The credit rating of the urban district “City of Yakutsk” (hereinafter, the City) stems from the low debt load, positive operational efficiency of the budget, high indicator of the share of capital expenditures in total expenditures (excluding subventions), and the moderate development indicators of the urban economy. ACRA notes the presence of risks of refinancing the City’s liabilities. The rating is constrained by the City’s moderate dependence on transfers from the budget of the Republic of Sakha (Yakutia) and the low level of accumulated liquidity.
Yakutsk is the administrative center of the Republic of Sakha (Yakutia) and is located in the Far Eastern Federal District. The City is situated in a permafrost zone. The population of Yakutsk averaged 388,000 in 2024. The City is the largest transportation cluster in the Republic of Sakha (Yakutia) and its economy is primarily focused on providing various types of services to the population.
KEY ASSESSMENT FACTORS
Positive operational efficiency of the budget coupled with a moderate need to use additional funds. The revenues of the City’s budget are annually approximately half formed by transfers from the budget of the Republic of Sakha (Yakutia) and in individual years, this indicator has reached up to two-thirds of the revenue side of the budget. Subventions regularly account for more than half of the transfers from the higher budget. Personal income tax revenues are the main source of tax revenues for the City’s budget; over the past four actual years, their share has on average exceeded 60% of the total volume of tax and non-tax revenues (TNTR). Taxes on total income on average amounted to 28% of TNTR for the specified period. A significant amount of revenues for the City also comes from property taxes and rental income.
The averaged1 ratio of the current account balance to current revenues for 2022–2026 is estimated at 6%. As of the end of 2024, the current account balance stood at 9% of the total volume of the City’s current revenues, which indicates that current revenues are sufficient to finance current expenditures in full. This year the indicator is also expected to be positive.
The share of capital expenditures in total expenditures (excluding subventions) is assessed as high. The averaged value of this indicator for 2022–2026 will be 23%. The quality assessment of the flexibility of budget expenditures corresponds to the fourth category. Capital expenditures are annually financed mainly from the higher budget, which limits the City’s ability to reduce them if necessary. The current account balance after interest income and expenditures is consistently positive, allowing interest expenditures to be covered by the City’s current revenues. The modified free cash flow indicator of the City’s budget is rather volatile, which indicates a periodic need to finance capital expenditures using additional funds.
The share of TNTR in budget revenues (excluding subventions) is assessed as moderately high — its averaged value for 2022–2026 exceeds 70%. The ratio of the average modified budget deficit (MBD) over the period specified above to current revenues will be -2%. At the same time, the MBD may amount to around 5% of current revenues, which indicates the budget’s moderate need to use additional financing. Given the low debt load of the City, ACRA has adjusted the assessment of the ratio of the average MBD to current revenues by one notch upward.
The quality assessment of the City’s budget profile corresponds to the second category. Budget forecasting is partially complicated: cases of significant deviations of tax revenues from planned indicators have been recorded. The volume of lost tax revenues associated with the use of tax benefits is insignificant for the City’s budget. Cases of violation of budget legislation by the City have not been identified.
The budget was executed with a surplus of 3% of TNTR in 2024, which enabled the City to partially reduce the size of its debt and slightly increase the volume of balances in accounts. The revenue side of the City’s budget increased by 8% last year, including TNTR increasing by approximately a third. Growth of TNTR was driven by higher personal income tax revenues (+22%) and revenues from taxes on total income (+60%). At the same time, the size of transfers declined by 5% vs. 2023, mainly due to capital transfers falling by a quarter. The expenditure side of the City’s budget increased by 3% year-on-year, with current expenditures growing by 5% and capital expenditures falling by 8%.
According to the parameters of the current version of the City’s budget decision, revenues may decline by 4% this year vs. 2024. At the same time, TNTR will increase by around 10% year-on-year, and like last year, this growth will mainly be driven by personal income tax proceeds and proceeds from taxes on total income, which are expected to increase by 8% and 19%, respectively. The volume of transfers has been approved at 14% below the level of 2024. The expenditure side of the budget is expected to increase by 2% year-on-year, which will result in a budget deficit of 9% of TNTR. The main source of funding will be borrowed funds, but the City also plans to use most of its accumulated balances in accounts for these purposes.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
Low leverage. During the analyzed period (since 2020), the debt load of the City’s budget has remained low, while it has been consistently decreasing (except for 2023), mainly due to the growth of the current revenues of the City. As of January 1, 2025, the City’s debt was RUB 4.2 bln. The debt portfolio was 46% bank loans, 28% were loans from the budget of the Republic of Sakha (Yakutia), the rest were guarantees. A year earlier, the debt was equal to RUB 4.5 bln. The decrease in the indicator was due to the decrease of the bank debt. The debt repayment schedule at the beginning of the current year assumed the repayment of 41% of the City’s total debt in 2025, 29% in 2026, and 20% in 2027.
As of July 1, 2025, the City’s debt had declined by 17% compared to the indicator as of the start of the year. Since the start of the year, the volume of debt decreased by RUB 0.4 bln in bank loans and by approximately RUB 0.1 bln in budget loans. At the same time, the volume of guarantees decreased by RUB 0.2 bln. In accordance with the updated repayment schedule, the City will have to repay 24% of its debt this year, and 37% next year.
The ratio of the City’s debt to current revenues was 14% in 2024. ACRA assumes that the specified indicator may be 16% at the end of 2025, which corresponds to a low debt load. Interest expenditures are not burdensome for the budget — the ratio of averaged interest expenditures to total expenditures (excluding subventions) is just over 1%. ACRA estimates that the ratio of the City’s debt to gross municipal product could be significantly lower than 20%.
The quality assessment of the City’s debt portfolio corresponds to the second category. The weighted average debt repayment period amounts to less than four years. Debt is diversified by instruments. The operational efficiency of the budget is positive and as a result, the City does not need to obtain debt to finance its current expenditures. According to the City, the budget did not have any overdue payables as of January 1, 2025 and April 1, 2025. The total debt of public sector companies was RUB 2.6 bln as of the start of the year, with a significant portion of it falling on one of the enterprises in the agricultural sector.
Low accumulated liquidity. As of the end of 2024, accumulated liquidity in the City’s accounts had increased by 17% compared to 2023 due to execution of the budget with a surplus in 2024. Over the past 12 months, balances in accounts have averaged half the amount of the City’s monthly budget expenditures. In accordance with the City’s plans for budget execution this year, most of the accumulated funds can be used to finance the expected deficit.
The liquidity ratio of the City’s budget will be less than 20% as of the end of 2025.
The quality assessment of the liquidity profile of the City’s budget corresponds to the third category. The City has not made bond placements in the past. In ACRA’s opinion, the volume of accumulated funds is insufficient to cover the share of debt to be repaid this year. The Agency notes the presence of risks of refinancing debt obligations. Short-term loans from the Federal Treasury Department over the past two and a half years were attracted once, in 2024. As of the beginning of the year, the City had no undrawn credit lines with a maturity of more than a year.
Moderate economic development indicators and a diversified structure of shipped products. The City does not accommodate any major industrial enterprises that could significantly influence its economy.
In the structure of shipped products by type of economic activity, the largest shares (average value for 2021–2024) were formed by the sectors Transportation and Storage (21%) and Provision of Electricity, Gas and Steam (18%). A significant volume of shipped products was provided by the sectors Mining (14%) and Information and Communication Activities (12%).
In ACRA’s opinion, the estimated share of the Region’s GRP formed by the City could amount to around 10% on average for the period from 2020 to 2024, however, according to the City’s estimates, this indicator could exceed 15%. The ratio of the averaged nominal accrued wages for the City as a whole for 2021–2024 to the subsistence minimum calculated for the City significantly exceeded 4.0. The level of officially registered unemployment in the City at the end of 2024 was 0.7%. The averaged estimated unemployment rate (according to the ILO’s methodology) for the above period could have been around 6%.
KEY ASSUMPTIONS
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Estimated share of the GRP of the Republic of Sakha (Yakutia) formed in the City at around 10%;
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The City’s execution of its budget as per the parameters of the current version of the budget decision;
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Using accumulated liquidity to finance the projected budget deficit.
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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Higher share of GRP of the Republic of Sakha (Yakutia) contributed by the City;
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Sustainable growth of the budget’s operational efficiency;
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Lower need of the budget to use accumulated funds to finance capital expenditures;
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Higher volume of balances in budget accounts at the end of this year.
A negative rating action may be prompted by:
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Consistent decline in the share of TNTR in the City’s total revenues (excluding subventions);
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Lower share of capital expenditures in total budget expenditures (excluding subventions);
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Debt load on the budget exceeding 30% of current revenues coupled with a continued share of short-term debt at more than 20% of total debt.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has been assigned to the urban district “City of Yakutsk” 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.
A credit rating has been assigned to the urban district “City of Yakutsk” for the first time. 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 urban district “City of Yakutsk”, 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 urban district “City of Yakutsk” 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 urban district “City of Yakutsk”. No conflicts of interest were discovered in the course of credit rating assignment.
