The credit rating of the Khabarovsk Krai (hereinafter, the Region) has been upgraded due to changes to the quality assessments of its financial profile as a result of the application of the updated Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
The credit rating of the Region is based on the moderately low debt load and low debt refinancing risks, as well as positive operational efficiency of the budget, and the moderately high share of tax and non-tax revenues (TNTR) in total budget revenues (excluding subventions). The rating is under pressure from the budget’s continuing need for additional sources of financing, moderate level of capital expenditures, and the Agency’s expectations of lower accumulated liquidity held by the Region at the end of the year.
The Khabarovsk Krai is part of the Far Eastern Federal District and is home to around 1.3 mln people. According to the Region’s estimates, its gross regional product (GRP) reached RUB 1,416 bln in 2024.
KEY ASSESSMENT FACTORS
Positive operational efficiency and a continuing need for additional financing sources. The averaged1 ratio of the current account balance to current revenues for 2021–2025 will be 3%. The current account balance was positive in 2024, and it exceeded the portion of capital expenditures financed by the Region without using federal transfers. Nevertheless, ACRA expects the indicator for 2025 may be negative, which will require the Region to use accumulated funds to partially finance current expenditures.
The averaged share of capital expenditures in the Region’s total expenditures will be 9% in 2021–2025. The quality assessment of the flexibility of budget expenditures corresponds to the fourth category. Capital expenditures are annually financed mainly using funds from the senior budget, while their volume, in the Agency’s opinion, is insignificant for the Region’s budget. The current account balance after taking into account interest revenues and expenditures is consistently positive, thanks to which interest expenditures are covered using current revenues. The modified free cash flow is quite volatile (in separate years the indicator has been heavily negative), which explains the Region’s periodic need to partially finance its capital expenditures using additional funds.
The averaged share of TNTR in the Region’s revenues (excluding subventions) for 2021–2025 will equal 80%. The averaged ratio of the modified budget deficit (MBD) to current revenues for the abovementioned period will be just below 0%. ACRA assumes that the budget’s need to use additional funds in 2025–2026 will be significant, which is indicated by the negative value of the non-averaged MBD in the indicated years.
The quality assessment of the budget profile corresponds to the second category. ACRA notes significant deviations of some actual budget revenues from the targets. The Region transfers to lower budgets a portion of the tax revenues collected in connection with the application of the simplified taxation system, as well as all transport tax revenues. The volume of lost tax revenues due to the application of tax benefits projected for 2024 is insignificant for the Region’s budget.
In 2024, the revenue side of the Region’s budget increased by 15% compared to the year before, including TNTR growing by 19%. TNTR growth was largely driven by higher personal income tax revenues (+22%), corporate income tax revenues (+12%), and taxes on total income (+44%). In addition, revenues from the placement of budget funds made a considerable contribution to the growth of TNTR, as they more than doubled last year. The size of transfers was practically unchanged year-on-year. The Region’s budget expenditures increased by 14% last year compared to 2023. The growth was largely driven by increased current (+14%) and capital (+16%) expenditures. The budget was executed with a surplus of 5% of TNTR in 2024, which allowed the Region to increase its account balances.
According to the budget allocations approved as of February 1, 2025, the Region’s budget revenues will decrease by 11% by the end of this year compared to 2024. At the same time, the Region’s TNTR will fall slightly, mainly due to corporate income tax revenues declining by 12%. The approved allocations for the volume of transfers are expected to be half the actual values as of the end of 2024. Budget expenditures for 2025 are planned to increase by 6% year-on-year.
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 risks of debt refinancing. The Region’s debt amounted to RUB 58.3 bln at the end of 2024, which is 2% lower than in 2023. The debt portfolio consisted of budget loans (more than 97%), bonds (about 3%), and the Region’s guarantees. According to the debt repayment schedule at the beginning of the year, 21% of the debt was due in 2025 and around 17% in 2026.
As of March 1, 2025, the size of the Region’s debt and its repayment schedule had not changed.
The regional budget’s debt load is moderately low — the ratio of debt to current revenues amounted to 32% at the end of 2025. The ratio of interest expenditures to total budget expenditures (excluding subventions) averaged over 2021–2025 will not exceed 1%. The ratio of the Region’s debt to projected GRP will be about 4% this year.
The quality assessment of the Region’s debt profile corresponds to the third category. As per the repayment schedule as of January 1, 2025, the weighted average debt repayment period does not exceed four years. Debt is mainly budget loans. The operational efficiency of the budget is predominantly positive, however, in 2025 the current account balance may be well below zero. The debt load of the Region’s municipalities is very low. The ratio of the total debt to TNTR of municipalities was 14% in 2024, with more than a third of the debt due from Komsomolsk-on-Amur. The financial debt of the public sector did not exceed RUB 1.0 bln as of January 1, 2025. At the beginning of this year, the Region had 16 concession agreements, six of which were signed in 2023 and two in 2024.
Funds held in accounts are sufficient to cover the expected budget deficit. In 2024, the balances in the Region’s accounts increased by 40% compared to 2023, which was possible thanks to execution of the budget with a surplus, as well as the use of funds from the Region’s autonomous and budgetary institutions. Over the past 12 months, the balances of funds in the Region’s accounts have on average been twice as high as its monthly expenditures. Most of temporarily available funds can be used this year to finance the budget deficit. The remaining funds will allow for the partial financing of deficits in future periods.
The liquidity ratio of the Region’s budget will be 95% in 2025.
The quality assessment of budget liquidity corresponds to the second category. The Region has bonds in circulation in the debt market; no new issues are planned for the current year. The Region has no open credit lines with a drawdown period of more than a year. The Region did not attract short-term loans from the Federal Treasury Department (FTD) in 2024. Obtaining treasury loans is not yet planned for 2025, however, an agreement with the FTD has been concluded. The risks of refinancing debt obligations are assessed as low, but they may become moderate, given ACRA’s expectations of a reduction in the volume of balances in the Region’s accounts.
Moderate economic development indicators. The Region’s tax revenues are heavily diversified. Over the past four years, sectors funded by the budget (including state governance, education, healthcare, and cultural activities) contributed the largest share, which averaged for 2021–2024 amounted to 20%. The trade sector and industries related to transporting freight and communications accounted for 16% of tax revenues during the specified period. A significant share (12%) was formed by the mining sector, mainly mining of metal ores.
The ratio of the Region’s per capita GRP averaged for 2020–2023 to the national average was 92%. The ratio of the averaged wage to the averaged regional subsistence minimum in 2021–2024 considerably exceeded 3.5. The unemployment rate calculated according to the ILO’s methodology reached just over 2.1% in 2023, its lowest recorded value in the entire analyzed period. The averaged unemployment rate in the Region for 2020–2023 is no more than 3%. Unemployment in the Region was below 2% for October to December 2024.
KEY ASSUMPTIONS
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Execution of the Region’s budget as per the budget allocations approved as of February 1, 2025;
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Use of most of the accumulated funds to cover the expected deficit of this year.
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 positive rating action may be prompted by:
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Lower need of the budget for additional funding;
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Stable growth of the share of capital expenditures in total budget expenditures (excluding subventions);
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Consistent decline of the ratio of debt to current revenues below 30%;
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Significant decline of indirect debt load.
A negative rating action may be prompted by:
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Significant decline of the budget’s operational efficiency;
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Sharp and significant growth in the share of short-term commercial debt;
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Ratio of debt to current revenues exceeding 55%;
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Significant decrease in the volume of funds held in the Region’s accounts.
ISSUE RATINGS
Khabarovsk Krai, 35007 (ISIN RU000A0ZZQQ0), maturity date: October 24, 2025, issue volume: RUB 5 bln — A(RU).
Rationale. In the Agency’s opinion, the bond listed above is a senior unsecured debt instrument, the credit rating of which corresponds to the credit rating of the Khabarovsk Krai.
REGULATORY DISCLOSURE
The credit ratings have been assigned to the Khabarovsk Krai and the bond issue (ISIN RU000A0ZZQQ0) of the Khabarovsk Krai 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 under the National Scale for the Russian Federation was also applied to assign the credit rating to the above issue.
The credit rating of the Khabarovsk Krai and the credit rating of the bond issue (ISIN RU000A0ZZQQ0) of the Khabarovsk Krai were published by ACRA for the first time on June 19, 2020. The credit rating of the Khabarovsk Krai and its outlook and the credit rating of the bond issue (ISIN RU000A0ZZQQ0) of the Khabarovsk Krai 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 Khabarovsk Krai, 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 unsolicited and the Government of the Khabarovsk Krai participated in their assignment.
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 Khabarovsk Krai. No conflicts of interest were discovered in the course of credit rating assignment.
