The credit rating of the Ryazan Region (hereinafter, the Region) reflects its moderately low debt load, moderately high share of capital expenditures, and moderate indicators of socio-economic development.
The Ryazan Region is part of the Central Federal District and borders the Moscow area, the largest Russian market of goods and services. The Region is monocentric as almost all business activities are concentrated in its administrative center, the city of Ryazan, where about half of the Region’s population lives. The Region’s GRP is close to 0.5% of the total GRP of all Russian regions. Around 0.8% of the country’s population lives in the Region.
key assessment factors
The high share of capital expenditures, a half of which is financed internally. The Region’s budget has a sufficient share of internal revenues in the total revenues (excluding subventions): the averaged 1 share will amount to 71% for 2019–2023. The averaged share of capital expenditures in aggregate expenditures (excluding subventions) in the same period will equal 22%. On average, the Region finances half of its capital expenditures using transfers from the federal budget, while the remaining portion of expenditures is financed using internal revenues.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
The averaged ratio of the current account balance to current revenues for 2019–2023 will be 9%. The ratio of modified budget deficit to current revenues for the above period will amount to -3%. These ratios indicate that the Region's revenues are sufficient to cover its current expenses and that the Region has to borrow to cover its capital expenditures.
The regional budget law provides for the 2022 budget deficit at 13% of tax and non-tax revenues (TNTR). According to the draft budget law for 2023, the deficit is planned at 5% of TNTR, which is expected to be covered by funds accumulated in budget accounts in previous years, as well as by bank and budget loans.
According to ACRA's estimates, the actual budget deficit in 2022 may turn out to be lower than that indicated in the budget law. The intermediate budget surplus for the nine months of 2022 amounted to RUB 5.8 bln, with a 25% / 23% y-o-y increase in revenues/expenditures.
Moderately low debt load and low refinancing risks. According to ACRA's estimates, the ratio of the Region's debt to its current revenues may reach 34% by the end of 2022 and 37% by the end of 2023, which indicates a moderately low level of debt load. The ratio of the averaged debt to GRP will be about 5%.
As of November 1, 2022, the Region's debt included only budget loans falling due until 2037. In 2022 and 2023, the Region is to repay about 7% of its debt obligations. Public debt servicing costs are not a burden on the Region's budget: the average interest expenses in 2019–2023 will be 1% of total budget expenditures, excluding subventions.
Some accumulated liquidity may be used to cover budget deficits. As of November 1, 2022, the volume of budget account balances exceeded average monthly expenditures in 9M 2021 by more than three times and it covered about 90% of the Region's debt obligations. According to the Region’s current budget law, a portion of accumulated liquidity may be used to cover budget deficits in 2022. The liquidity ratio calculated as per ACRA's methodology may amount to 79% this year.
The diversified economy with a relatively low level of unemployment. The level of diversification of the regional economy is quite high. According to ACRA's estimates, the public sector, which is the largest sector of the economy, accounts for around 18% of tax revenues of the regional budget. In the structure of products shipped in 2020, the share of petroleum products amounted to about 13%. The stable industry structure of tax revenues and low concentration on volatile sectors of the economy mean that the Region is relatively resilient to negative economic developments.
In 2018–2021, the averaged wage exceeded the averaged regional subsistence minimum for working-age population by more than three times, while unemployment was below the national average. In 2020, the Region's GRP grew by 1.1% in physical terms whereas in all other Russian regions, GRP declined by 2.2%.
KEY ASSUMPTIONS
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Execution of the 2022 budget in line with the budget law.
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Retaining the accumulated liquidity to cover budget deficits in the next several years.
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 positive rating action may be prompted by:
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The debt load declining below 30% of current revenues of the regional budget;
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Better socio-economic development indicators.
A negative rating action may be prompted by:
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The debt load exceeding 55% of current revenues;
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Lower standalone budget liquidity;
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Increase in current budget expenditures not supported by a corresponding growth of revenues.
issue ratings
None.
regulatory disclosure
The credit rating of the Ryazan Region 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 Ryazan Region was published by ACRA for the first time on October 16, 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 Ryazan 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 Ryazan 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 Ryazan Region. No conflicts of interest were identified in the course of credit rating assignment.
