The credit rating of the urban district of Nizhny Novgorod (hereinafter, the City) is based on its low debt load coupled with significant debt refinancing risks, positive operational efficiency of the budget, a high share of capital expenditures in total expenditures (excluding subventions), as well as the sustainable indicators of the City’s economy that is focused on the manufacturing sector. The City’s considerable dependence on transfers from the Nizhny Novgorod Region (hereinafter, the Region), low liquidity indicator, and a moderate need for additional funding have a constraining effect on the rating.
Nizhny Novgorod is the administrative center of the Nizhny Novgorod Region and is located in the Volga Federal District (hereinafter, the VFD). It is among the 10 largest cities in Russia. The City is a major transportation hub of the VFD and one of Russia’s largest industrial centers. According to ACRA’s estimates, the City’s share in the gross regional product (GRP) of the Region may exceed 50% annually.
As per a law passed by the Region on April 4, 2025, the City and the Kstovo municipal district (hereinafter, the KMD) of the Nizhny Novgorod Region were transformed by being merged into a single municipality with the status of an urban district.
key assessment factors
Low debt load and significant risks of refinancing liabilities. As of the end of 2025, the debt of the City1 had increased by 4% and amounted to RUB 17.2 bln. The size of bank loans increased by RUB 4.6 bln, while budget loans declined by RUB 4.0 bln (out of which RUB 2.8 bln were written off by the Region). As of the start of the year, the debt portfolio consisted of budget loans (53%) and bank loans (47%). According to the debt repayment schedule, as of January 1, 2026, the City had to repay or refinance 52% of its debt liabilities in 2026, practically all of which (90%) are bank loans. This volume of repayments is the equivalent of 23% of the City’s tax and non-tax revenues (TNTR) projected for 2026. In ACRA’s opinion, this indicates the presence of high refinancing risks. The City will have to repay no more than 5% of its debt in 2027–2029.
As of March 1, 2026, the City’s debt (including the KMO) was RUB 13.8 bln, which is 20% lower than the indicator as of the start of the year. Around half of the bank loans were repaid using the City’s intra-annual liquidity and funds from its autonomous and budgetary institutions in order to save on interest expenses on debt servicing. ACRA assumes that the volume of bank debt will recover as funds are returned to institutions closer to the end of the year,. The volume of budget loans grew by RUB 0.5 bln due to the consolidation of the debt of the City and the KMO. This year 36% of debt liabilities will be repaid and then 7% in 2027 according to the updated debt repayment schedule.
The City’s debt load is assessed as low — the ratio of debt to current revenues was 29% as of the end of 2025. ACRA expects this metric to not change significantly in 2026 due to a probable increase in current revenues.
The ratio of averaged2 for 2022–2026 interest expenditures to total expenditures (excluding subventions) will amount to around 2%. According to ACRA’s estimates, the ratio of debt to gross municipal product could be significantly lower than 20%. Both of these indicators do not lead to adjustments to the debt load.
The qualitative assessment of the City’s debt profile corresponds to the second category. At the beginning of the year, the weighted average debt maturity exceeded three years. The debt portfolio was roughly equally divided between budget loans and bank loans. The budget’s operational efficiency is consistently positive; the City does not need to raise debt to finance current expenditures. The budget had no overdue payables as of January 1, 2026. According to the City, its municipal enterprises had no financial debt and overdue accounts payable as of Q3 2025. The City often concludes leasing agreements to purchase vehicles: presently, 20 contracts have been concluded with a total annual payment of around RUB 1.0 bln. In addition, the City has also signed eight concession agreements, but the annual payments for them are not as significant.
Positive operational efficiency of the budget and a moderate need to use additional financing. The averaged ratio of the current account balance to current revenues will be just under 10% in 2022–2026. The current account balance was positive in 2025 (at around 9% of current revenues). ACRA expects this indicator to be largely unchanged in 2026, which indicates that current revenues are sufficient to finance all current and some capital expenditures.
The share of capital expenditures in the City’s total expenditures3 (excluding subventions) is estimated by the Agency as high, while the indicator averaged for 2022–2026 will amount to 43%. The qualitative assessment of the flexibility of budget expenditures corresponds to the third category. Capital expenditures are annually financed primarily using the senior budget. The current account balance after interest income and expenses is consistently positive, which allows interest expenses to be covered by the City’s current revenues. The modified free cash flow indicator of the City’s budget is consistently negative, indicating the need to finance capital expenditures using additional funds.
The averaged share of TNTR in budget revenues (excluding subventions) is assessed as moderately high — it will be 68% averaged for 2022–2026. At the same time, the Agency notes that, taking into account all funds received in the form of transfers, the City’s annual revenues are more than half generated by transfers from the Region’s budget, which indicates the City’s significant dependence on the higher budget.
The ratio of the modified budget deficit (MBD) to current revenues averaged for 2022–2026 is expected to be -4%, and the MBD may equal 5% in 2026, which indicates the moderate need of the City’s budget for additional financing. Nevertheless, the Agency has adjusted this indicator to the second category given the City’s low debt load.
The qualitative assessment of the City’s budget profile corresponds to the second category. Budget forecasting is partly complicated since revenues are mostly generated by transfers from the higher budget. There are also cases of significant deviations of tax revenues from planned indicators. The shortfall in tax revenues associated with the application of tax benefits, in the Agency’s opinion, is insignificant for the City’s budget. The amount of taxes not received by the budget due to the provision of benefits to taxpayers amounted to around 2% of TNTR in 2024. There are no breaches of budget legislation.
The City’s budget deficit for 2025 amounted to 8% of TNTR, and it was fully covered using borrowed funds.
According to the budget assignments approved on March 1, 2026, the City’s budget revenues will grow by 2% year-on-year in 2026. However, TNTR will increase by 11% due to the expected increase in personal income tax revenues (+22%), property tax revenues (+41%), and taxes on total income (+10%). The volume of transfers has been approved at 7% lower than in 2025, which is mainly due to a reduction in the volume of capital transfers by around a quarter. The approved amount of expenditures is 2% higher than the actual figure for 2025. At the same time, current expenditures will increase by 6%, while capital expenditures, on the contrary, will decrease by 17% compared to last year’s level. With these budget parameters, the 2026 deficit will amount to around 8% of TNTR, and it is expected to be covered using cash balances and borrowed funds.
Low level of cash balances in the City’s accounts. As of the end of 2025, the volume of balances in the City’s accounts had grown by more than three times compared to the indicator for 2024. However, the volume of accumulated cash is still insufficient to cover all budget needs. Over the past 12 months, account balances covered on average about 12% of the City’s monthly budget expenditures. According to the approved budget parameters, the entire amount of accumulated funds can be used this year to partially finance the expected deficit.
The city budget’s liquidity ratio will be 8% by the end of 2026.
The qualitative assessment of the budget liquidity profile corresponds to the third category. The City has experience in issuing bonds. Debt refinancing risks are assessed as significant, and the City will have to repay or refinance a significant amount of debt in 2026. There are no plans to borrow short-term loans from the Federal Treasury Department this year. The City uses credit lines to close its need for short-term financing; as of the beginning of March 2026, the total amount of undrawn credit lines was RUB 6.0 bln, and most of this amount will be available for use this year only.
Comparatively high level of economic development. The City is one of the largest industrial centers in the VFD, and its economy is focused on the manufacturing industry. In some years, including 2025, the manufacturing industry has accounted for more than 50% of the City’s shipped products. Among the manufacturing sectors, the largest share in the volume of shipments is contributed by production of vehicles (12%) and production of ready metal components (8%). The sector transportation and storage accounts for a significant share of shipped products (14%).
The estimated share of the GRP of the Region produced within the City may have exceeded 50% from 2022 to 2025. The ratio of the averaged nominal accrued wage for the City in 2022–2025 to the subsistence minimum calculated for the Region was much higher than 4.0. Official unemployment in the City was less than 0.1% in 2025. The averaged estimated unemployment rate (according to the ILO’s methodology) for the above period could be less than 1%.
1 Until 2025 inclusive, ACRA uses in its calculations only the indicators of the urban district of Nizhny Novgorod, excluding the KMO.
2 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities under the National Scale for the Russian Federation.
3 When calculating budget indicators, capital expenditures and capital transfers of the City do not include part of the capital subsidies provided to the City by the Region and received by the Region itself in the form of infrastructure budget loans.
KEY ASSUMPTIONS
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Estimated share of the GRP of the Region produced within the City is around 50%;
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2026 budget execution in line with the plan approved on March 1, 2026;
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Raising commercial debt to cover the projected budget deficit;
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Continued significant dependence of the City’s budget on the higher budget.
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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Sustainable growth of the budget’s operational efficiency;
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Lower debt refinancing risks;
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Significant increase in the volume of balances in the budget’s accounts.
A negative rating action may be prompted by:
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Lower share of internal revenues in the budget;
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The ratio of debt to current revenues exceeding 35%;
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Further increase in the volume of commercial borrowings considered by ACRA to be short-term.
Rating components
Standalone creditworthiness assessment (SCA): a.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has been assigned to Nizhny Novgorod 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 Nizhny Novgorod under the national scale for the Russian Federation and 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, rating scales, models, and key rating assumptions.
The credit rating of Nizhny Novgorod assigned under the national scale for the Russian Federation was published by ACRA for the first time on November 21, 2017 and then withdrawn on December 23, 2025.
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 was assigned based on data provided by Nizhny Novgorod, 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 (financial) statements of Nizhny Novgorod as of March 1, 2026.
The credit rating is solicited and Nizhny Novgorod 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 Nizhny Novgorod during the year preceding the rating action.
No conflicts of interest were discovered in the course of credit rating assignment.
