The credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra (hereinafter, the Region) is based on high regional economic indicators, high budget liquidity, and low debt load.
The Region is located in the Ural Federal District. It is an administrative subject of the Russian Federation and at the same time is part of the Tyumen Region. 1 The Region’s population is 1.7 mln (1% of Russia’s population). The Region’s GRP amounted to RUB 5.65 tln in 2021 and, According to the Region’s estimates, it reached RUB 6.37 tln in 2022. Annually the Region’s GRP amounts to around 5% of the total GRP of Russia’s regions.
1 A portion of corporate income tax revenues collected in the Region goes to the Tyumen Region’s budget (its size is regulated by a relevant agreement between the Tyumen Region and the Region and amounts to 29.5%).
KEY ASSESSMENT FACTORS
Low debt load and high budget liquidity. The Region’s debt portfolio is composed of bonds due before 2024 and infrastructure budget loans due by 2038. By the end of 2022, the ratio of the Region’s debt to current revenues amounted to 2.5%, which indicates a low debt load. By the end of 2023, this ratio will reach 18% due to the need to cover budget deficits. As of January 1, 2023, the amount of budget account balances was several times higher than the total debt and almost equaled average monthly budget expenditures in 2022. By May 1, 2023, the volume of liquidity had increased against the beginning of the year. The amount of accumulated funds is sufficient to cover debt repayments in 2023–2024. The ratio of the Region's debt to GRP is insignificant. Interest expenses are not burdensome.
High budget self-sufficiency. Budget deficit expected by the Region in 2023 is about 21% of tax and non-tax revenues (TNTR), which is expected to be financed mainly by borrowings and some of the accumulated liquidity.
In 2019–2023, the averaged 2 share of TNTR should amount to 91% of total revenues (excluding subventions).
The flexibility of budget expenditures is moderately high. The averaged ratio of capital expenditures to total budget expenditures, excluding subventions, should be 15.5% for the analyzed period, while the share of capital expenditures financed by the Region with its own funds should be close to 100%.
The averaged ratio of current account balance to current revenues should be about 8.4% for 2019−2023, which indicates that current revenues are enough to cover current expenses and a portion of capital expenditures.
The ratio of averaged modified budget deficit to averaged current revenues should reach -7.7%, which indicates an insignificant need for debt financing or utilizing account balances.
The Region is a federal budget donor, producing more than 40% of Russian oil. The sectoral structure of the Region’s GRP is stable and the contribution of the mineral extraction sector exceeds a half of the GRP. Most of taxes and charges collected in the Region are transferred to the federal budget, while a lesser portion goes to the Region’s consolidated budget. The Region’s tax revenues form a significant share of the federal budget’s total tax revenues.
In 2019−2022, the ratio of averaged wage to averaged regional subsistence minimum amounted to 5.2, and the Region’s unemployment rate (according to the ILO’s methodology) was significantly lower than the national average.2 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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Maintaining a countercyclical budget policy in terms of expense planning.
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Financing the 2023 budget deficit mostly with borrowings.
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 negative rating action may be prompted by:
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Critical shrink of production volumes in the Region, declining macroeconomic indicators;
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Sustainably negative current account balance;
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Significantly lower budget liquidity;
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Debt load exceeding 30% of current revenues;
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Significant changes in inter-budgetary relations in Russia.
ISSUE RATINGS
Khanty-Mansiysk Autonomous Okrug-Ugra, 35001 (ISIN RU000A0JX215), maturity date: December 18, 2023, issue volume: RUB 6 bln — ААА(RU);
Khanty-Mansiysk Autonomous Okrug-Ugra, 35002 (ISIN RU000A0ZYKW4), maturity date: December 17, 2024, issue volume: RUB 7 bln — ААА(RU).
Rationale. In ACRA’s opinion, the bonds listed above are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra.
REGULATORY DISCLOSURE
The credit ratings of the Khanty-Mansiysk Autonomous Okrug-Ugra and the bonds (RU000A0JX215, RU000A0ZYKW4) issued by the Khanty-Mansiysk Autonomous Okrug-Ugra 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 on the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.
The credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra and the credit ratings of the bonds (RU000A0JX215, RU000A0ZYKW4) issued by the Khanty-Mansiysk Autonomous Okrug-Ugra were published by ACRA for the first time on September 26, 2017, September 28, 2017, and December 15, 2017, respectively. The credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra and its outlook, as well as the credit ratings of the bonds (RU000A0JX215, RU000A0ZYKW4) issued by the Khanty-Mansiysk Autonomous Okrug-Ugra 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 Khanty-Mansiysk Autonomous Okrug-Ugra, 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 Government of the Khanty-Mansiysk Autonomous Okrug-Ugra participated in the rating process.
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 Government of the Khanty-Mansiysk Autonomous Okrug-Ugra. No conflicts of interest were identified in the course of credit rating process.
