The credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra (hereinafter, the Region) is based on high regional economic indicators, the high liquidity of the Region’s budget, and low debt load.
The Region is located in the Ural Federal District. It is an administrative subject of the Russian Federation and at the same time is part of the Tyumen Region.1 The Region’s population is 1.7 mln (1% of Russia’s population). The Region’s GRP amounted to RUB 4.5 tln in 2019, around 5% of Russia’s total GRP. According to the Region’s assessments, its GRP amounted to RUB 4.0 tln in 2020.
1 Part of the income tax revenues collected in the Region goes to the Tyumen Region’s budget (its size is regulated by the contract between the Tyumen Region and the Region and amounts to 29.5%).
Key rating assessment factors
Low debt load and high budget liquidity. The Region’s debt portfolio is composed entirely of bonds with maturities before 2024. The Region’s debt to current revenues ratio was 4% at the end of 2020 and, according to ACRA's estimates, the ratio will grow up to 19% in 2021, which is still assessed as low. As of December 1, 2020, the budget’s account balances (including deposits) exceeded total debt as of January 1, 2021 by almost eight times and average monthly budget expenses for 2020 by almost four times. The Region has enough accumulated liquidity both for debt payments this year and for financing the 2021 budget deficit.
The Region is a federal budget donor, producing more than 40% of Russian oil. The sectoral structure of the Region’s GRP is stable and the contribution of natural resources to this indicator exceeds 60%. In 10M 2020, 86% of taxes and charges collected in the Region were sent to the federal budget and only 14% went to the Region’s consolidated budget. At the same time, the Region’s tax revenues amounted to 11% of the federal budget’s total tax revenues for 10M 2020. The Region ranked third in GRP per capita among Russian regions in 2018. In 2016−2019, the ratio of averaged2 wages to the averaged regional subsistence minimum grew steadily (4.2−4.5x), and the Region’s unemployment rate (according to ILO methodology) is significantly lower than the national average.
High budget self-sufficiency. The averaged share of tax and non-tax revenues (TNTR) should be 94% of total income (excluding subventions) for 2017−2021.
The flexibility of budget expenses is moderately high. The averaged ratio of capital expenses to total budget expenses excluding subventions should be 14% for 2021, while the share of capital expenses financed by the Region with its own funds should be about 93%.
The averaged ratio of current operations to current revenues will be about 10% for 2017−2021, which indicates that current revenues can cover current expenses.
In 2020, the regional TNTR exceeded the same indicator of 2019 by 2%. The growth was observed in corporate income tax (+7%) and personal income tax (+5%). The rest of tax revenues showed a slight decrease, mostly in property taxes (-4%). According to the current version of the Region's Budget Law,3 in 2021, the total budget revenues may decrease by 14% compared to 2020 (mainly due to a decrease in corporate income tax revenues by 26%). In this regard, the budget deficit will be about RUB 35 bln (17% of TNTR), which is expected to be covered mainly by debt financing.
2 Hereinafter, averages are calculated according to the Methodology for Credit Ratings Assignment to Regional and Municipal Authorities of the Russian Federation.
3 Law of Khanty-Mansiysk Autonomous Okrug–Ugra dated November 26, 2020 No. 106-oz "On the budget of Khanty-Mansiysk Autonomous Okrug–Ugra for 2021 and further for 2022 and 2023" (adopted by the Duma of Khanty-Mansiysk Autonomous Okrug–Ugra on November 26, 2020).
Key assumptions
- Maintaining countercyclical budget policy in terms of expense planning;
- 14% decline in total revenues in 2021 against 2020;
- 5% decline in total expenditures in 2021 against 2020;
- Financing this year’s budget deficit mainly with borrowings.
Potential outlook or rating change factors
The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
- Growth rates of current revenues lagging behind dynamics of current expenses;
- Significant decrease in budget liquidity;
- Increase in debt load over 30% of current revenues;
- Significant changes in inter-budget relations in Russia.
Issue ratings
Khanty-Mansiysk Autonomous Okrug-Ugra, 35001 (ISIN RU000A0JX215), maturity date: December 18, 2023, issue volume: RUB 6 bln — ААА(RU);
Khanty-Mansiysk Autonomous Okrug-Ugra, 35002 (ISIN RU000A0ZYKW4), maturity date: December 17, 2024, issue volume: RUB 7 bln — ААА(RU).
Rationale. In ACRA’s opinion, the bonds listed above are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra.
Regulatory disclosure
The credit ratings of the Khanty-Mansiysk Autonomous Okrug-Ugra and bonds (RU000A0JX215, RU000A0ZYKW4) issued by the Khanty-Mansiysk Autonomous Okrug-Ugra 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. In the course of assigning a credit rating to the bond issues above, the Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments under the National Scale for the Russian Federation was also used.
The credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra and the credit ratings of the bonds (RU000A0JX215, RU000A0ZYKW4) issued by the Khanty-Mansiysk Autonomous Okrug-Ugra were first published by ACRA on September 26, 2017, September 28, 2017, and December 15, 2017, respectively. The credit rating of the Khanty-Mansiysk Autonomous Okrug-Ugra and its outlook, as well as the credit ratings of the bonds (RU000A0JX215, RU000A0ZYKW4) issued by the Khanty-Mansiysk Autonomous Okrug-Ugra 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 the data provided by the Khanty-Mansiysk Autonomous Okrug-Ugra, 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 ratings are solicited and the Government of the Khanty-Mansiysk Autonomous Okrug-Ugra participated in the rating process.
No material discrepancies between the provided data and the data officially disclosed by the Khanty-Mansiysk Autonomous Okrug-Ugra in its financial statements have been discovered.
ACRA provided no additional services to the Government of the Khanty-Mansiysk Autonomous Okrug-Ugra. No conflicts of interest were discovered in the course of credit rating process.
