The credit rating of the Republic of Tatarstan (hereinafter, the Region) is based on its low debt load with insignificant refinancing risks, as well as a strong budget profile with high operational efficiency and flexibility of budget expenditures. High economic indicators provide additional support to the rating.
The Region is part of the Volga Federal District and is home to 4 mln people (around 3% of the country’s population). According to the Region’s estimates, its gross regional product (GRP) amounted to RUB 4,320 bln in 2023.
KEY ASSESSMENT FACTORS
Strong budget profile and high operational efficiency indicators. The averaged1 ratio of the current account balance to current revenues for 2021–2025 will be 39%. In 2024, the current account balance may reach 45% of the Region’s current revenues, which indicates that it is able to finance all current expenditures using current revenues, as well as the bulk of capital expenditures.
The averaged share of capital expenditures in total expenditures (excluding subventions) for 2021–2025 will amount to 49%. Capital expenditures are mostly funded by the Region at its own expense. The averaged share of tax and non-tax revenues (TNTR) in the Region’s revenues (excluding subventions) will equal 85% for the same period.
The ratio of the modified budget deficit (MBD) to current revenues averaged over 2021–2025 will be -2%. This indicates that the Region finances its capital expenditures mainly from budget revenues, but will need to use accumulated liquidity to finance the entire volume of planned capital expenditures. ACRA notes that by the end of 2024, the MBD will remain well below 1% of current revenues, which indicates the budget’s insignificant need to use additional financing.
The Region’s budget profile is determined as strong. There are no cases of violation of budget legislation; the amount of lost tax revenues due to the use of tax benefits is insignificant for the Region’s budget. In 2023, the volume of budget revenues lost due to the provision of benefits amounted to slightly less than 3% of TNTR. The Region has conservative budget planning, and the actual deficit is frequently much lower than the target indicators, which is often due to the volatility of corporate income tax revenues.
The Region executed its budget in 2023 with a deficit of 6% of TNTR, which was fully covered by budget loans from the senior budget.
According to the Region’s updated data, budget revenues in 2024 will be 19% higher than in 2023. It is expected that the Region’s TNTR will increase by 20%, while the volume of transfers may grow by 10%. At the same time, current transfers will demonstrate an almost twofold increase, while capital transfers, on the contrary, will decrease by 20%. It is expected that the growth of budget expenditures in 2024 will be 14%. The Region has planned to execute the budget with a slight deficit, which will be fully financed using accumulated balances in accounts.
As of 10M 2024, the revenues of the Region’s budget had grown by 11% compared to the indicator for the same period last year, including 12% growth of TNTR, which was driven by higher personal income tax proceeds (+36%) and proceeds from taxes on total income (+39%), while corporate income tax revenues declined by 10%. Considerable growth (of more than three times) was also recorded by interest income from placing budget funds, while transfers increased by 6%. On the other hand, budget expenditures were practically unchanged. Therefore, the intermediate budget surplus amounted to around RUB 73.0 bln as of November 1, 2024.
The Region’s budget law for 2025–2027 envisages the revenue side of the budget falling by 18% in 2025 relative to the expected indicator for the end of this year. The volume of TNTR may also decline by 18%, while transfers may decline by 22%. Budget expenditures may decline by 16% in 2025 vs. 2024. In this case, the budget deficit will be 3% of TNTR and will be financed using funds in the Region’s accounts.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
Low debt load and non-commercial nature of debt. In 2023, the Region’s debt amounted to RUB 125.7 bln. The lion’s share of the debt portfolio (92%) was budget loans, while the remaining part was guarantees, in particular, a guarantee issued at the end of 2023 to JSC TatDorTransNeft (founder is the Republic of Tatarstan) to cover funds received from JSC “DOM.RF” (ACRA rating AAA(RU), outlook Stable) to build roads in the Region, and a guarantee issued in 2005 to KAMAZ PTC (ACRA rating AA(RU), outlook Stable) for obligations to the federal budget. As of January 1, 2024, the Region had a balanced debt repayment schedule, and refinancing risks were minor in the short term because the debt is non-commercial. The Region had to repay around 14% of its debt from 2024 to 2025, out of which the largest part (RUB 16.1 bln) was due in 2024.
As of December 1, 2024, the Region’s debt was RUB 114.0 bln, which is 9% smaller than the indicator recorded at the start of the year. Since the start of 2024, the Region has repaid RUB 15.0 bln of budget loans (provided for advance financing of budget expenditures) using inter-budget transfers from the federal budget. Besides this, the Russian Ministry of Finance wrote off an additional RUB 9.5 bln of budget loans in connection with the transfer of tax revenues from the implementation of new investment projects in the Region to the federal budget. At the same time, since 2024 began, a new guarantee worth RUB 13.0 bln to construct motorways has been provided to JSC TatDorTransNeft. In addition, the volume of guarantees provided to KAMAZ PTC increased by around RUB 0.7 bln due to currency revaluation. According to the updated debt repayment schedule, the Region has to repay 4% of its debt liabilities in 2024–2026; there are no repayments due in the remaining part of 2024.
At the end of 2023, the ratio of debt to current income of the Region was around 30%. The indicator value is projected to be 22% as of the end of 2024. The decrease in the debt burden is explained by the expected growth of the Region’s current income. The indicator will not exceed 30% in 2025, according to ACRA’s expectations.
Interest expenditures are not burdensome for the Region — interest expenditures averaged for 2021–2025 will be well below 1% of total budget expenditures (excluding subventions). The ratio of the Region’s debt to projected GRP at the end of this year will amount to less than 3%.
The debt profile is assessed as very strong — the weighted average maturity of debt is well above 3.5 years and the debt portfolio consists only of non-commercial instruments. The budget’s operational efficiency is consistently positive, which indicates the absence of any need to finance current expenditures using debt or accumulated liquidity. There are no cases of overdue debt payments. According to the Region, the debt of its public sector companies was RUB 27.7 bln as of October 1, 2024 and their overdue payables amounted to RUB 16.3 bln. The debt load of municipalities is low. In 2023, the ratio of municipalities’ debt to their TNTR was 34%, with Kazan account for all the debt.
Accumulated liquidity is sufficient to finance the budget deficit expected at the end of the year. As of November 1, 2024, the balances in the Region’s accounts had increased by more than 2.5x compared to the start of the year. Since the start of this year, they have exceeded average monthly budget expenditures by approximately twofold. In ACRA’s opinion, accumulated funds will be sufficient to finance the budget deficit expected at the end of 2024 in full. The remaining funds will be sufficient to finance the deficit planned for 2025.
The Region’s liquidity ratio will considerably exceed 140% at the end of 2024.
ACRA doubts that companies and financial institutions that are strategically important to the Region’s economy or significantly depend on its budget will need targeted financial support in the medium term.
The budget’s liquidity profile is strong. The Region did not attract short-term loans from the Federal Treasury Department to replenish its funds in the past period of the current year. The Region does not use credit lines as an instrument of its own liquidity. The risks of refinancing debt obligations are assessed as insignificant given the non-commercial nature of the debt.
The Region’s economy is developed and moderately focused on the extraction of commodities. According to ACRA’s calculations, the oil and gas industry generated the maximum share (22%) of tax revenues in 2020–2023 (averaged over this period). The wholesale and retail trade sector generated around 14% of tax revenues, and the manufacturing sector formed another 24% (including more than 7% contributed by chemical production). The averaged share of industries comprising the state sector of the Region for 2020–2023 is low (10%). The economic diversification indicator has not changed significantly based on the results of 10 months of the current year.
The largest industrial enterprises in the Region are Tatneft PJSC (ACRA rating AAA(RU), outlook Stable), Nizhnekamskneftekhim PJSC (ACRA rating AAA(RU), outlook Stable), TANECO JSC, Kazanorgsintez PJSC (ACRA rating AAA(RU), outlook Stable), and KAMAZ PTC.
The Region’s per capita GRP averaged over 2019–2022 was 108% of the national average. According to the Region’s GRP expectations for 2023, averaged GRP per capita in 2020–2023 may decrease to 106% of the national average, which nevertheless will not result in the Region’s GRP category changing. The monthly wage to subsistence minimum ratio averaged over 2020–2023 far exceeds 3.5x. The unemployment rate averaged for the same period and calculated according to the ILO’s methodology is low at 2.3%. The unemployment rate was 2.1% in 2023.
KEY ASSUMPTIONS
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Execution of the budget in 2024 as per the Region’s adjusted data;
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No need for commercial debt;
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Considerable use of funds accumulated in accounts to cover the projected budget deficit at the end of this year.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the credit rating will highly likely stay unchanged within the 12 to 18-month horizon.
A negative rating action may be prompted by:
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The need to provide extraordinary support to state sector companies and financial organizations;
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Substantial changes in inter-budget relations in Russia;
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Persisting growth of the budget’s need for debt financing;
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Stable growth of the Region’s debt above 30% of current revenues.
ISSUE RATINGS
There are no outstanding issues.
regulatory disclosure
The credit rating has been assigned to the Republic of Tatarstan 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 credit rating of the Republic of Tatarstan was published by ACRA for the first time on November 17, 2017. The credit rating and its outlook 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 rating was assigned based on data provided by the Government of the Republic of Tatarstan, 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 rating is solicited and the Government of the Republic of Tatarstan participated in its assignment.
In assigning the credit rating, 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 the Republic of Tatarstan. No conflicts of interest were discovered in the course of credit rating assignment.
