The credit rating of the Tyumen Region (hereinafter, the Region) is based on its high share of internal budget revenues, low debt load and minimal debt refinancing risks, as well as the moderately high assessment of the Region’s socioeconomic development.
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 the country’s population. As part of the preliminary forecast of the Region’s socioeconomic development for 2025–2027, the estimated volume of gross regional product (GRP) for 2023 is RUB 1,829.9 bln, which is 6% more than the previous year. In 2024, the Region expects GRP to increase by 8% in nominal terms and 3% in real terms compared to GRP for 2023.
KEY ASSESSMENT FACTORS
The budget profile has a high share of internal revenues and retains the need to use additional funds (borrowings and available liquidity). The current version of the Region’s budget law for 2024 foresees revenues declining by 23%, mainly due to tax and non-tax revenues (TNTR) falling by 22%. At the same time, budget expenditures will grow by around 8%, current expenditures will increase by 10%, and capital expenditures will fall by 7%. The deficit at the end of the year may amount to 32% of TNTR, and, according to the Region’s plans, around half of it will be financed using borrowed funds.
According to the execution of the budget for the first five months of this year, corporate income tax proceeds declined by 25% compared to the same period last year. In accordance with the current version of the law on the regional budget, in 2024 it is envisaged that they will reduce by 28% compared to 2023. Personal income tax revenues, in turn, increased by 35% in this period, while the budget law envisages them growing by 5% by the end of the year. At the same time, the expenditure side of the budget increased by 20% over the first five months of this year compared to the same period last year. Taking into account the analysis of current budget execution, as well as execution of the Region’s budget over the past five years, ACRA expects that revenues and expenditures may be higher than the targets this year. As a result, the size of the deficit will be slightly higher than the parameters projected by the Region, which will require a larger amount of accumulated liquidity to be spent at the end of the year with a decrease in the amount of borrowings.
According to ACRA’s calculations, the averaged1 ratio of the Region’s current account balance to current revenues for 2021–2025 may be 3.6%. The current account balance will be negative in 2024 and significant in absolute terms, which indicates that current revenues are insufficient to finance the entire volume of current expenditures. This will require borrowed funds or spending previously accumulated liquidity.
The share of capital expenditures in the Region’s total expenditures (excluding subventions) is assessed as high — it may average 16.2% for 2021–2025. 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 TNTR in the Region’s revenues over the aforementioned period will amount to 96.8% (excluding subventions). The ratio of the modified budget deficit to current revenues averaged for 2021–2025 is expected at -11.9%. ACRA uses a positive adjustment for this indicator, taking into account the expected low debt load of the Region at the end of the current year, as well as the consistently high volume of funds in the Region’s accounts.
The quality assessment of the Region’s budget profile is high. There are no known 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. The budget law provides for additional transfer of personal income tax revenues to municipal budgets. The budget process is characterized by moderate accuracy of planning and dominance of conservative expectations. Deviations of actual revenues from the forecast indicators provided for in the first version of the budget are observed mainly in transfers and corporate income tax revenues due to the volatility of the external environment. These deviations occur for reasons beyond the Region’s control.
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 minimal refinancing risks. Although the volume of the Region’s debt increased by 33% in 2023, this still corresponds to a low level (less than 3% of current revenues). The current version of the budget law states that the Region plans to significantly increase its debt in 2024, mainly by resorting to commercial loans. The Region’s debt to current revenues ratio is expected to be around 18%, which still allows the Region’s debt load to be assessed as low. Since 2010, the Region’s debt has only been made up of budget loans and guarantees, which accounted for 87% and 13% of debt as of the start of 2024, respectively.
The debt repayment schedule is balanced — as of January 1, 2024, the Region had to repay around 11% of its debt in 2024. Over the first five months of 2024, the Region’s public debt increased by 7% amid the attraction of a tranche of an infrastructure budget loan to finance infrastructure projects, as well as due to the increase in obligations under state guarantees of the Region. At the same time, the repayment schedule as a percentage of the total debt has not changed; the Region still has to repay 11% of its debt by the end of this year.
The Region plans to obtain a bank loan in 2024, which will result in a change to the structure of debt. This somewhat increases the refinancing risks. However, they remain minimal due to the low size of debt and the significant volume of balances in the Region’s accounts.
Interest expenditures are not burdensome for the Region — the averaged level of interest expenditures for 2021–2025 will be around 1% of the Region’s total budget expenditures (excluding subventions). The ratio of the Region’s debt to GRP will amount to 2.5%.
The quality assessment of the Region’s debt load 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 load of municipalities, and the Region’s balanced debt policy based on the use of long-term debt instruments. The current account balance is primarily positive, with the exception of the planned value for the current year. The financial debt of public sector companies is insignificant and amounted to 4% of TNTR as of January 1, 2024.
High accumulated liquidity of the budget. The size of funds in the Region’s accounts grew by more than 70% last year due to 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. Over the first five months of this year, the volume of funds in the budget’s accounts increased by a further 20%, and as of June 1, 2024 exceeded the Region’s debt as of the same date by nine times.
The liquidity ratio of the Region’s budget (according to ACRA’s methodology) will be around 75% in 2024. However, ACRA applied a positive adjustment to this indicator because the Region regularly places accumulated liquidity in deposits.
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 January 1, 2024. No credit lines were acquired over the first five months of this year. An agreement with the Federal Treasury Department for the Tyumen Region on providing budget loans to the Region to replenish its balances in the single budget account has not been signed in 2024 because 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. The ratio of these indicators, averaged for 2019–2022 has declined from high to moderately high, and, according to the Region’s projections and ACRA’s calculations, will remain at this level over the forecast period.
The ratio of the averaged wage for 2020–2023 to the averaged regional subsistence minimum for the same period exceeds 3.5. The unemployment rate averaged for 2020–2023 calculated as per the ILO’s methodology was 3.6%.
The Region’s economy is based on hydrocarbon production and processing, 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 2020–2023 — 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 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 revenue side of Region’s budget according to the parameters set out by the current version of the budget law, except for personal include tax revenues, and execution of the expenditure side to a larger extent than planned;
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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 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 stay 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.
