Training on Forecasting, April 7–8

ACRA affirms A-(RU) to the Ryazan Region, changes outlook to Stable

ACRA has changed the credit rating outlook of the Ryazan Region (hereinafter, the Region) due to the Region’s stable debt profile indicators and the macroeconomic situation, which may limit economic growth opportunities and the possibility for the Region to improve its budget profile in the medium term.

The Region’s credit rating is based on its moderate debt load, high share of capital expenses, and sufficiently large liquidity cushion.

The Ryazan Region is part of the Central Federal District. About half of the Region’s population lives in its administrative center, the city of Ryazan. The Region’s GRP is close to 0.5% of the total GRP of all Russian regions. Nearly 0.8% of the country’s population lives in the Region.

Key rating assessment factors

Diversified economy and relatively low level of unemployment. The level of diversification of the regional economy is quite high. ACRA assesses that the public sector, which is the largest sector of the economy, accounts for around 17% of the regional budget’s tax and non-tax revenues. In the structure of products shipped in 2017–2018, the share of produced petroleum products amounted to 15–18%. The stable industry structure of tax revenues and low concentration on volatile sectors of the economy mean that the Region is comparatively resilient to negative economic phenomena. However, in the current situation, there are no prospects for the growth of economic indicators that could have a positive effect on the Region’s financial profile.

In 2015–2018, the average wage to average regional subsistence wage ratio was almost 300%, while unemployment was below the national average. Average GRP per capita growth in the Region in 2017–2018 was lower than the growth of this indicator in the specified period.

Half of the high share of capital expenses is financed by transfers from the federal budget. The regional budget has a sufficient share of internal revenues in total income (excluding subventions). This share averaged1 76% in 2016–2020. The average share of capital expenses in aggregate expense (excluding subventions) in 2016–2020 will equal 21%. On average, the Region finances half of its capital expenses using transfers from the federal budget, while the remaining portion of expenses are financed using internal revenues. The average ratio of the balance of current operations to operating income for the analyzed period stands at 16%, which indicates that operating income in sufficient to cover current expenses. In 2016–2019, the modified budget deficit (MBD) indicator was positive, however it has been decreasing since 2018, and will move into negative territory in 2020. The average ratio of the MBD to operating income is also falling: in 2018 in stood at 5.6%, in 2020 it will drop to 2.1%, and in 2022 in will be negative, which indicates increased possibility of growing debt and lower balances in budget accounts.

Stable debt load and moderate refinancing risk. At the end of 2019 the Region’s debt to operating income ratio stood at 43%. ACRA doesn’t expect this ratio to change much in 2020, despite the projected budget deficit, which will be financed using balances formed at the end of the year.


1 Hereinafter, averages are calculated according to the Methodology for Credit Ratings Assignment to Regional and Municipal Authorities of the Russian Federation.

As of the end of 2019, the Region’s public debt included budget loans (57%) and bank loans (43%).

The largest volume of debt repayments/refinancing is scheduled for 2021 (29%). Over the next three years the Region will have to repay or refinance 71% of its debt.

The Region’s public debt servicing expenses are not a burden on the regional budget (the average level of interest expenses in 2016–2020 will amount to 2% of aggregate budget expenses, excluding subventions).

The debt load of municipal entities (hereinafter, MEs) grew in 2016–2019, but is currently at a permissible level (the ratio of aggregate debt to the aggregate size of tax and non-tax revenues of MEs grew from 10% in 2016 to 15% in 2019). In absolute terms, ME debt increased by RUB 1.6 bln in the aforementioned period.

Significant accumulated liquidity at the start of 2020. Throughout 2019, the Region’s monthly needs for funding were covered solely by account balances at the start of the each month (except December). In October 2019, the Region began placing budget funds in bank deposits. The volume of accumulated liquidity as of the start of 2020 exceeds the size of debt repayments scheduled for 2020 by 1.2 times. Part of these funds will be used to finance budget deficits of future periods in accordance with the Region’s current budget law.

Key assumptions

  • Using accumulated liquidity to finance the budget deficit this year;
  • Maintaining a balanced budget policy over the projected period;
  • Maintaining a high share of federal transfers in capital expenses.

Potential outlook or rating change factors

The Stable outlook assumes that the credit rating will most likely remain unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Refinancing a significant portion of commercial debt using long-term borrowings;
  • Growth of budget liquidity.

A negative rating action may be prompted by:

  • Growth of debt load above 55% of operating income;
  • Reduced available liquidity.

Issue ratings

No outstanding issues have been rated.

Regulatory disclosure

The credit rating of the Ryazan Region has been assigned under the national scale for the Russian Federation based on the Methodology for Credit Rating Assignment to Regional and Municipal Authorities 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 Ryazan Region was published by ACRA for the first time on October 16, 2017. The credit rating of the Ryazan Region and its outlook
are expected to be revised within 182 days following the publication date of this press release in compliance with the Calendar of planned sovereign credit rating revisions and publications.

The credit rating was assigned based on the data provided by the Ryazan Region, information from publicly available sources (the Ministry of Finance, the Federal State Statistics Service, and the Federal Tax Service), as well as ACRA’s own databases. The credit rating is solicited and the Government of the Ryazan Region participated in the rating process.

No material discrepancies between the provided data and the data officially disclosed by the Ryazan Region in its financial statements have been discovered.

ACRA provided no additional services to the Government of the Ryazan Region. No conflicts of interest were discovered in the course of credit rating assignment.

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