ACRA affirms A-(RU) to the Tver Region, changes outlook to Positive

The credit rating of the Tver Region (hereinafter, the Region) is based on its balanced budget policy and a predictable level of public debt without significant refinancing risks. The credit rating is constrained by the Region’s moderate economic development indicators.

The change in outlook is due to a growth of liquidity reserves in 2020, which the Region finished with a surplus. The accumulated liquidity will allow the Region not to increase its debt load, considering that a deficit planned for 2021 will be financed with a partial use of balances. The change in outlook is also due to an increase in the share of capital expenditures as forecasted by the Region.

The Region is located in the Central Federal District (CFD). The Region is home to almost 1% of the Russian population and generates 0.5% of Russia’s total GRP. In 2019, the Region’s GRP reached RUB 485 bln1. The Region ranks second after Moscow in electricity produced among CFD regions, producing 17% of the total volume of electricity in the CFD in 2019.

1 Taking into account the assessment of housing services produced and consumed by homeowners, as well as the assessment of fixed capital consumption based on its current market value.

Key rating assessment factors

Accumulated liquidity will allow the Region to finance its budget deficit and repay debt within the next two years. These factors will contribute to the improvement of liquidity and debt load assessments, which in turn may lead to an upgrade of the Region’s credit rating. The average value of account balances has been constantly growing for the last four years and reached RUB 8.8 bln (138 percent of average monthly expenses) in 2020.

As of January 1, 2021, the volume of balances on the Region’s accounts was equivalent to half of its debt.

When it comes to liquidity management, the Region uses funds of its budgetary and autonomous institutions. The loan of the Federal Treasury Department was raised last December and refinanced with a budget loan.

Predictable level of public debt without significant refinancing risks. The debt load on the Region’s budget is moderately low: at the end of 2020, the Region’s debt to current income ratio stood at 31%. Its further dynamics will depend on the Region’s policy on management of accumulated account balances. According to ACRA’s baseline scenario, the Region will finance this year’s budget deficit using account balances. However, if additional debt is raised to finance the deficit, the debt load assessment will not change in the medium term.

The Region’s debt did not change in 2020, amounting to RUB 23.18 bln as of January 1, 2021. The debt structure has changed in favor of an increased share of budget loans, which accounted for two-thirds of the Region’s debt. Budget loans should be repaid in 2021–2034 (including the loan provided by the Federal Treasury Department). Bank loans (should be repaid in 2021–2022) accounted for the remaining one third of the Region’s debt.

As of January 1, 2021, the largest share of debt repayment was due in 2022 (25%). Refinancing risks are assessed as low.

As of April 1, 2021, the Region’s debt to banks was fully repaid.

Interest expenses are not burdensome: the averaged2 level of interest expenses in 2017–2021 should be less than 1% of total budget expenses (excluding subventions).

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

Balanced budget policy aimed at curbing growth of budget expenditures. The Region finished the previous year with a surplus of 4.8% of tax and non-tax revenues (TNTR), which was used to increase balances on the accounts of the Federal Treasury.

The surplus was formed against the background of a 23 percent increase in budget expenditures and was possible because of a 10 percent rise in TNTR compared to 2019. The growth was registered for all types of tax revenues, as well as for a part of non-tax revenues. A significant increase in revenues was fixed in the information and communication type of economic activity. Transfers rose by 45% in 2020.

In 2021, the Region expects a decrease in income tax revenues by nearly 10%. Meanwhile, revenues from other types of TNTR are expected to increase, as a result of which the Region’s TNTR, according to the current version of the budget law, will grow by 6.8%. ACRA proceeds from a more conservative scenario, under which TNTR are expected to rise by 3.5%.

The Region expects a significant increase in capital expenditures in 2021 (up 60%) along with a growth of total expenses by 10%.

The averaged share of TNTR in total revenues (excluding subventions) should be 76% in 2017−2021. The averaged ratio of current account to current revenues over this period should be 8%, and the ratio of the averaged modified budget deficit to current revenues should be 2%. This indicates that current revenues are sufficient to cover current expenses. However, when financing capital expenses, the Region may need to attract funds.

Diversified economy with moderate development. The key sectors of the Region’s economy include food production, vehicle production, transport and communications, and power generation. Per capita GRP does not exceed 60% of the national average, and wages on average do not exceed 2.9% of the regional subsistence minimum.

Tax revenues are quite diversified. According to ACRA, manufacturing accounted for most of the revenues in 2020 (23%). More than a quarter of these revenues came from the production of various vehicles and equipment. Trade, information and communication activities, transportation and storage, as well as power generation, transmission and distribution are also among important industries in terms of their share in tax revenues.

Unemployment in the Region is lower than the national average.

Key assumptions

  • TNTR growing by 3,5% in 2021 compared to the previous year;
  • Use of accumulated liquidity to finance the budget deficit over the next two years.

Potential outlook or rating change factors

The Positive outlook assumes that the rating will most likely change within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Growth of the averaged level of capital expenditures over 12% of expenses in 2017–2021 (excluding subventions);
  • Maintaining enough liquidity after financing this year’s deficit;
  • Growth of GRP and wages in the Region outpacing the national average.

A negative rating action may be prompted by:

  • Sharp reduction in TNTR with no opportunities to reduce budget expenses;
  • Growth in debt load higher than 55% of current revenues.

Issue ratings


Regulatory disclosure

The credit rating of the Tver Region was assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings 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 Tver Region was published by ACRA for the first time on December 12, 2017. The credit rating of the Tver Region and its outlook are expected to be revised within 182 days following the publication date of this press release as per the Calendar of planned sovereign credit rating revisions and publications.

The credit rating was assigned based on the data provided by the Tver 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 Tver Region participated in its assignment.

In assigning the credit rating, ACRA used only information, the quality and reliability of which was, in ACRA's opinion, appropriate and sufficient to apply the methodologies.

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

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