The credit rating of the Republic of Tatarstan (hereinafter, the Region) is based on the Region’s moderately low debt load with a comfortable debt repayment schedule and insignificant refinancing risks, as well as a substantial amount of funds held in the Region’s accounts, and a strong budget profile with an insignificant need to utilize accumulated liquidity to finance capital expenditures. High economic development indicators provide additional support to the rating.

The Region is part of the Volga Federal District and is home to 3.9 mln people, 2.7% of the Russian population. In 2020, the Region’s gross regional product (GRP) amounted to RUB 2,634 bln. According to the Region’s assessments, 2021 GRP was RUB 3,355 bln.

key assessment factors

Strong budget profile with a low need to use free liquidity. The averaged1 ratio of the balance of current operations to current revenues for 2019–2023 will amount to 29%. The balance of current operations will remain positive in 2022, which is an indication of the sufficiency of current revenues to finance current expenditures and corresponds to the highest assessment of the operating efficiency of the budget (as per ACRA’s methodology).

The averaged share of capital expenditures in total expenditures for 2019–2023 will amount to about 41%, which, according to ACRA’s methodology, corresponds to a high level of flexibility of budget expenditures. Capital expenditures are mostly funded by the Region at its own expense. The averaged share of tax and non-tax revenues (TNTR) in the Region’s revenues (excluding subventions) for the same period will exceed 82%.

The ratio of the modified budget deficit averaged over 2019–2023 to current revenues will be -3%. This indicates that the Region finances its capital expenditures mainly fr om budget revenues, but it may need to use some accumulated liquidity.

The Region finished 2021 with a surplus of 4% of TNTR, which allowed it to increase the size of funds in its accounts.

According to the current version of the Region’s budget law, TNTR is expected to increase by 2% in 2022 compared to last year due to proceeds from profit tax and taxes on goods and services potentially growing by 3%. However, transfers may fall by more than 7%, and as a result of this, the Region’s budget revenues will remain unchanged compared to the 2021 indicator. It is expected that the budget’s expenses will increase by approximately 14%, including capital expenditures, which the Region plans to increase by 18% compared to last year, and current expenditures, for which a 12% increase is planned. The anticipated deficit of 13% of TNTR will be two-thirds covered by accumulated liquidity, while the remaining part of the deficit is to be financed by infrastructure budget loans (IBLs).

At the end of the first six months of this year, the Region’s budget revenues had increased by 39% compared to the same period in 2021, with TNTR growing by almost 45%. Profit tax revenues, which provided for most of the growth of TNTR, increased by 76%, while transfers for 6M grew by 5%. The spending side of the budget grew by 20% in the aforementioned period. The Region recorded an intermediate budget surplus of RUB 38.7 bln (a year earlier the Region had a RUB 8.7 bln surplus).

Based on the execution of the budget for the first half of the year, ACRA believes that during 2022 the revenue part of the budget may increase more significantly than stipulated in the current version of the budget law. For this reason, the budget deficit may be below the projected level, which will make it possible to retain part of the accumulated liquidity.



Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.

Moderately low debt load and non-commercial nature of debt. As of the start of 2022, the Region’s debt amounted to RUB 96.6 bln, and included budget loans and guarantees (89% and 11%, respectively). Historically, most of the debt is represented by budget loans, while the remainder is guarantees provided in 2005 for liabilities of KAMAZ (ACRA rating A+(RU), outlook Stable) to the federal budget. Refinancing risks are virtually absent due to the non-commercial nature of debt and the significant volume of funds in budget accounts.

As of August 1, 2022, the Region’s debt had fallen to RUB 93.0 bln. The decrease of the absolute amount of debt over the past part of the current year is due to currency revaluation of the Region’s government guarantees. At the same time, the volume of budget loans increased by RUB 2.4 bln because the Region joined the IBL provision program. The expected volume of funds to be raised under the program this year will amount to RUB 10.4 bln. In ACRA’s opinion, these funds will not have a negative influence on the Region’s debt load because they are long-term and have a balanced repayment schedule (repayment is scheduled for 2024–2037). The risks of refinancing obligations in the short term and medium term continue to be insignificant. As of August 1, 2022, the share of budget loans in the Region’s total debt increased to 95%. It is expected that debt repaid in 2022–2023 will amount to less than 1% of the total volume of debt.

As of the end of 2021, the ratio of the Region’s debt to current revenues amounted to 31%. In 2022, this indicator may rise to 35% in line with the current version of the Region’s budget law due to financing the projected deficit. At the same time, the debt load will be maintained at a moderately low level (according to the Agency’s methodology).

Interest expenses are not burdensome for the Region — averaged for 2019–2023 they will not exceed 0.1% of total budget expenditures (excluding subventions).

The ratio of averaged debt to GRP of the Region will amount to 3%, which corresponds to a low level of total debt as per ACRA’s methodology.

The volume of accumulated liquidity continues to increase. Since the beginning of 2022, the budget account balances of the Region were 1.5x higher than its monthly expenses. As of July 1, 2022, accumulated liquidity exceeded the indicator as of the start of the year by more than 2.5x times. A large part of accumulated funds will probably be used to cover this year’s budget deficit. Due to this, the Region’s budget liquidity ratio (according to ACRA’s methodology) will amount to 72% as of the end of 2022.

In the medium term, the Agency doubts that companies and financial institutions that are strategically important to the Region’s economy or significantly depend on its budget will need targeted financial support.

The Region does not use credit lines as an instrument of its own liquidity. A contract with the Federal Treasury Department had not been concluded as of the date of the analysis as this is not necessary.

The Region’s economy is developed and moderately focused on the extraction of commodities. ACRA’s calculations show that the oil and gas industry generated the maximum share (around 23%) of tax revenues in 2018–2021 (averaged over this period). The wholesale and retail trade sector generated around 12% of tax revenues, and the manufacturing sector formed another 22%.

The averaged per capita GRP of the Region for 2017–2020 was 108% of the national average. The averaged monthly wage to subsistence minimum ratio in the Region exceeded 350% in 2018–2021. The unemployment rate averaged for 2018–2021 and calculated according to the ILO’s methodology was low at 3.0%. In 2021, the unemployment rate was 2.6%.

key assumptions

  • 2022 budget to be executed in line with the Region’s budget law;

  • IBLs to be granted according to the approved lim it in 2022;

  • Using accumulated funds to cover the projected budget deficit;

  • No need for additional debt financing to cover current expenditures;

  • No need to fulfil state guarantees this year.

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:

  • The need to provide extraordinary support to state sector companies and financial organizations;

  • Substantial changes in inter-budget relations in Russia;

  • The need to fulfil the state guarantees to the Russian Ministry of Finance;

  • 2022 budget deficit exceeding available liquidity.

issue ratings

There are no outstanding issues.

regulatory disclosure

The credit rating has been assigned to the Republic of Tatarstan 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 Republic of Tatarstan was published by ACRA for the first time on November 17, 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 Government of the Republic of Tatarstan, 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 Republic of Tatarstan 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 Republic of Tatarstan. No conflicts of interest were discovered in the course of credit rating assignment.


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