The credit rating of the Kostroma Region (hereinafter, the Region) is based on the moderate debt load and the smooth debt repayment schedule (after some of the budget loans had been restructured), as well as the stable debt profile metrics. The rating is constrained by moderate development indicators of the regional economy, some of which do not exceed national averages, and the relative inflexibility of budget expenditures.
The credit rating outlook has been changed from Positive to Stable in view of ACRA’s expectations that the Region may exhaust its own liquidity due to the potential failure to meet tax revenue targets.
The Kostroma Region is located in the Central Federal District. The Region is home to around 570,000 people (0.4% of Russia’s population). The regional economy is small, generating about 0.2% of the total gross regional product (GRP) of Russian regions. According to the Region’s estimates, its GRP will be RUB 344 bln in 2024.
KEY ASSESSMENT FACTORS
Stable budget profile indicators with a pronounced dependence on the federal budget. Given the current budget execution progress in a number of tax revenues over the ten months of this year, ACRA expects that by the end of 2025, the revenue side of the budget may not be fully executed. At the same time, the expenditure part is likely to be executed in full. In this case, the Region will need to use the more funds remaining in the accounts than stipulated in the current version of the budget law, and it will also need to use additional sources to cover the deficit.
Based on these assumptions, the likely ratio of the modified budget deficit averaged1 over 2022–2026 to the Region’s current revenues will be negative. The share of tax and non-tax revenues (the TNTR) in the revenue structure (excluding subventions) will amount to about 74%, taking into account the planned growth in 2026, according to the draft budget law. The averaged ratio of the current account balance to current revenues will be 10.5% for the specified period; this indicator is adjusted to 10%, taking into account its decrease in 2026.
The share of capital expenditures in the Region’s total expenditures is assessed as high; but it is declining from its peak values of 2022–2023. This indicator averaged for 2022–2026 will exceed 20%. Around half of capital expenditures are financed using transfers from the federal budget. The opportunities to reduce capital expenditures on the Region’s own are not obvious, and the need for financing infrastructure is generally significant. The current account balance, after interest income and expenses, is regularly positive, and the modified free cash flow differs in modulus and magnitude. In this regard, the quality assessment of the flexibility of the Region’s budget expenditures corresponds to the third category.
The assessment of the Region’s budget profile corresponds to the second category, which is due to the moderate accuracy of budget planning, insignificance of the amount of tax benefits established by regional legislation, as well as transfer of additional tax revenues to lower budget levels. In individual years, the ratio of the Region’s debt to its TNTR has exceeded the maximum values set by budget legislation.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
Moderate debt load. Since 2022, the Region’s debt has been made up of long-term budget loans, while the nominal size of debt has hardly changed. The ratio of debt to current revenues was 45% in 2024. ACRA expects this indicator may grow in 2025 due to the potential decline of current revenues against 2024. As of the beginning of this year, the Region was to repay slightly more than 21% of its debt annually. After restructuring a part of budget loans, the Region now has to repay no more than 7% of the debt annually; however, as the Agency assumes that the Region would need to raise additional debt by the end of the year, this share (7%) is not viewed as stable.
Interest expenditures are not burdensome: the averaged share of interest expenditures for 2022–2026 will not exceed 1% of total budget expenditures (excluding subventions), given that the terms of the debt are preferential. The ratio of the Region’s debt to GRP fluctuates within 10% annually.
The Region’s debt profile corresponds to the second category. This is explained by the sufficiently long weighted average debt repayment period, non-diversified debt structure, and the minimal level of overdue payables. The current account balance is positive on an annual basis; there are no indirect budget liabilities; public sector companies do not need any support from the regional budget. The total debt load of municipalities is high but it has begun to decline.
Moderate volume of accumulated liquidity. By the end of 2024, the liquidity ratio significantly exceeded 140%, mostly due to the budget execution with a surplus. ACRA expects that in 2025 the regional budget will be deficit so that the maximum volume of account balances will be utilized.
The quality assessment of the liquidity profile corresponds to the second category: the average monthly balances on the Region’s accounts do not exceed the average monthly expenditures of its budget; there is a need to attract additional liquidity; no purchases of credit lines were carried out. In some years, the Region uses loans from the Federal Treasury Department. In ACRA’s opinion, debt refinancing risks and accounts payable of the budget are low.
Moderately developed and highly diversified economy. The largest enterprises in the Region are wood processing, metal, jewelry, and electricity companies. The Region generates surplus energy. According to the Agency’s estimates, the largest share of tax revenues is contributed by manufacturing companies, enterprises responsible for the supply of electricity, gas, steam, and water, retail and wholesale trade, and also repairs, and financial and insurance activities. Industries that are part of the public sector of the economy provide about 20% of tax revenues and account for around 20% of the Region’s GRP.
The Region’s economy is characterized by a low GRP per capita (approximately 50% of the national average).
The ratio of averaged wages to the regional subsistence minimum amounted to 3.35 for 2021–2024. The unemployment rate averaged for the same period was 2.9%.
KEY ASSUMPTIONS
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Continued high dependence on transfers from the federal budget.
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Debt load remaining at the current level.
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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Balance of current operations to current revenues consistently exceeding 20%;
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Significant growth of the share of internal revenues in the budget;
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Significant and sustainable decline in the debt load to 30% of current revenues or lower;
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Prolonged growth of the economic profile metrics.
A negative rating action may be prompted by:
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Debt to current revenues ratio exceeding 55%;
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Significantly lower volume of accumulated liquidity and higher expenditures.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has been assigned to the Kostroma Region based on the following methodologies: the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation to calculate the SCA and determine the credit rating and the credit rating outlook of the Kostroma Region under the national scale for the Russian Federation; the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities to ensure consistent and uniform application of ACRA’s methodologies, models, and key rating assumptions.
The credit rating of the Kostroma Region under the national scale for the Russian Federation was published by ACRA for the first time on October 12, 2017.
The credit rating and its outlook are expected to be revised within 182 days as per the Calendar of sovereign credit rating revisions and publications.
The credit rating is assigned based on data provided by the Kostroma 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 rating analysis was performed using the RAS accounting statements of the Kostroma Region as of November 1, 2025.
The credit rating is solicited and the Kostroma 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 Kostroma Region during the year preceding the rating action.
No conflicts of interest were discovered in the course of credit rating assignment.
Rating components: the standalone creditworthiness assessment is equal to the credit rating and corresponds to ‘a-‘.
