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. Business activities are concentrated in the administrative center, the city of Ryazan, where about half of the Region’s population lives. The Region’s GRP is close to 0.44% of the total GRP of all Russian regions. Around 0.7% of the country’s population lives in the Region.
key assessment factors
The moderately 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 averaged1 share will amount to 72% for 2020–2024. The averaged share of capital expenditures in total expenditures (excluding subventions) in the same period will equal 23%. On average for 2020–2024, the Region finances half of its capital expenditures with transfers from the federal budget, while the remaining portion of expenditures is financed with internal revenues.
The averaged ratio of the current account balance to current revenues for 2020–2024 will be 8%. 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 2022 budget was executed with a surplus of 5% of tax and non-tax revenues (TNTR). The regional budget law provides for the 2023 budget deficit at 19% of TNTR, which is expected to be covered mostly with funds in budget accounts (65%) accumulated in previous years, as well as with bank and budget loans (35%). In the first nine months of this year, the budget was executed with a surplus of 8% of TNTR; the current execution of the revenue part of the regional budget (an increase of about 8% y-o-y against the planned year-end reduction of revenues by 3%) allows ACRA to consider the planning conservative and expect budget execution by the end of the year with a deficit that is less than stipulated by the current version of the Region’s budget law. This, in turn, will allow the Region to maintain a greater amount of accumulated liquidity
1 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 low refinancing risks. According to ACRA's estimates, the ratio of the Region's debt to its current revenues may reach 36% by the end of 2023, which indicates a moderately low level of debt load. The ratio of debt to GRP will be about 5%.
As of January 1, 2023, the Region's debt included only budget loans falling due until 2037. In 2023 and 2024, the Region is to repay about 3% of its debt obligations annually. By October 1, 2023, the Region’s debt structure has not changed, and its volume has increased by 8% due to RUB 2 bln of new budget loans granted for financial support to infrastructure projects and for advanced financing of expenditures. Public debt servicing costs are not a burden on the Region's budget: the average interest expenses in 2020–2024 will be 0.3% of averaged total budget expenditures, excluding subventions.
Some accumulated liquidity may be used to cover budget deficits. The amount of budget account balances sustainably exceeds average monthly expenditures. As of January 1, 2023, the balances covered about 50% of the Region's debt obligations as of the same date and about 90% as of October 1, 2023. According to the Region’s current budget law, a portion of accumulated liquidity may be used to cover budget deficits in 2023. The liquidity ratio calculated as per ACRA's methodology may amount to 91% 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 share of the manufacturing sector, which is the largest sector of the economy, averaged for 2019–2022 is around 28% of tax revenues of the regional budget. At the same time, the share of industries comprising the manufacturing sector are comparable, and in 2022, the share of the leading industry did not exceed 6%. The wholesale and retail sale sector generates about 17% of tax revenues, the public sector's share is 16%. 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 2019–2022, the averaged wage exceeded the averaged regional subsistence minimum for working-age population by more than three times, while unemployment was sustainably below the national average. In 2021, the Region's GRP grew by 3.9% in physical terms whereas in all other Russian regions, GRP increased by 7.3%.
KEY ASSUMPTIONS
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Execution of the 2023 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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Increase in available sources of liquidity;
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Better socio-economic development indicators.
A negative rating action may be prompted by:
- The debt load exceeding 55% of current revenues;
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Internal budget revenues declining below 60% of the total revenues (excluding subventions);
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Lower volume of budget’s own liquidity;
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Increase in current budget expenditures not supported by a corresponding growth of revenues.
issue ratings
No outstanding issues have been rated.
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 of the Ryazan Region has been revised and published earlier than the dates specified in the Calendar of sovereign credit rating revisions and publications due to early performance of procedures for reviewing and agreeing the disclosed information with the rated entity. The planned revision date was November 1, 2023, the new revision date is October 25, 2023. The planned disclosure date was November 7, 2023, the new disclosure date is October 27, 2023.
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 unsolicited 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 were, 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.
