The credit rating of Saint Petersburg (hereinafter, the City) is based on the City’s well-developed economy, balanced budget structure, low debt load, and sufficient budget liquidity.
Saint Petersburg is a city of federal importance and home to 3.8% of Russia’s population (fourth place by population). According to data for 2021, the City’s gross regional product accounted for about 7.8% of the total GRP of Russia’s regions. The City ranks second among Russian regions by the nominal GDP; it is a major cultural epicenter of the country and the largest transport hub in the north-west Russia. Saint Petersburg has a developed maritime, river, railway, air, and motor transport infrastructure.
KEY ASSESSMENT FACTORS
Low debt load and minimal refinancing risks. In 2023, the City’s public debt remained almost unchanged regardless the initially planned growth and amounted to less than 10% of current revenues. As of January 1, 2024, the debt was made up of bonds due in 2024–2028 (72%) and budget loans due in 2024–2037 (28%). According to the current version of the budget law, the City’s debt may grow this year in view of planned budgetary and market borrowings. Nonetheless, the debt load, as calculated by ACRA, will not exceed 20% of current revenues, which is low. The City is to repay 24% of its debt this year and 27% in 2025, but given the low debt load and sufficient budget liquidity, these repayments will not be burdensome for the City. The debt/GRP ratio of the City will be below 2% by end-2024.
Debt service costs are not burdensome for the City’s budget and do not exceed 1% of total expenditures.
The Agency determines the qualitative assessment of the debt load of St. Petersburg at the highest level due to the low debt burden of municipalities and the City’s debt policy based on the use of long-term debt instruments. The debt structure is diversified by instruments, the weighted average maturity of the debt at the beginning of this year exceeded three and a half years, and the credit history of the City is positive. The current account balance is positive every year.
Sufficient budget liquidity. The City fulfills its expenditure obligations on time and regularly deposits temporarily free funds with banks. As of January 1, 2024, the City’s temporarily free budget funds were 2.5 times higher than average monthly budget expenditures in 2023, and they were almost three times higher than the volume of public debt as of the same date. Based on ACRA’s methodology, the liquidity ratio may amount to 132% in 2024.
The qualitative assessment of the City budget liquidity is moderate. The City does not need to borrow short-term loans from the Federal Treasury Department to cover cash gaps. According to the City, no credit lines were procured over the past 24 months, as they are unnecessary. As of January 1, 2024, the budget had no overdue debt obligations or payables. Refinancing risks are minimal.
Balanced budget structure and sufficient budget discipline. The City’s budget is highly self-sufficient — for 2020–2024, the averaged1 ratio of tax and non-tax revenues (TNTR) to internal revenues, excluding subventions, will amount to 97%. The averaged share of capital expenditures in the City’s total expenditures (excluding subventions) will amount to more than 25.6% for the aforementioned period. In 2020–2024, the averaged current account balance to current revenues ratio will exceed 20%, and the ratio of the averaged modified budget deficit to current revenues will amount to 0.8%. According to the current version of the budget law and ACRA’s calculations, the modified budget deficit is expected to be negative in 2024. These indicators show that current revenues are sufficient to cover current expenditures, but it may be necessary to raise debt or draw on accumulated liquidity to finance capital expenditures.
In 2023, the City executed its budget with a deficit of 2% of TNTR. According to the current version of the budget law, the 2024 deficit is projected at 14% of TNTR, as the growth of expenditures (14%) will outrun the growth of revenues (3%). In particular, current expenses are expected to grow by 19% while capex are expected to remain at the past year’s level. The deficit is planned to be covered by borrowing and using part of accumulated liquidity.
The City’s budget profile is viewed as strong. There were no violations of budget laws over the past five years. The budget process is characterized by moderate planning accuracy and the predominance of conservative expectations. Deviations of actual revenues from the forecast figures stipulated by the first version of the budget law are mostly associated with transfers and corporate income tax revenues due to fluctuations in the external environment. Such deviations occur for reasons beyond the City’s control.
The City’s highly developed economy provides for a diversified tax base. The City’s per-capita GRP is consistently higher than the national average by 1.5 times, and as a result of a significant increase in nominal GRP in 2021, this ratio (before averaging) exceeded 2. Tax revenues are highly diversified by sector — according to ACRA’s calculations, the averaged estimate of the maximum share of a single industry in the City’s tax revenues in 2019–2022 did not exceed 30%. Nevertheless, the Agency notes growth of the share of the trade sector in GRP and tax revenues. Unemployment remains low and did not exceed 2% in 2019–2022. The average monthly wage was more than five times higher than the City’s subsistence minimum in the aforementioned period.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
KEY ASSUMPTIONS
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Budget execution in 2024 as outlined in the budget law.
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Maintaining a conservative debt policy.
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Maintaining sufficient budget liquidity.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the credit rating will highly likely remain unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
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Debt load growing above 30% of the City’s current revenues;
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Significant fall in available liquidity.
ISSUE RATINGS
Saint Petersburg, 35001 (ISIN RU000A0ZYHX8); maturity date: May 28, 2025, issue volume: RUB 30 bln —
AAA(RU).
Saint Petersburg, 35002 (ISIN RU000A0ZYKJ1); maturity date: December 4, 2026, issue volume: RUB 25 bln —
AAA(RU).
Saint Petersburg, 35003 (ISIN RU000A102A15); maturity date: April 13, 2027, issue volume: RUB 30 bln —
AAA(RU).
Saint Petersburg, 35004 (ISIN RU000A102K88); maturity date: September 28, 2028, issue volume: RUB 30 bln —
AAA(RU).
Rationale. In ACRA’s opinion, the bonds of Saint Petersburg are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of Saint Petersburg.
REGULATORY DISCLOSURE
The credit ratings have been assigned to Saint Petersburg and bond issues (ISIN RU000A0ZYHX8, RU000A0ZYKJ1, RU000A102A15, RU000A102K88) of Saint Petersburg under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Regions and Municipal Entities 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 Financial Instruments under the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.
The credit ratings of Saint Petersburg and the government securities (ISIN RU000A0ZYHX8, RU000A0ZYKJ1, RU000A102A15, RU000A102K88) of Saint Petersburg were published by ACRA for the first time on June 27, 2017, December 4, 2017, December 12, 2017, October 22, 2020, and December 17, 2020, respectively. The credit ratings of Saint Petersburg and bond issues (RU000A0ZYHX8, RU000A0ZYKJ1, RU000A102A15, RU000A102K88) of Saint Petersburg are expected to be revised within 182 days following the publication date of this press release as per the Calendar of sovereign credit rating revisions and publications.
The credit ratings were assigned based on data provided by Saint Petersburg, 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 Government of Saint Petersburg participated in their assignment.
In assigning the credit ratings, 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 the Government of Saint Petersburg. No conflicts of interest were discovered in the course of credit rating assignment.
