The credit rating of the Penza Region (hereinafter, the Region) is based on the moderately low debt load coupled with low debt liability refinancing risks, moderately high shares of capital expenditures in the Region’s total expenditures (excluding subventions) and tax and non-tax revenues (TNTR) in total revenues (excluding subventions). The rating is constrained by the declining operational efficiency of the budget and a growing need to use additional financing, as well as an expected substantial decline in accumulated liquidity by the end of this year.
The Penza Region is located in the Volga Federal District. The Region is home to around 1.2 mln people. According to the Region’s estimates, its gross regional product (GRP) for 2024 exceeded RUB 725 bln.
key assessment factors
Moderately low debt load and low liability refinancing risks. Last year, the Region’s debt declined by 19% year-on-year and amounted to RUB 22.1 bln. The debt portfolio was almost entirely made up of budget loans, while guarantees provided by the Region stood at just over 1%. According to the repayment schedule as of January 1, 2025, over the next three years the Region had to repay no more than 17% of its debt liabilities annually.
As of October 1, 2025, the size of the Region’s debt had declined by 10% compared to the start of the year as a result of the write-off of part of the budget loans to a total of RUB 2.2 bln. In addition, this April, most of the budget loans were restructured as per Decree of the Government of the Russian Federation No. 79. According to the updated debt repayment schedule, the Region had to repay just over 7% of its debt annually over the next four years as of October 1, 2025.
The ratio of the Region’s debt to current revenues will be 26% by the end of 2025, which corresponds to a low debt load. ACRA has adjusted this indicator because it sees the possibility of the Region’s debt load growing in 2026.
Interest expenditures are not a burden for the Region due to the non-commercial nature of debt — interest expenditures averaged1 for 2022–2026 amount to less than 1% of total budget expenditures (excluding subventions). The ratio of the Region’s debt to projected GRP at the end of this year will be around 3%.
The qualitative assessment of the Region’s debt profile corresponds to the third category. The weighted average debt repayment period exceeds four years. The debt portfolio is almost entirely represented by budget loans. The operational efficiency of the budget, with the exception of the forecast period of 2025–2026, is positive. As of October 1, 2025, the Region’s budget did not have any overdue payables. The debt load of municipalities is moderate — the ratio of the debt of municipalities to their total TNTR was 36% as of the end of 2024. Penza accounted for more than 80% of the total debt of the municipalities. The size of financial debt of public sector companies and their overdue payables was insignificant for the Region’s budget as of nine months of this year.
1 Hereinafter, averages are calculated according to the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation.
Declining operational efficiency coupled with the budget’s growing need to use additional financing. The averaged ratio of the current account balance to current revenues for 2022–2026 will be 5%. At the same time, the current account balance may turn negative (-2%) by the end of 2025 due to the growth of the Region’s current expenditures outpacing its current revenues. The negative operational efficiency indicates a need to use additional funds to finance the Region’s current expenditures in full.
The averaged share of capital expenditures in total expenditures in 2022–2026 will amount to 14%. The qualitative assessment of the flexibility of budget expenditures corresponds to the second category. In certain years, the lion’s share of capital expenditures has been financed using funds from the higher budget. The current account balance after taking into account interest income and expenditures is consistently positive (with the exception of the forecast period from 2025 to 2026). The modified free cash flow is volatile, which explains the periodic need to partly finance capital expenditures using additional funds.
The averaged share of TNTR in the Region’s total revenues for 2022–2026 (excluding subventions) will amount to 72%, which in ACRA’s opinion, indicates a moderately low dependence on the higher budget. The ratio of the averaged modified budget deficit (MBD) to current revenues for the above period is expected to be -3%. The budget’s need for additional funds is estimated by ACRA as moderate. According to the Agency’s projections, the MBD for 2025–2026 will be around 8% and 7% of the Region’s current revenues, respectively. At the same time, the projected values of the averaged indicator show that the Region’s need to use additional financing has grown.
The qualitative assessment of the budget profile corresponds to the first category. No cases of violation of budget legislation have been identified. The Region transfers to lower budgets part of the personal income tax revenues collected from foreign citizens and taxes collected in connection with the application of the simplified taxation system, as well as a part of the state fee for the performance of legally significant actions by federal authorities. The actual volume of lost tax revenues associated with the application of tax incentives in 2024 was insignificant for the regional budget. The Agency notes significant annual deviations of some actual budget revenues from the targets.
The budget was executed with a surplus of 7% of TNTR last year, which enabled the Region to repay all of its bank loan debt and part of its budget loan debt.
According to budget allocations approved as of October 1, 2025, the Region’s revenues will grow by 2% this year compared to last year, while TNTR is expected to grow by 3%. However, proceeds from corporate and personal income tax are expected to grow by 4% and 6%, respectively. Transfers have been approved at slightly below the level of 2024 (-2%), while capital transfers are planned to be similar to last year’s volume. The expenditure side of the Region’s budget will grow by 15% this year, mainly due to current expenditures increasing by 17% year-on-year. The planned deficit will amount to 9% of TNTR and be financed mainly using funds in the Region’s accounts.
Based on the current data on the execution of the Region’s budget, ACRA assumes that corporate income tax revenues may decline compared to 2024, while personal income tax revenues may increase. If other budget parameters remain unchanged, this will lead to an increase in the expected budget deficit, which will require the Region not only to use account balances in full, but to attract debt financing as well.
Accumulated liquidity will allow the Region to cover part of the budget deficit expected this year. As of the end of 2024, the Region’s accumulated funds had declined by 8% compared to the start of the year. Over the past 12 months, balances in accounts on average exceeded the budget’s monthly expenditures by around 1.5 times. This year, the size of accumulated funds will be enough to finance most of the budget deficit projected by the Agency. At the same time, ACRA assumes that the Region will need to raise commercial debt in order to cover the remaining part of the 2025 budget deficit and in 2026–2027.
The budget liquidity ratio will be 75% by the end of 2025. ACRA has adjusted this indicator, since it is expected to fall considerably in 2026 on the back of utilization of accumulated funds.
The qualitative assessment of budget liquidity corresponds to the second category. The risks of refinancing debt liabilities are assessed as low due to the noncommercial nature of debt and the extension of its repayment periods as a result of the restructuring of most of the debt. The size of the regional budget’s payables was insignificant for the budget as of October 1, 2025. The Region does not currently have any open credit lines. In February this year, the Region entered into an agreement with the Federal Treasury Department on the provision of short-term budget loans to replenish balances, but no amounts under this agreement have been utilized yet.
Moderate economic development indicators. The ratio of the averaged per capita GRP of the Region for 2020–2023 to the corresponding national average was 50%. This ratio for 2021–2024 could have remained at a comparable level in accordance with the current forecast of the Region and ACRA’s expectations.
The ratio of averaged wages to the regional subsistence minimum for the working-age population for 2021–2024 exceeds 3.5, which has a positive effect on the assessment of the economic profile of the Region. The unemployment rate averaged over the same period was 2.8%, while the indicator for 2024 was 2.2%.
The Region has highly developed trade and manufacturing sectors. According to the Agency’s assessments, the highest share of tax revenues from enterprises registered in the Region comes from the manufacturing sector. The averaged share of these tax revenues was 29% for 2021–2024 and generated by enterprises engaged in the food industry, metallurgical production, and the production of machinery, equipment, and computers, indicating a high level of diversification of tax revenues. The second largest sector of the economy that makes a significant contribution to the Region’s tax revenues is a set of industries that form the public sector, which provided approximately 19% of tax revenues for the specified period. A significant volume of tax revenues is also generated by the wholesale and retail trade sector, whose share for the specified period amounted to around 15%. In 9M 2025, no significant changes has occurred in the industry structure of tax revenues.
KEY ASSUMPTIONS
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Lower revenues from corporate income tax and higher personal income tax revenues in 2025 compared to the budget parameters approved as of October 1, 2025;
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Budget expenditures executed as per the approved parameters;
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Using a considerable volume of accumulated liquidity to finance the projected budget deficit;
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Obtaining borrowed funds to finance the budget deficit.
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 ratio of debt to current revenues remaining below 30% in 2025–2026;
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Lower need of the budget to use additional financing;
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Maintaining accumulated liquidity by the end of the year.
A negative rating action may be prompted by:
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Further decline in the budget’s operational efficiency;
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Declining share of capital expenditures in the Region’s total expenditures;
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Significant growth of the share of short-term debt of the back of new commercial borrowings.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has been assigned to the Penza Region based on the following methodologies: the Methodology for Assigning Credit Ratings to Regions and Municipal Entities of the Russian Federation to calculate the SCA and determine the credit rating and credit rating outlook of the Penza Region under the national scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency within the Scope of Its Rating Activities to ensure consistent and uniform application of ACRA’s methodologies, models, and key rating assumptions.
The credit rating of the Penza Region under the national scale for the Russian Federation was published by ACRA for the first time on September 20, 2018.
The credit rating and its outlook are expected to be revised within 182 days as per the Calendar of sovereign credit rating revisions and publications.
The credit rating was assigned based on data provided by the Penza 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 rating analysis was performed using the RAS accounting (financial) statements of the Penza Region as of October 1, 2025.
The credit rating is solicited and the Penza Region 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 Penza Region during the year preceding the rating action.
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 а-.
