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Moody's upgrades Moscow Oblast (Russia) to Ba3 from B1.

Summary: Outlook positive

Moody's Investors Service has today upgraded

the global-scale foreign and local-currency ratings of Moscow Oblast to

Ba3 from B1. The outlook on the ratings is positive.

RATINGS RATIONALE

The upgrade in Moscow Oblast's ratings is supported by its improving

operating balances, solid financing surplus anticipated in 2011 and

decreasing debt position, produced by continuing economic growth in the

region and growing tax receipts. "These positive financial results

reflect conservative fiscal management capable to address the region's

challenges of inherited budget imbalances, high off-balance liabilities

and overall high debt burden," says Alexander Proklov, a Moody's Vice

President - Senior Analyst and lead analyst for Moscow Oblast.

"The austerity measures implemented by the regional government, coupled

with high tax receipts have brought debt to around 40-42% of its

operating revenue in 2011, down from 63% in 2010," says Mr Proklov. At

the same time, tax revenue growth of around 20% for 2011 should boost the

operating surplus to around 15% of operating revenues. "Additionally,

federal support in the forms of low-interest bearing loans, transfers

and lending through state-owned banks have facilitated the budget

readjustments," adds Mr. Proklov.

The region has streamlined and balanced its debt structure towards

increasing the share of federal soft-lending with rather smooth maturity

profile. Despite this progress, the region still has relatively short

maturities, which incur refinancing risk. "Going forward, the Moscow

Oblast's capacity to meet refinancing needs at affordable rates and the

central government's willingness to retain its support to the region

beyond 2011 remain core factors in the stability and potential progress

of the rating," says Mr. Proklov.

The region's tax revenues remain potentially volatile and could sharply

drop in a global and national economic slowdown, whilst operating

expenditure is more rigid, dominated by salaries, social obligations and

other politically sensitive spending items. "The relatively diversified

economy, with its strong tertiary sector, as well as its proximity to the

City of Moscow, mitigates some national volatility; but overall the

potential economic weakness remains a constraining factor for the

region's credit profile," concludes Mr. Proklov.

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Publication:EMBIN (Emerging Markets Business Information News)
Geographic Code:4EXRU
Date:Nov 29, 2011
Words:355
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