version of the budget law, which corresponds to a low total debt load under ACRA’s methodology.
The volume of accumulated liquidity is stable. 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 its total debt. Since the start of 2022, balances in the Region’s accounts have on average exceeded monthly budget spending by more than five times. As of August 1, 2022, the volume of accumulated budget funds had increased by 24% compared to the indicator as of the start of the year. A significant part of accumulated funds will probably be used to finance the deficit this year. Due to this, the Region’s budget liquidity ratio (according to ACRA’s methodology) will amount to around 100% as of the end of 2022.
The regional budget does not have any overdue payables. Municipal entities have an insignificant debt load.
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 1.2x in 2017–2020.
The ratio of the averaged wage for 2018–2021 to the averaged regional subsistence minimum for the same period exceeded 3.5. The unemployment rate averaged for 2018–2021 calculated as per the ILO’s methodology was 4.5%, with unemployment falling from 4.8% to 4.4% in 2021.
The Region’s economy benefits from the hydrocarbon production and processing sectors, which generate most of the tax revenues. According to ACRA’s calculations, the oil products industry provided the largest share of tax revenues averaged over the past four years — 25%. 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 the residents of KMAO–Yugra and YNAO. The agreement is valid until December 31, 2025. According to the agreement, 29.5% of profit tax revenues collected in KMAO–Yugra and YNAO are transferred to the Region's budget to fund the abovementioned programs.
key assumptions
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Execution of the Region’s budget according to the parameters set out by the current version of the budget law;
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Capital expenditures falling in the event of budget revenues declining below the projected level;
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Debt load exceeding 15% 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 KMAO–Yugra and YNAO.
potential outlook or rating change factors
The Stable outlook assumes that the credit rating will highly likely remain unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
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Liquidity decreasing below monthly budget expenditures;
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Debt load exceeding 30% of current revenues coupled with higher refinancing risk;
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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 and its outlook are expected to be revised within 182 days following the publication date of this press release as per the Calendar of sovereign credit rating revisions and publications.
The credit rating was assigned based on 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), and ACRA’s own databases. The credit rating is solicited and the Government of the Tyumen Region participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, 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 discovered in the course of credit rating assignment.
