The credit rating of the Tomsk Region (hereinafter, the Region) has been upgraded based on the improvement of a number of its budget profile indicators and growth of the Region’s accumulated liquidity amid the achievement of a budget surplus in 2022 coupled with support from the federal government in the form of refinancing part of the Region’s short-term commercial debt.
The Region’s rating stems from a moderate debt load, moderately low risks of refinancing obligations, and the medium development indicators of the regional economy compared to the national average. The rating is constrained by the budget’s moderate operating indicators and the Agency’s expectations regarding growth of the budget’s need to borrow money for the financing of capital purposes.
The Tomsk Region is located in the Siberian Federal District and is home to 1.1 mln people (0.7% of Russia’s population). In 2021, the Region’s GRP amounted to RUB 706 bln, about 0.6% of the total GRP for all regions of the Russian Federation. According to the Region’s estimates, its GRP grew to RUB 765 bln in 2022.
Almost a third of the Region’s territory is unpopulated due to a large area of wetlands and forests. Tomsk is a major educational center and in 2021 the Region ranked third after Moscow and St. Petersburg in terms of the number of students per 10,000 inhabitants among Russia’s regions.
key assessment factors
Moderate debt load and moderately low risks of refinancing obligations in the short term. As of the start of 2023, the Region’s debt amounted to RUB 49.2 bln, which is 2% higher than the indicator for 2021. Debt grew due to the attraction of budget loans to repay the commercial obligations of the Region (around RUB 3.2 bln were refinanced) and its municipalities (around RUB 1.5 bln), as well as the attraction of budget loans to carry out infrastructure projects. Thanks to this, as of January 1, 2023, practically three-quarters of the debt portfolio consisted of budget loans, while the remaining part was the Region’s government bonds, part of which are retail bonds. As of the start of the year, the debt repayment schedule did not include any significant repayment peaks. ACRA assesses the current refinancing risks as moderately low, despite the fact that this year, the volume of debt due may amount to around RUB 5.7 bln, or 8% of tax and non-tax revenues (TNTR) projected by ACRA for 2023. This is related to the fact that most of the debt (74%) due this year is covered by the Region’s account balances. Around 8% of debt is due to be repaid in 2024.
The Region also issues bonds that are available for purchase by the general public and may be repaid before their maturity date. The share of these bonds in the Region’s total bonds is declining and accounted for 0.6% as of January 1, 2023.
As of the end of 2022, the Region’s debt to current revenues ratio stood at 55%. The Agency forecasts that this ratio will remain unchanged in 2023. The ratio of averaged[1] interest expenditures to total expenditures (excluding subventions) for 2019–2023 will not exceed 2%. The ratio of the Region’s averaged debt to GRP will amount to around 6%.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
The volume of available liquidity increased considerably in 2022. Since the beginning of 2022, the Region’s account balances (excluding funds from autonomous and budgetary institutions) have exceeded the monthly expenses of its budget by 40% on average. Thanks to the execution of the budget with a surplus, the volume of accumulated liquidity exceeded the indicator for 2021 by 62%. According to ACRA’s projections, accumulated funds may be used in full to cover the budget deficit this year. The liquidity ratio of the Region’s budget will be 42% in 2023.
This year, the Region and the Federal Treasury Department (FTD) signed an agreement on the provision of funding. In 2022, several short-term FTD loans were provided to finance cash gaps. As of March 1, 2023, there were no open but unused credit lines in banks.
Moderate budget profile indicators and moderate need for borrowed financing in the medium term. In 2019–2023, the averaged ratio of the balance of current operations to current revenues will stand at 7%, and the current account balance will also remain positive in 2023, in ACRA’s opinion.
The averaged share of capital expenditures in total expenditures for 2019–2023 will amount to around 14%. Capital expenditures on average are approximately two-thirds financed by the Region at its own expense. The share of TNTR in the Region’s revenues averaged for the same period (excluding subventions) will be 69%.
The ratio of the modified budget deficit to current revenues averaged for 2019-2023 will amount to -4%, which indicates the budget’s moderate need to use additional funds for capital purposes. This year, the budget’s need for additional financing may be fully covered by account balances. If this is the case, the Agency expects that the Regional will need to make new borrowings next year.
The Region finished 2022 with a budget surplus totaling 3% of TNTR, which allowed it to increase the size of funds held in its accounts. Regional budget revenues increased by 11% last year compared to 2021, while TNTR grew by 17%. Internal revenues grew thanks to corporate income tax revenues increasing by 19% and personal income tax and property tax revenues each increasing by 17%. The volume of transfers was practically unchanged compared to 2021 (a decline of less than 2% was recorded). The expenditure side of the Region’s budget increased by just over 3% compared to 2021, while capital expenditures grew by 9%.
According to the updated approved budget allocations, TNTR may continue to increase in 2023. Growth of 17% could be comparable to 2022, including a 54% increase of corporate income tax revenues year-on-year. The volume of transfers will remain at the level of 2022. In this case, the revenue side of the budget will increase by 11% year-on-year. It is assumed that the expenditure side of the budget will increase by 10% compared to the previous year, mainly due to a 57% increase of capital expenditures. Together, the factors described above could contribute to a surplus of 5% of TNTR, which will reduce part of the Region’s debt.
ACRA proceeds from the assumption that during 2023, corporate income tax revenues may increase no more than the expected inflation rate. In this case, if other approved budget assignments are unchanged, the Region’s TNTR will increase by no more than 4% compared to 2022, and overall revenues will increase by 2%. Expenditure growth rates of 10% year-on-year will result in a budget deficit of 7% of TNTR, which, according to the Agency, can be financed almost in full using the Region’s account balances.
Diversified economy with a significant dependence on oil production. In 2018–2021, on average around a quarter of the Region’s GRP came from mining operations, mainly oil. According to ACRA’s calculations, the largest share of tax revenues (averaged for 2018–2021) was 13% made up of wholesale trade, and about 11% came from oil and gas production. According to the latest data for 10 months of 2022, wholesale trade accounted to around 21% of tax proceeds, while oil and gas production contributed around 10%. GRP per capita remains below the national average (in 2018–2021 the ratio of averaged indicators was 81%). According to the Region’s data, unemployment stood at 6.6% in 2022. Unemployment averaged for 2019–2022 amounted to 6.9%. The average monthly wage to subsistence wage ratio for the working-age population in the Region was 3.8x averaged for the same period.
key assumptions
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Growth of corporate income tax revenues in 2023 in line with expected inflation with other approved budget assignments unchanged;
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Execution of the budget with a deficit of 7% of TNTR in 2023;
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Using all accumulated liquidity to finance the expected budget deficit.
potential outlook or rating change factors
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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Growth of account balances by the end of the year;
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Lower reliance of the budget on external sources of liquidity;
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Debt load stably falling below 55% of operating revenues.
A negative rating action may be prompted by:
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Ratio of the per capita GRP of the Region to per capita average GRP declining below 80%;
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A shift in the Region’s debt policy toward using short-term debt instruments;
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Share of internal revenues in total revenues (excluding subventions) falling below 60%;
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Significant increase of the budget’s need to borrow funds to finance capital purposes due to insufficient funds held in the Region’s accounts.
issue ratings
Tomsk Region, 34055 (ISIN RU000A0JW1K9), maturity date: June 19, 2023, issue volume: RUB 7 bln — BBB+(RU).
Tomsk Region, 34062 (ISIN RU000A0ZYMJ7), maturity date: December 19, 2024, issue volume: RUB 7 bln — BBB+(RU).
Tomsk Region, 35067 (ISIN RU000A1024L7), maturity date: July 23, 2027, issue volume: RUB 20 bln — BBB+(RU).
Rationale. In ACRA’s opinion, the bonds of the Tomsk Region are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of the Tomsk Region.
regulatory disclosure
The credit ratings of the Tomsk Region and the bond issues of the Tomsk Region (RU000A0JW1K9, RU000A0ZYMJ7, RU000A1024L7) 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 Financial Instruments under the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.
The credit rating of the Tomsk Region and the credit ratings of the government securities of the Tomsk Region (RU000A0JW1K9, RU000A0ZYMJ7, RU000A1024L7) were published by ACRA for the first time on April 10, 2018, April 10, 2018, April 10, 2018, and May 13, 2021, respectively. The credit rating of the Tomsk Region and its outlook and the credit ratings of the government securities of the Tomsk Region (RU000A0JW1K9, RU000A0ZYMJ7, RU000A1024L7) 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 ratings were assigned based on data provided by the Administration of the Tomsk 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 ratings are solicited and the Administration of the Tomsk Region participated in their assignment.
In assigning the credit ratings, 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 Administration of the Tomsk Region. No conflicts of interest were discovered in the course of credit rating assignment.
