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 liquidity of the budget and moderately high socioeconomic development of the Region.
The Tyumen Region is located in the Ural Federal District. The Region includes the Khanty-Mansi 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), which amounts to approximately 1.1% of Russia’s population. According to the Region’s assessments, its gross regional product (GRP) may have reached RUB 1,695 bln in 2023, which is higher than the indicator expected for 2022 by 6% in nominal terms and 3% in real terms. The Region’s GRP amounted to 1.3% of the total GRP of Russia’s regions on average in 2017–2021.
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 9.8%. The current account balance was positive in 2023 and significant in terms of its absolute value, which indicates the possibility of financing all current and capital expenses from current revenues. The current account balance is expected to be negative in 2024, 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 may average 20% 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).
According to the parameters of the Region’s current budget law, the ratio of the averaged modified budget deficit to current revenues for 2020–2024 will amount to -7.1%. The projected modified budget deficit for 2024 indicates that the Region will need to use accumulated liquidity or raise borrowed 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, as well as due to the consistently high balance of funds in the Region’s accounts.
In 2023, against the backdrop of a significant increase in corporate income tax revenues (+53% compared to 2022), a budget surplus was formed in the amount of 8% of TNTR, which made it possible to significantly increase the amount of liquidity in the Region’s accounts.
According to the Region’s current budget law, its revenues may decline by 23% in 2024, primarily due to a planned reduction in TNTR by 22% and transfers declining by more than 40%. At the same time, budget expenditures will be more or less the same as in 2023, current expenses are planned to be increased by 2%, while capital expenditures will be cut by 30%. The deficit at the end of this year may amount to 18% of TNTR, and, according to the Region’s plans, 82% of the deficit will be financed using commercial borrowings.
The quality assessment of the Region’s budget profile is high. There is no information about cases of violation of budget legislation; the amount of lost tax revenues due to the use of tax benefits is insignificant for the Region’s budget.
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. The volume of the Region’s debt increased by 33% in 2023, however, it remained at a very low level by the end of the year (less than 3% of current revenues). The current version of the budget law states that the Region plans to increase its debt by more than four times in 2024, which will amount to almost 19% of expected current revenues, however, this still allows the Region’s debt load to be assessed as low. Since 2010, the Region’s debt has been made up of budget loans and guarantees only, which accounted for 87% and 13% of debt as of the start of 2024, respectively. The debt repayment schedule as of the start of the year is balanced — this year the Region has to repay 11% of its debt; and the peak in repayments is scheduled for 2028, when the Region will have to repay 12% of its current debt; the other periods involve annual repayments of around 6%.
In 2024, the Region plans to obtain a bank loan, which will result in a change to the structure of debt. This somewhat increases the refinancing risks, however, they remain low due to the low size of debt and the significant volume of balances in the Region’s accounts.
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 debt to GRP will amount to 3%.
The quality assessment of the Region’s debt burden is determined by the Agency at the highest level due to the long weighted average debt repayment period, significantly exceeding 3.5 years, the insignificant debt burden of municipalities, and the Region’s balanced debt policy based on the use of long-term debt instruments.
The volume of accumulated liquidity increased in 2023. The size of funds in the Region’s accounts increased by more than 70% last year amid an increase in corporate income tax revenues, and, as a result, the budget surplus. As of January 1, 2024, the volume of liquidity was almost eight times higher than the Region’s debt as of the same date. According to the current version of the budget law, the Region does not expect to spend a considerable amount of its accumulated liquidity. The Region’s budget liquidity ratio (according to ACRA’s methodology) will amount to around 146% as of the end of 2024.
The Region places accumulated liquidity in deposits and its single treasury account, which generates interest income, which amounted to 2% of TNTR in 2023. The regional budget does not have any overdue payables. Municipal entities have an insignificant debt load.
The quality assessment of the Region’s budget liquidity is high. According to the Region, the budget did not have any overdue payables as of October 1, 2023, and there is no need to obtain short-term loans to finance cash gaps. Risks for refinancing debt obligations are minimal.
The Region’s socioeconomic indicators are moderately high. The Region’s GRP per capita has been high over the past five years, and the average of this indicator exceeded the national average by 1.2x in 2018–2021. According to the Agency’s calculations, from 2022 the ratio may decline from high to moderately high and remain at this level over the forecast period.
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 expects it to have declined further, to 3.1%, in 2023.
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 2019–2022 — 26%, while in 2023 this indicator may have approached 29%. 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 19% of current revenues in 2024;
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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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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.
