The credit rating of the Kaluga Region (hereinafter, the Region) has been upgraded due to growth of the liquidity ratio of the Region’s budget, which was due to execution of the budget in 2024 with a surplus and the restructuring of a significant part of budget loans this April that resulted in a considerable decline in the size of debt to be repaid in 2025.
The rating is based on the Region’s moderately low debt load with low refinancing risks, positive operational efficiency of the budget, and moderately high shares of capital expenditures in total expenditures (excluding subventions) and tax and non-tax revenues (TNTR) in the total revenues of the Region (excluding subventions). The rating is constrained by the moderate economic development indicators and the budget’s growing need for additional financing.
The Kaluga Region is part of the Central Federal District. The Region is home to around 1.0 mln people. According to the Region’s estimates, its gross regional product (GRP) exceeded RUB 880 bln in 2024.
KEY ASSESSMENT FACTORS
Moderately low debt load and low refinancing risks. The Region’s debt amounted to RUB 31.2 bln last year, which was similar to its size in 2023. The debt portfolio only included budget loans. According to the debt repayment schedule as of January 1, 2025, this year the Region had to repay 18% of its debt liabilities, and 16% annually from 2026 to 2028.
As of May 1, 2025, the Region’s debt remained at the same level, however, the repayment schedule had changed considerably. In April 2025, most of the Region’s budget loans were restructured as per Decree of the Government of the Russian Federation No. 79. According to the updated debt repayment schedule, the Region will have to repay 6% of its debt annually over the next four years.
The Region’s debt to current revenues ratio amounted to 33% in 2024. ACRA does not expect this ratio to change considerably in 2025 — the Region’s debt load will remain moderately low.
Interest expenditures are not burdensome for the Region due to the non-commercial nature of debt: interest expenditures averaged1 over 2021–2025 are less than 1% of total budget expenditures (excluding subventions). The Region’s debt to GDP ratio projected for the end of this year will be around 3%.
The quality assessment of the Region’s debt portfolio corresponds to the first category. The weighted average debt repayment period exceeds four years. The debt portfolio is entirely made up of budget loans. The operational efficiency of the Region’s budget is mainly positive, including in the forecast period (2025–2027). The debt load of municipal entities is low — the ratio of their debt to their total TNTR was 15% in 2024. The size of the financial debt of public sector companies and their overdue payables was insignificant for the Region’s budget as of the start of this year.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
Accumulated liquidity increased at the end of last year. In 2024, the volume of the Region’s accumulated funds increased by approximately twofold compared to the start of the year. Along with this, over the past 12 months, account balances have on average almost twice exceeded monthly budget expenditures. The volume of accumulated funds exceeds the budget deficit for 2025 projected by the Agency, combined with the volume of debt to be repaid this year. Therefore, ACRA believes that the Region will not need to attract commercial debt until the end of the year.
The budget liquidity ratio will exceed 140% by the end of 2025 thanks to an increase in account balances as of the end of last year and restructuring of part of the Region’s budget debt in April 2025, which enabled the volume of debt liabilities subject to repayment to be considerably lowered.
The quality assessment of the budget’s liquidity corresponds to the second category. Risks of refinancing debt obligations are assessed as low due to the non-commercial nature of debt and the extension of its maturity due to restructuring of the lion’s share of debt. The Region does not currently need to acquire credit lines as short-term loans from the Federal Treasury Department can be used to cover potential cash gaps.
Positive operational efficiency coupled with the budget’s growing need to use additional financing. The averaged ratio of the current account balance to current revenues for 2021–2025 will amount to just below 10%. In 2024, the current account balance was 16% of the volume of the Region’s current revenues amid a significant budget surplus. The indicator is also expected to be positive in 2025, but almost three times smaller than last year. The positive operational efficiency indicates that the Region’s current revenues are sufficient to finance its current expenditures in full.
The averaged share of capital expenditures in total expenditures for 2021–2025 will amount to 16%, while the quality assessment of the flexibility of budget expenditures corresponds to the third category. In separate years, most of capital expenditures have been financed using funds from the higher budget. The current account balance after taking into account interest income and expenditures is consistently positive (with the exception of the forecast period from 2025 to 2027). The modified free cash flow is volatile, which is explained by the periodic need for partial financing of capital expenditures at the expense of additional funds.
The averaged share of TNTR in the Region’s total revenues (excluding subventions) for the above period will amount to 83%, which indicates a low dependence on the senior budget. The ratio of the modified budget deficit (MBD) to current revenues averaged for 2021–2025 is expected to be -1%. The budget’s need for additional funds is assessed by ACRA as moderate. According to the Agency’s projections, the MBD will amount to around 7% of the Region’s current revenues over the next two years. At the same time, the projected values of the averaged indicator also point to the budget’s growing need to use additional financing.
The quality assessment of the budget profile corresponds to the first category. There are no cases of violation of budget legislation. The Region additionally transfers to lower budgets part of the proceeds from corporate income tax, property tax, personal income tax, and tax levied in connection with the simplified taxation system. The estimated volume of tax revenues lost due to the application of tax benefits was insignificant for the Region’s budget in 2024. The Agency notes significant annual deviations of some budget indicators from the targets.
In 2024, the revenue side of the Region’s budget increased by 10% compared to 2023. TNTR growth exceeded 18%, which was largely due to growing corporate income tax revenues (+14%), personal income tax revenues (+27%), and revenues from tax on goods and services (+11%). Income generated by depositing temporarily idle funds practically doubled. At the same time, the volume of transfers declined by a quarter year-on-year. Current transfers fell by 23%, while capital transfers fell by approximately a third. The Region’s budget expenditures increased by 3% amid a minor decline (-7%) in capital expenditures. Last year’s budget was executed with a surplus of 7% of TNTR, which enabled the Region to considerably grow its account balances.
According to the current version of the Region’s budget law, revenues will decline by 5% this year compared to last year. At the same time, TNTR will fall by 6%, including due to corporate income tax proceeds declining by 10%. Transfers have been approved at a slightly lower level than in 2024 (-4%), while capital transfers are planned to fall by 21%. The expenditure side of the budget will increase by 3% this year, mainly on the back of higher current expenditures. The planned deficit will be 3% of TNTR and will be financed mainly using accumulated liquidity.
ACRA assumes that the Region’s current expenditures in 2025 may increase at similar rates as expected end-of-year inflation. If other budget parameters remain unchanged, this will lead to an increase in the expected budget deficit, which will require the Region to use a larger volume of its accumulated funds.
Moderate economic development indicators. The ratio of the Region’s averaged per capita GRP for 2020–2023 to the corresponding national average was 70%. This ratio for 2021–2024 may have remained at the same level in accordance with the current forecast of the Region and ACRA’s expectations.
The ratio of wage to the regional subsistence minimum for the working-age population averaged for 2021–2024 exceeded 4.0, which is positive for the Region’s economic profile. Unemployment in the Region averaged for the same period was 2%, while in 2024 it was 1.5%.
The Region has significantly developed trade and manufacturing industries. According to the Agency’s estimates, the largest share of taxes paid by enterprises registered in the Region comes from the manufacturing sector. The share of these tax revenues averaged over 2021–2024 amounted to 45%, and was generated by companies in the food, metal, automotive and other industries, which is an indication of a high diversification of tax revenues. The second largest sector that generates a significant share of tax revenues is wholesale and retail trade, whose share of tax revenues in the above period amounted to 14%. At the same time, the aggregate of public sector industries generated about 12% of tax revenues in the same period, which indicates low dependence of the Region’s economy on this sector.
KEY ASSUMPTIONS
-
Execution of the revenue side of the Region’s budget in 2025 as per the current budget law;
-
Growth of the size of current expenditures in 2025 at rates close to the expected inflation at the end of the year;
-
Using a large part of the accumulated liquidity to cover the projected budget deficit.
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 positive rating action may be prompted by:
-
Stable growth of the budget’s operational efficiency;
-
Debt load declining sustainably below 30%;
-
Maintaining accumulated liquidity as of the end of this year.
A negative rating action may be prompted by:
-
Prolonged deterioration of socioeconomic development indicators;
-
The budget’s increased need for additional financing;
-
Significant increase in the share of short-term debt;
-
Considerable decline in available budget liquidity.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has been assigned to the Kaluga 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 credit rating of the Kaluga Region was published by ACRA for the first time on December 8, 2022. 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 Kaluga 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 Kaluga 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 Kaluga Region. No conflicts of interest were discovered in the course of credit rating assignment.
