ACRA affirms BBB(RU) to the Tomsk Region, outlook Stable, and BBB(RU) to bond issues

The credit rating of the Tomsk Region (hereinafter, the Region) is based on the moderate debt load in relation to the Region’s operating revenues, average regional economic development compared to the national average, moderate budget profile indicators, and low liquidity.

The Tomsk Region is located in the Siberian Federal District and is home to 1.1 mln people (0.7% of the Russian population). In 2019, the Region’s GRP amounted to RUB 623 bln, about 0.7% of the total GRP for all regions of the Russian Federation. Almost a third of the Region’s territory is unpopulated due to the large area of wetlands and forests. Tomsk is a major educational center and in 2019 the Region ranked third after St. Petersburg and Moscow in terms of the number of students per 10,000 inhabitants among Russia’s regions.

Key rating assessment factors

Moderate debt load. In 2020, the ratio of the Region’s debt to current revenues (according to ACRA’s methodology) increased from 50% to 59% due to the regional budget’s higher expenses from the financing of measures to fight against the coronavirus pandemic. In 2021, this ratio may increase to 62% due to the Region resorting to borrowing to finance the budget deficit as per the law on the regional budget. As of January 1, 2021, Region’s debt obligations included bonds (51%) and budget loans subject to repayment in 2021–2035 (29%). The remaining part of the Region’s debt was made up of bank loans due in 2022. Debt servicing expenses are not a burden on the regional budget due to the high share of budget loans in the debt structure (the averaged1 level of interest expenses in 2017–2021 should equal less than 3% of aggregate budget expenses, excluding subventions). In 2021–2022, the Region has to repay around half of its debt obligations. The Region also issues bonds that are available for purchase by the general public and may be repaid before their maturity date. These bonds accounted for 19% of the Region’s total bonds as of January 1, 2021. As of April 1, 2021, account balances amounted to around 50% of the regional budget’s average monthly expenses in 2020.

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

The Region’s budget indicators depend on profit tax revenues. The volatility of profit tax revenues is due to regional taxpayers who are part of the consolidated group of taxpayers, and oil price dynamics in rubles. In 2020, profit tax revenues were

The Region’s tax and non-tax revenues (TNTR) fell by 8% in 2020. However, a 72% increase in transfers from the federal budget resulted in the Region’s total revenues increasing by 13% in 2020. Budget expenses increased by 22% and the Region’s budget deficit in 2020 stood at RUB 10 bln (22% of TNTR). The law on the budget for 2021 envisages execution of the budget with a deficit of 10% of TNTR.

The averaged share of capital expenses in 2017–2021 should amount to around 16% of total expenses (excluding subventions). The averaged share of internal revenues in the aforementioned period should equal 73%. In 2017–2021, the averaged ratio of the balance of current operations to current revenues (according to ACRA’s methodology) will stand at 7%, and the ratio of the averaged modified budget deficit to operating revenues will amount to -8%. These indicators show that although operating revenues are sufficient to cover current expenses, it will be necessary to resort to borrowing to finance capital expenses.

The Region’s economy is dependent on oil production. More than a quarter of the Region’s GRP (27.5% in 2019) comes from mining operations, mainly oil. Deterioration in the structure of remaining reserves, production in highly developed fields, and an increase in the share of hard-to-recover reserves have led to a decline in oil production in the Region over the past six years. GRP per capita remains below the national average (89% in 2019). Unemployment in the Region fell from 9.1% in 2011 to 5.5% in 2019. However, in 2020 it grew to 8.7%. The average monthly wage to subsistence wage ratio for the working-age population in the Region exceeded 3.7x in 2019.38% lower than the 2019 indicator due to the decline in oil prices in H1 2020 and the unfavorable situation regarding disease control and prevention that continued throughout the year.

Key assumptions

  • Execution of the budget in 2021 with a deficit of no more than 10% of TNTR;
  • Reduction of capital expenses if the income target is not achieved.

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:

  • Lower reliance on external sources of liquidity;
  • Debt load falling below 55% of operating revenues.

A negative rating action may be prompted by:

  • A shift in the Region’s debt policy towards using short-term debt instruments;
  • Debt load exceeding 80% of current revenues.

Issue ratings

Tomsk Region, 34055 (ISIN RU000A0JW1K9), maturity date: June 19, 2023, issue volume: RUB 7 bln — BBB(RU).

Tomsk Region, 34062 (ISIN RU000A0ZYMJ7), maturity date: December 19, 2024, issue volume: RUB 7 bln — BBB(RU).

Rationale. In ACRA’s opinion, the bonds of the Tomsk Region are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of the Tomsk Region.

Regulatory disclosure

The credit ratings of the Tomsk Region and the bond issues of the Tomsk Region (RU000A0JW1K9, RU000A0ZYMJ7) have been 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 Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments on the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.

The credit rating of the Tomsk Region and the credit ratings of the government securities of the Tomsk Region (RU000A0JW1K9, RU000A0ZYMJ7) were published by ACRA for the first time on April 10, 2018. The credit rating of the Tomsk Region and its outlook as well as the credit ratings of the government securities of the Tomsk Region (RU000A0JW1K9, RU000A0ZYMJ7) 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 ratings were assigned based on data provided by the Administration of the Tomsk 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 credit ratings are solicited, and the Administration of the Tomsk Region participated in their assignment.

In assigning the credit ratings, 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 Administration of the Tomsk Region. No conflicts of interest were discovered in the course of credit rating assignment.

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