The credit rating of the Sverdlovsk Region (hereinafter, the Region) reflects balanced budget profile indicators and low debt refinancing risks. The Region’s socioeconomic development indicators are moderate and partially dependent on the local metals industry.
The Sverdlovsk Region is part of the Ural Federal District and borders seven other regions of the Russian Federation. The Region’s population is about 4.22 mln (3% of Russia’s population). The gross regional product (GRP) amounted to RUB 4.1 tln in 2023 and, according to the Region’s estimates, it exceeded RUB 4.4 tln in 2024 (the Region’s GRP is consistently around 3% of the total GRP generated by Russia’s regions).
KEY ASSESSMENT FACTORS
High budget self-sufficiency and flexibility of budget expenditures. The Region’s ratio of tax and non-tax revenues (TNTR) to total revenues (excluding subventions) is high: its averaged1 value for 2021–2025 is projected to be 90%. The ratio of current account to current revenues for the same period may amount to about 18%.
The averaged share of capital expenditures in the Region’s total expenditures for 2021–2025 is very high — about 22%. At the same time, the quality assessment of the budget expenditure flexibility corresponds to the third category: capital expenditures are financed primarily from the regional budget, however, taking into account their dynamics in the periods of low TNTR, the possibility of their significant reduction is not obvious. The need to increase the volume of capital expenditures corresponds to the capabilities of the regional budget. The current account balance after interest income and expenses is regularly positive.
In the Agency’s opinion, the ratio of the modified budget deficit to current revenues averaged over the abovementioned period may be negative. Regardless significant amounts held in budget accounts, this indicator is not adjusted, as these amounts are expected to be used to cover budget deficits.
This year’s budget is expected to show a significant deficit, which will be financed mainly through the issuance of bonds and the utilization of available funds.
The quality assessment of the Region’s budget profile is at the maximum level. There is no information about any breach of legislation that could affect the budget profile. The Region transfers extra tax revenues to a lower level; tax benefits cause no significant impact on the budget (6% and 7% of TNTR in 2023 and 2024, respectively). Budget planning is conservative and is hampered by a partial dependence on the demand and prices for the main goods manufactured by regional enterprises.
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 insignificant debt refinancing risks. As of January 1, 2025, the Region’s debt load amounted to 21% of its current revenues and it is expected to grow to 26% by the end of this year. Taking in account this growth trend, ACRA has applied an adjustment for threshold value.
At the beginning of the current year, three quarters of the Region’s debt consisted of budget loans; the rest were bonds.
Regardless that at the beginning of the year the Region’s short-term debt was 25%, the repayment schedule is generally balanced due to the debt structure. The Region has already concluded a single supplementary agreement contemplated by Decree of the Government of the Russian Federation No. 79 dated February 1, 2025, according to which RUB 48.9 bln of budget loans is due to be repaid in 2025–2039 (repayment of two thirds of this debt has been postponed to the period from 2030 to 2039, in equal annual payments, with the possibility of waiver subject to certain conditions).
Interest expenses are not burdensome for the Region since interest expenses averaged for 2021–2025 will amount to 1% of total budget expenditures (excluding subventions).
The ratio of debt to GRP annually does not exceed 4%, which corresponds to the low total debt load as per ACRA’s methodology.
The quality assessment of the debt profile corresponds to the maximum level. The weighted average debt maturity was 3.75 years at the beginning of the year, the debt structure is diversified; overdue accounts payable are minimal, and the current account balance is regularly substantially positive. The debt of public sector companies is not significant for the regional budget, and the need for their support cannot have a significant impact on it. Total expenses under the commitments to public-private partnerships and concessions did not exceed RUB 2 bln in 2024. The debt of the lower-level budgets is sustainably low. The Region’s debt policy is based on long-term borrowings.
High volume of available liquidity. The liquidity ratio amounted to 529% in 2024, and it is expected to fall to 123% this year due to the need to cover budget deficits. In 2024, the Region’s account balances (including funds of autonomous and budgetary institutions, as well as funds of organizations that are not part of the budget process) on average exceeded monthly budget expenditures by two times. At the same time, monthly volumes of the regional budget’s internal funds are much lower. The Region deposits its accumulated liquidity with banks, which generates interest income.
The quality assessment of the liquidity profile is maximum. The Region is an active borrower in the debt market; there is no need to attract additional financing due to the presence of significant account balances. No tenders for credit lines have been held over the past 24 months, as they are unnecessary; no loan agreements were made with the Federal Treasury Department in 2024 and the past period of 2025. Refinancing risks are minimal, no significant increase in accounts payable of the regional budget is observed.
Diversified economy with moderate concentration on the metals industry. The Region’s GRP per capita averaged for 2020–2023 amounted to 89% of the national average. The ratio of wage to regional subsistence minimum averaged for 2021–2024 was 4.4. At the end of 2024, the unemployment rate averaged over the last four years calculated according to the ILO’s methodology amounted to 2.2%.
ACRA notes the moderate concentration of the economy on the metals industry which produces about a tenth of Russia’s steel and finished rolled products, up to a quarter of steel pipes, a fifth of iron ore, and a third of copper cathode. About a quarter of the world’s titanium is produced in the Region. According to ACRA’s estimates, the contribution of the metal production industry to the Region’s tax revenues averaged for 2021–2024 amounted to 17%. In 2024, six of the ten largest organizations in the Region (in terms of revenue) were related to the metals industry. Mechanical engineering and chemicals are also the key industries for the Region.
KEY ASSUMPTIONS
-
Maintaining a high share of TNTR in the budget’s revenue structure.
-
Maintaining a low or moderately low debt load.
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:
- The Region’s debt load consistently low, along with high budget liquidity and low refinancing risks.
A negative rating action may be prompted by:
-
Considerable growth of the budget’s need for debt financing;
-
Significant growth of the short-term portion of debt.
issue ratings
Sverdlovsk Region, 35004 (ISIN RU000A0ZYDU3), maturity date: October 22, 2025, issue volume: RUB 10 bln — АA(RU).
Sverdlovsk Region, 35005 (ISIN RU000A0ZZQH9), maturity date: October 23, 2026, issue volume: RUB 5 bln — АA(RU).
Sverdlovsk Region, 35006 (ISIN RU000A1016N9), maturity date: December 15, 2026, issue volume: RUB 5 bln — АA(RU).
Sverdlovsk Region, 34007 (ISIN RU000A101UG7), maturity date: June 28, 2025, issue volume: RUB 10 bln — АA(RU).
Sverdlovsk Region, 35008 (ISIN RU000A101Z17), maturity date: July 29, 2027, issue volume: RUB 12 bln — АA(RU).
Sverdlovsk Region, 35009 (ISIN RU000A102CT6), maturity date: November 17, 2027, volume: RUB 8 bln — АA(RU).
Rationale. In ACRA’s opinion, the bonds of the Sverdlovsk Region are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of the Sverdlovsk Region.
REGULATORY DISCLOSURE
The credit ratings have been assigned to the Sverdlovsk Region and the bond issues (ISIN RU000A0ZYDU3, RU000A0ZZQH9, RU000A1016N9, RU000A101UG7, RU000A101Z17, RU000A102CT6) of the Sverdlovsk Region 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 credit ratings to the above issues.
The credit ratings of the Sverdlovsk Region and the government securities (ISIN RU000A0ZYDU3, RU000A0ZZQH9, RU000A1016N9, RU000A101UG7, RU000A101Z17, RU000A102CT6) of the Sverdlovsk Region were published by ACRA for the first time on September 8, 2017, October 24, 2017, October 18, 2018, December 11, 2019, June 29, 2020, July 24, 2020, and November 18, 2020, respectively. The credit rating of the Sverdlovsk Region and its outlook, as well as the credit ratings of the government securities of the Sverdlovsk Region, 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 Sverdlovsk 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 ratings are solicited and the Government of the Sverdlovsk Region participated in their assignment.
Disclosure of deviations from the approved methodologies: the relative liquidity of the Region is estimated with a deviation from the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation due to the impossibility to segregate its own budget funds from the funds of autonomous and budgetary institutions and organizations that are not participants to the budget process.
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 Sverdlovsk Region. No conflicts of interest were discovered in the course of credit rating assignment.
