The credit rating of the Belgorod Region (hereinafter, the Region) is based on its low debt load, moderate debt refinancing risks, high share of capital expenditures in total budget expenditures, and a positive current account balance. The rating is constrained by the dependence of the budget and the regional economy on the volatile revenues of the metals industry and a low volume of liquidity.
The Negative credit rating outlook has been maintained due to a likely increase in the Region’s debt load in the forecast period and a possible decline of liquidity to the minimum level.
The Region is part of the Central Federal District and is home to 1.5 mln people (1% of the country’s population in 2024). According to the Region’s estimates, its gross regional product (GRP) was RUB 1,436 bln in 2024.
KEY ASSESSMENT FACTORS
Low debt load that may grow. As of January 1, 2025, the Region’s debt amounted to 18% of its current revenues. Budget loans accounted for 75% of debt, while loans, bonds and guarantees were also present in the debt structure. As per its schedule, in 2025–2026, the Region had to repay or refinance 51% of its debt. This share had declined to 38% as of May 1, 2025 as a result of the restructuring of part of the budget loans. The size of debt is expected to grow significantly by the end of this year; the ratio of debt to the Region’s current revenues will also grow. Nevertheless, ACRA assumes that the ratio will continue to remain below 30%.
Interest expenditures are not burdensome for the Region: averaged1 interest expenditures for 2021–2025 will amount to less than 1% of total expenditures (excluding subventions); the ratio of debt to GRP is expected to be around 3% at the end of this year.
The Region’s debt profile corresponds to the first category, which stems from the weighted average debt repayment period amounting to 3.6 years as of the start of this year. In addition, debt is diversified, and the Region’s budget does not have any overdue payables. The current account balance is regularly substantially positive. The total debt of the public sector is insignificant for the Region’s budget, the debt load of municipalities is also small, and its relative size is declining. There is no information about defaults.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
Low projected liquidity. The liquidity ratio of the Region’s budget in 2024 was 75%, and is expected to decline to 26% by the end of this year. In the future, it may decline even further.
The quality assessment of liquidity corresponds to the third category. This is due to the presence of a public credit record and use of funds from the Federal Treasury Department. Average monthly balances in the Region’s budget accounts do not exceed its average monthly expenditures. ACRA assumes that the Region may need to obtain additional financing. Refinancing risks are assessed as moderate. The dynamics of budget’s payables are insignificant.
Stable budget profile indicators. In assessing the parameters of the budget profile, ACRA proceeds from the assumption that the rate of decline in transfers will be lower than that assumed by the current version of the budget law. This assumption is confirmed by the speed of execution of the Region’s budget for five months of this year in terms of transfers. The ratio of current account balance to current revenues averaged for 2021–2025 will amount to 12% according to the Agency’s projections. The averaged share of capital expenditures in total expenditures for 2021–2025 will remain high (more than 20%). The averaged share of TNTR in the Region’s revenues (excluding subventions) will amount to around 80% for the above period. The ratio of modified budget deficit to current revenues averaged for 2021–2025 is projected at -4.5%. The base score for the indicator has been adjusted upward by a single notch due to the low debt load.
The quality assessment of the flexibility of budget expenditures corresponds to the second category. This is due to the following circumstances: capital expenditures in most cases are carried out primarily at the expense of the regional budget, however, the possibility to reduce these expenditures is not clear; based on current statistics, infrastructure and capital investment facilities do not require significant financial investments; the current account balance is regularly considerably positive.
The quality assessment of the Region’s budget profile corresponds to the first category. ACRA takes into account the periodic substantial deviations of actual budget revenues from the targets due to the strong dependence of tax proceeds on sectors of the economy characterized by high volatility. The Region has not violated its budget law. The amount of lost funds in connection with the provision of benefits, in the Agency’s opinion, is not significant for the Region’s budget. The Region facilitates the transfer of additional tax revenues to the municipal level.
Moderately developed economy focused on the metals industry. According to ACRA’s calculations, the averaged share of the Region’s tax revenues from the metal ore mining and metal production industries was 37% in 2021–2024. The non-averaged share for 2024 is 33%. A significant share of tax revenues in 2024 was also formed by agriculture, retail and wholesale trade, and food production. The largest companies operating in the Region in terms of revenues are metallurgical and agriculture enterprises.
In 2020–2023, the Region’s averaged GRP per capita amounted to 88% of the national average. ACRA notes a gradual decline in the indicator in recent years.
The ratio of the nominal salary to the subsistence minimum averaged for 2021–2024 remained above 4x. Unemployment in the Region is low, and in 2024 it was 2.9%. The unemployment rate in the Region averaged for 2021–2024 was 3.3%.
KEY ASSUMPTIONS
- Lower rates of decline in transfers than those provided for in the current version of the budget law.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Negative outlook assumes that the rating will highly likely be downgraded within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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Lower need of the budget to attract additional funds;
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Significant growth in available budget liquidity.
A negative rating action may be prompted by:
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Decrease in the operational efficiency of the budget;
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Ratio of debt to current revenues exceeding 30%;
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Increase in the share of the Region’s short-term debt;
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Ratio of averaged GRP per capita falling below 80% of the national average.
ISSUE RATINGS
Belgorod Region, 34016 (ISIN RU000A1025F6), maturity date: September 18, 2025, issue volume: RUB 4.5 bln — АA-(RU).
Rationale. In ACRA’s opinion, the bond issue of the Belgorod Region is a senior unsecured debt instrument, the credit rating of which corresponds to the credit rating of the Belgorod Region.
REGULATORY DISCLOSURE
The credit ratings of the Belgorod Region and the bond issue (ISIN RU000A1025F6) of the Belgorod Region have been assigned 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 the credit rating to the above issue.
The credit ratings of the Belgorod Region and the bond issue (ISIN RU000A1025F6) of the Belgorod Region were published by ACRA for the first time on June 13, 2017 and September 18, 2020, respectively. The credit rating of the Belgorod Region and its outlook and the credit rating of the bond issue of the Belgorod Region 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 the Belgorod 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 Government of the Belgorod Region 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 the Belgorod Region. No conflicts of interest were discovered in the course of credit rating assignment.
