The credit rating of the Tyumen Region (hereinafter, the Region) is based on its low debt load and lack of debt refinancing risks, as well as the budget’s high self-sufficiency and flexibility of budget expenditures. The rating is supported by the high socio-economic development of the Region.
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 1.6 mln (not including the population of the autonomous districts). According to the Region’s assessments, its gross regional product (GRP) may have reached RUB 1,600 bln in 2022.
key assessment factors
Strong budget profile coupled with a continued need to use additional funds. The ratio of the Region’s current account balance to current revenues averaged1 for 2020–2024 will be around 4%. The current account balance is expected to be negative in 2023, however, it will not be large relative to the volume of current revenues (around -2%), which indicates that the Region will be able to finance most of its current expenditures using current revenues.
The share of capital expenditures in the Region’s total expenditures (excluding subventions) is assessed as high — it will average 19% for 2020–2024. Annually, capital expenditures are more than 90% financed by the Region’s 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 96% (excluding subventions).
The ratio of the averaged modified budget deficit to current revenues for 2020–2024 will amount to -16% as per the Region’s current budget law. The projected modified budget deficit for 2023 indicates that the Region will need to use accumulated liquidity and raise additional funds to finance capital expenditures. The Agency applied a positive adjustment to this indicator due to the expected low debt load of the Region by the end of this year.
In 2022, the Region recorded a significant budget deficit of 24% of TNTR, most of which was covered using previously accumulated liquidity.
According to the current version of the Region’s budget law, revenues may continue to decline in 2023, with this decrease amounting to around 10% as of the end of the year. TNTR may decline by 9% vs. 2022, while corporate income tax revenues may fall by 8%. According to the budget law, transfers will decline by 20%. As a result of the budget execution for the past six months, there was no reduction in revenues, growth was 2% compared to the same period last year, and tax revenues demonstrated, albeit to varying degrees, a positive trend. The Region expects the expenditure part of the budget to decline by 10% relative to the year before. At the same time, capital expenditures will fall by 37%, while current expenditures will remain at roughly the same level as last year. As of the end of H1 2023, expenditures declined by 11% compared to the indicator for the same period last year. The expected budget deficit for 2023 will amount to 24% of TNTR; to finance it the Region plans to resort to commercial borrowing, while approximately half of the deficit will be financed using funds in accounts.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
Low debt load and absence of debt refinancing risks. As of the start of 2023, the Region’s debt amounted to RUB 6.3 bln and was made up of budget loans and guarantees (82% and 18%, respectively). The debt repayment schedule as of the beginning of the year did not imply significant repayments in the coming years.
Over the first half of the year, the Region’s debt increased by 28% due to it receiving an infrastructure budget loan to finance infrastructure projects, as well as amid an increase in obligations under state guarantees of the Region; as of July 1, 2023, the Region’s debt was RUB 8.1 bln. In the next five years, the Region needs to repay 36% of its debt, while this year it does not need to repay any obligations. Risks of refinancing obligations were practically absent as of the July 1, 2023 due to the low size of debt and the significant volume of balances in the Region’s accounts.
As of the end of 2022, the Region’s ratio of debt to current revenues stood at 3%. In 2023, this indicator may grow to 17% according to the current version of the budget law due to financing the projected deficit. The debt burden will continue to be low.
Interest expenses are not burdensome for the Region — the averaged level of interest expenses for 2020–2024 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 2%.
The volume of accumulated liquidity declined considerably in 2022. The size of funds in the Region’s accounts declined significantly last year due to financing the budget deficit. At the same time, the volume of remaining liquidity is still high and exceeds the Region’s total debt by practically six times. Since the start of 2023, the volume of balances in accounts has more than doubled compared to the start of the year and as of July 1, 2023 exceeded public debt as of the same period by multiple times. According to the current version of the budget law, around half of accumulated liquidity will be used to finance the budget deficit projected for 2023. The Region’s budget liquidity ratio (according to ACRA’s methodology) will amount to around 82% as of the end of 2023.
The Region places accumulated liquidity in deposits and its single treasury account, which generates interest income. 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 2018–2021.
The ratio of the averaged wage for 2019–2022 to the averaged regional subsistence minimum for the same period exceeded 3.5. The unemployment rate averaged for 2019–2022 calculated as per the ILO’s methodology was 4.2%, with unemployment falling from 4.4% to 3.9% in 2022.
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, 2035 and may be extended. 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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Financing the expected deficit using commercial borrowings;
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Debt load exceeding 17% of current revenues in 2023;
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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 corporate income 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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Steady decline in the budget’s operational efficiency;
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Further significant decline in liquidity;
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Debt load exceeding 30% of current revenues coupled with higher refinancing risks;
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Substantial change to 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 Government of 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.
