The credit rating of the Chelyabinsk Region (hereinafter, the Region) is based on its moderately low debt load, minimal liability refinancing risks, as well as positive operational efficiency of the budget coupled with a significant share of capital expenditures in total expenditures (excluding subventions). The rating is constrained by the moderate development indicators of the Region’s economy, as well as the budget’s substantial need for additional sources of financing.
The Region is part of the Ural Federal District. It is home to 3.4 mln people. According to the Region, its gross regional product (GRP) reached RUB 2,916 bln in 2024.
KEY ASSESSMENT FACTORS
Positive operational efficiency of the budget and a substantial need for additional financing. According to the current budget schedule, the Region’s total revenues and tax and non-tax revenues (TNTR) will grow by 4% in 2025 compared to 2024. Corporate income tax revenues will increase by 21%, while personal income tax revenues and transfers will remain at roughly the same level as last year. Interest income generated by depositing budget funds is planned to be almost 80% lower than last year. Budget expenditures are projected to potentially increase by 10%. A budget deficit of 26% of TNTR (before deducting possible excesses) is planned to be covered mainly by borrowing (including at the expense of infrastructure budget loans) and by using liquidity accumulated in previous periods.
Taking into account the execution of the budget as of July 1, 2025, ACRA assumes that this year corporate income tax proceeds will not reach the approved target indicators, while personal income tax revenues and proceeds from depositing budget funds may be much higher than last year. In this case, while maintaining other approved allocations unchanged, the budget deficit of the Region may be higher than expected, which will lead to the use of a larger volume of accumulated funds.
The averaged1 ratio of the Region’s current account balance to current revenues for 2022–2026 will fall just below 20%, however, ACRA has applied an upward adjustment for the threshold value due to the expected increase of the indicator in the forecast period. The current account balance will remain positive by the end of the year and will be sufficient to finance part of the Region’s expected capital expenditures.
The averaged share of capital expenditures in total expenditures will be 36% for 2022–2026. The quality assessment of the flexibility of budget expenditures corresponds to the second category. Capital expenditures are significant and annually almost completely financed by the Region’s budget. The current account balance, including account interest income and expenditures, is consistently positive, allowing interest expenses to be covered by current revenues. The modified free cash flow is rather volatile (in certain years the indicator has been well below zero), which explains why the Region periodically needs to partly finance capital expenditures using additional funds.
The averaged share of TNTR in the Region’s revenues (excluding subventions) will be 89% for 2022–2026. The ratio of the modified budget deficit to current revenues for the abovementioned period is expected to be -12%. This indicates that the budget has a moderately high need for additional funding. ACRA has adjusted the indicator of the need to use additional financing to a higher category due to the Region having a significant volume of account balances.
The quality assessment of the budget profile corresponds to the first category. There are no cases of violation of budget legislation. The Region additionally transfers to lower budgets revenues from personal income tax, tax levied in connection with the application of the simplified taxation system, and tax on the extraction of minerals. The volume of lost tax revenues due to the application of tax benefits projected for 2025 is recognized as insignificant for the Region’s budget. ACRA notes significant deviations of some actual types of budget revenues from planned indicators, since a significant portion of revenues is formed by receipts from volatile industries.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
Moderately low debt load and a smooth debt repayment schedule. As of the end of 2024, the Region’s debt had increased by 46% year-on-year (to RUB 76.7 bln), which was due to the receipt of budget loans to finance infrastructure projects totaling RUB 28.6 bln. As of the start of 2025, the Region’s budget portfolio included budget loans (93%), bonds (around 5%), and guarantees (the remainder). As per the debt repayment schedule as of January 1, 2025, the Region had to repay 9% of its debt obligations this year and 11% in 2026. In April this year, budget loans were restructured in accordance with Decree of the Government of the Russian Federation No. 79. As of August 1, 2025, the updated schedule included the Region paying off 6% of its remaining debt this year and 8% in 2026.
As of the end of 2024, the ratio of the Region’s debt to current revenues was 29%. ACRA expects the Region’s debt load to grow this year in view of the expected attraction of debt to finance the budget deficit. The ratio of debt to current revenues may exceed 30% in 2025, which will correspond to a moderately low debt load.
The ratio of the Region’s interest expenditures to total budget expenditures (excluding subventions) averaged for 2022–2026 will amount to around 1%. The ratio of debt to projected GRP will not exceed 4% this year.
The quality assessment of the Region’s debt portfolio corresponds to the first category. The average weighted maturity of debt is significantly higher than four years. Debt is mainly made up of budget loans. The budget’s operational efficiency is predominantly positive, which indicates that current expenditures are covered by current revenues without the need for borrowings. The debt load of the Region’s municipalities is very low. The ratio of total debt to TNTR of the municipalities was 3% in 2024. The financial debt of public sector enterprises as of April 1, 2025 was insignificant for the Region’s budget. There were no overdue payables as of January 1, 2025 and July 1, 2025.
High account balances. The budget deficit for the previous year was financed through budget loans and funds of the Region held in its accounts. Since the beginning of this year, the Region’s account balances have been, on average, several times higher than its monthly budget expenditures. The Region plans to use funds held in its accounts and borrowings to finance the budget deficit.
The Region’s budget liquidity ratio will be 93% in 2025, which corresponds to a score of 3. However, the score for the liquidity ratio has been adjusted to 2 because the Region regularly receives a significant volume of interest income from managing balances in its single treasury account.
The quality assessment of budget liquidity corresponds to the first category. The Region has bonds in the debt market and plans to raise funds this year. The Region does not have any open credit lines with a drawdown period of more than a year. The Region did not obtain short-term loans from the Federal Treasury Department in 2024. There are currently no plans to obtain a treasury loan in 2025. Debt refinancing risks are assessed as minimal because the volume of funds in accounts exceeds the total debt.
Moderate economic development indicators. According to ACRA’s calculations, over a third of the Region’s tax revenues may come from the metals sector annually. The peak values of this share were observed in 2021. There is no other significant concentration of tax revenues in the Region. Public sector enterprises have generated about 13% of the budget’s tax revenues in the past. No significant changes were observed in the indicators of concentration of tax revenues as of the end of 2024.
The Region’s averaged GRP per capita equaled 71% of the national average in 2020–2023. According to the Region’s estimates for the forecast period, a decline in this indicator is not expected. The unemployment rate was 1.9% in 2024, and the averaged rate for 2021–2024 was 2.5%. The ratio of monthly wage to the subsistence minimum averaged for 2021–2024 exceeded 4.
KEY ASSUMPTIONS
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More pessimistic budget execution in terms of corporate income tax revenues and more optimistic execution in terms of personal income tax revenues and income from the use of property;
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Execution of the budget in 2025 with a deficit that exceeds the parameters in the current budget law;
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Using accumulated liquidity.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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The share of the Region’s TNTR in its revenues increasing (excluding subventions);
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Declining need of the Region’s budget for additional sources of funds;
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The ratio of the Region’s debt to current revenues sustainably lower than 30%.
A negative rating action may be prompted by:
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Growing concentration of the Region’s economy on the metals sector;
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Consistently lower operational efficiency of the budget;
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Significant increase in the volume of short-term commercial debt;
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Significant decline in the volume of the Region’s temporarily idle funds.
ISSUE RATINGS
Chelyabinsk Region, 35001 (ISIN RU000A102FV5), maturity date: November 30, 2027, issue volume: RUB 7 bln — AA(RU).
Chelyabinsk Region, 35002 (ISIN RU000A102L61), maturity date: December 17, 2027, issue volume: RUB 8 bln — AA(RU).
Chelyabinsk Region, 35003 (ISIN RU000A102L79), maturity date: December 17, 2027, issue volume: RUB 8 bln — AA(RU).
Rationale. In the Agency’s opinion, the bonds of the Chelyabinsk Region are senior unsecured debt instruments, the credit ratings of which correspond to the credit rating of the Chelyabinsk Region.
REGULATORY DISCLOSURE
The credit ratings of the Chelyabinsk Region and the government securities of the Chelyabinsk Region (ISIN RU000A102FV5, RU000A102L61, RU000A102L79) 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 ratings to the above issues.
The credit ratings of the Chelyabinsk Region and the government securities of the Chelyabinsk Region (ISIN RU000A102FV5, RU000A102L61, RU000A102L79) were published by ACRA for the first time on December 26, 2017, December 1, 2020, December 21, 2020, and December 21, 2020, respectively. The credit rating and its outlook, as well as the credit ratings of the government securities of the Chelyabinsk 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 of the Chelyabinsk Region and the government securities of the Chelyabinsk Region (RU000A102FV5, RU000A102L61, RU000A102L79) were revised and disclosed earlier than the dates specified in the Calendar of sovereign credit rating revisions and publications due to prompt execution of credit rating revision procedures. The planned revision date was August 21, 2025; the new revision date is August 19, 2025. The planned disclosure date was August 26, 2025; the new disclosure date is August 22, 2025.
The credit ratings were assigned based on data provided by the Chelyabinsk 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 Chelyabinsk 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 additional services to the Government of the Chelyabinsk Region. 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 aa.
