The credit rating of Saint Petersburg (hereinafter, the City) is based on the low leverage and minimal refinancing risks, high level of economic development, balanced characteristics of the budget profile, and a significant volume of accumulated liquidity.
Saint Petersburg is a city of federal importance and home to 3.8% of Russia’s population (fourth place by size of population). According to data for 2023, the City’s gross regional product (GRP) accounted for about 6.9% of the total GRP of Russia’s regions. The City ranks second among Russian regions by nominal GDP; it is a major cultural center of the country and the largest transport hub in northwestern Russia. Saint Petersburg has developed maritime, river, railway, air, and motor transport infrastructure.
KEY ASSESSMENT FACTORS
Balanced characteristics of the budget profile and moderate need for additional funds. The averaged1 ratio of the current account to current revenues for 2022–2026 will be just under 20%. ACRA assumes that the size of the current account balance will remain well above zero in 2025 (at 15% of the volume of the City’s current revenues). The positive current account balance points to the ability to finance a significant part of the City’s capital expenditures without resorting to additional financing.
The averaged share of capital expenditures in total expenditures (excluding the volume of subventions) for 2022–2026 will be 26%. The quality assessment of the flexibility of budget expenditure corresponds to the first category. Capital expenditures are annually almost entirely financed by the city budget. The City has a significant level of development of social, transport and utility infrastructure. The current account balance after taking into account interest income and expenses is regularly positive. The modified free cash flow indicator is quite volatile, which indicates a periodic need to use additional financing for capital purposes.
The City’s budget has low dependence on transfers from the higher budget — from 2022 to 2026, the averaged ratio of tax and non-tax revenues (TNTR) to budget revenues (excluding subventions) will be 98%. The ratio of the averaged modified budget deficit (MBD) to current revenues for the above period is expected to be -5%. The City’s need to use additional funds is assessed by ACRA as moderate. According to the Agency’s projections, the MBD for 2025 will be around 10% of the City’s current revenues. Nevertheless, given the low debt load of the City, ACRA has adjusted the averaged ratio of MBD to current revenues to a higher category.
The City’s budget profile assessment corresponds to the first category. No violations of budget laws have been identified. The budget process is characterized by moderate planning accuracy and the predominance of conservative expectations. Deviations of actual revenues from the forecasts stipulated by the first version of the budget law are mostly associated with transfers and corporate income tax revenues due to the volatility of the external environment. Such deviations occur for reasons beyond the City’s control. The estimated volume of lost tax revenues associated with the application of tax incentives in 2024 did not pose any risks to the City’s budget.
The City’s budget was executed with a deficit of 4% of TNTR in 2024. The main source of financing the deficit was the balances in the City’s accounts.
According to the City’s updated plan, the volume of budget revenues will remain virtually unchanged compared to the actual execution for 2024. TNTR will also remain at a level comparable to last year. Based on the results of the current year, an increase in revenues from corporate income tax (+5%), total income taxes (+13%) and property taxes (+12%) is expected. In turn, personal income tax revenues may decrease slightly (-1%) year-on-year. Transfers are planned to be one third lower than last year’s level, mainly due to a 32% decrease in the volume of current transfers. It is expected that the City’s budget expenditures will increase by 7% by the end of 2025, with current expenditures growing by 14% and capital expenditures decreasing by 10%. The budget deficit for 2025 will be 13% of TNTR; the City plans to use part of the account balances and attract borrowed financing to finance it.
Based on the latest data on execution of the City’s budget, ACRA assumes that corporate income tax revenues may demonstrate more negative dynamics than the target, while personal income tax revenues, on the contrary, may increase compared to last year. In this case, while maintaining other budget parameters unchanged, the deficit by the end of 2025 may be lower than planned values, which will allow the City to use a smaller volume of account balances.
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 minimal debt refinancing risks. By the end of 2024, the City’s debt had decreased by 17% year-on-year to RUB 72.9 bln. Bonds accounted for 60% of the debt, with budget loans making up the remainder. Based on the repayment schedule as of January 1, 2025, the City was to repay 20% of its obligations in 2025 and 15% in 2026.
As of July 1, 2025, the volume of the City’s debt had declined by 14%, however, the repayment schedule had not undergone any significant changes. RUB 10.2 bln in bonds have been repaid since the start of the year. For this reason, the share of bonds in the debt portfolio has declined to 53%. The updated schedule assumes that the City will repay 22% of its obligations this year, and 23% in 2026.
The debt load of the City remains low. The ratio of debt to current revenues is expected to be 15% by the end of 2025.
Interest expenditures are not a burden for the City’s budget: the averaged indicator for 2022–2026 is below 1% of total budget expenditures (minus subventions). The ratio of the Region’s debt to the GRP projected for the current year will be slightly more than 1%.
The quality assessment of Saint Petersburg’s debt profile corresponds to the first category. The City’s debt load is consistently low. The weighted average maturity of debt at the middle of this year exceeded four years. The debt portfolio includes long-term instruments. The budget’s operational efficiency is consistently positive (including the indicator projected for 2025). According to the City’s information, there were no overdue accounts payable as of January 1, 2025. The debt load of the City’s municipalities was also zero at the end of 2024. As of January 1, 2025, the financial debt of public sector enterprises amounted to RUB 61.8 bln, and their overdue accounts payable were insignificant. Currently, three public-private partnership projects and 14 concession agreements are being implemented in the City.
High level of budget liquidity. The City fulfills its expenditure obligations on time and regularly places temporarily free budget funds in deposits, and uses repo operations to manage liquidity. As of January 1, 2025, the City budget’s funds exceeded public debt on the same date. Over the past 12 months, average account balances exceeded monthly budget expenditures by over 2.5x. In ACRA’s opinion, in 2025, the balances in the City’s accounts will be enough to fully cover the expected budget deficit (along with debt obligations due to be repaid).
According to the Agency’s projections, the liquidity ratio in 2025 may be 110%, which corresponds to a moderately high level of budget liquidity. However, given that the City regularly places significant amounts to deposits, ACRA applies an upward adjustment to this indicator.
The quality assessment of the City’s budget liquidity corresponds to the first category. The City is an active participant in the debt market, with three bond issues currently in circulation. The risks of debt refinancing are assessed as minimal. The amount of accounts payable at the beginning of the year was insignificant for the City’s budget. Currently, the City has no open credit lines, and there are no plans to borrow short-term budget loans from the Federal Treasury Department this year.
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 over 1.5x. The ratio of the Region’s per-capita GRP to the national average per-capita GRP averaged over 2020–2023 was 193%. According to the current projections of the City and the expectations of ACRA, this ratio for 2021–2024 could remain at a comparable level. The ratio of averaged wages to subsistence minimum for the working-age population for 2021–2024 significantly exceeded 4.0. The averaged unemployment rate over the same period was 1.7%.
The economy of Saint Petersburg is well diversified. The largest share of the City’s GRP (34%) by the end of 2023 was formed by the wholesale and retail industries. 13% of GRP was generated by the manufacturing industry and industries related to transportation and storage. The public sector industries accounted for about 11% of GRP.
The budget tax proceeds are also sufficiently diversified: the maximum share of revenues for 2024, according to ACRA’s estimates, was provided by wholesale and retail trade (20%). Professional, scientific and technical activities accounted for about 12%, and about 10% were formed by financial and insurance activities. The public sector industries collectively accounted for 11% of the City’s tax revenues.
KEY ASSUMPTIONS
-
Slight decline in corporate income tax revenues along with growing personal income tax revenues;
-
Budget expenditures as stipulated by the updated plans of the City;
-
Borrowing loans from commercial banks to cover budget deficits;
-
Maintaining high budget liquidity.
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:
-
Debt load growing above 30% of the City’s current revenues;
-
Significant fall in available liquidity.
ISSUE RATINGS
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 the bond issues (ISIN 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 RU000A0ZYKJ1, RU000A102A15, RU000A102K88) of Saint Petersburg were published by ACRA for the first time on June 27, 2017, December 12, 2017, October 22, 2020, and December 17, 2020, respectively. The credit ratings of Saint Petersburg and the government securities (ISIN 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.
Rating components: the standalone creditworthiness assessment is equal to the credit rating and corresponds to the level of aaa.
