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.
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)|
|Date:||Nov 29, 2011|
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