IBI-Rating has affirmed the credit rating of Ternopil city at uaВВВ grade

IBI-Rating informs on affirming of the credit rating of Ternopil city at uaВВВ keeping the «stable» outlook.

The affirmed credit rating grade of Ternopil city is due to importance of the city as a regional center, diversification of budget revenues and moderate level of budget provision, which is comparable to the average value for local budgets in Ukraine, as well as a low level of debt burden on the consolidated budget revenues, given its expected growth in the future.

The development of Ternopil city in 2016 continued to be influenced by the overall situation in the economy, which was in the stage of recession and political instability. Despite this, the city's economy for the second consecutive year has demonstrated gradual recovery, accompanied by an increase in the volumes of industrial output sold (including for export), capital investments and FDI, construction works completed and retail trade turnover.

This trend helped ensure growth of the main indicators of social and economic development of Ternopil city, most of which are either equal to or exceed the average values in the country per capita, as well as to an increase in revenues to the local budget.

Measures of decentralization of budgetary relations and delegation of powers to cities to collect certain state taxes and duties, which have been implemented by the central government since 2015, and changes in the budget legislation norms in terms of payment of taxes to local budgets, indexation of land valuation, an increase in nominal wages, measures on administration of taxes and duties at the local level, allowed Ternopil city to further increase revenues to the budget.

By results of 2016, the volume of budget revenues increased by 32.9% as compared with 2015, amounting to UAH 1 729.6m. This was facilitated by an increase in tax revenues by 43.0% to the amount of UAH 729.7m and non-tax revenues by 9.3% to the amount of UAH 96.2m, as well as transfers from higher level budgets by 29.4% to the amount of UAH 886.6m. The budget of Ternopil city was consolidated with a surplus in the amount of UAH 5.9m, versus UAH 59.8m in the previous year. The decrease in this indicator is due to an increase in the local budget expenditures by 1.4 times to the amount of UAH 1 723.5m, including the increase in capital expenditures by 1.6 times to the amount of UAH 291.1m, whose volume accounted for 17% of all the budget expenditures.

The city maintains a high level of depreciation of fixed assets, including housing stock, engineering and transport infrastructure facilities, hence the need for significant capital investments in the local infrastructure. Sources of financing of capital investments in the short-term perspective will also be loan funds from international financial institutions, which will have an impact on the dynamics of the indicator of consolidated debt burden on the budget revenues, which in 2016 continued to be at a low level and accounted for 6.9%.

A positive impact on the credit rating may have, as follows: increased revenues to Ternopil city budget and improvement of most indicators of social and economic development in the city per capita. A negative impact on the credit rating may have, as follows: decreased budget revenues indicators, reduction in liquidity, a substantial increase in debt obligations, deterioration of the borrowings market conditions or limiting of the access to it for municipal formations.

In order to conduct the analytical research the materials obtained from Ternopil city have been used, including: treasury statements for 2016, data on the implementation of the program of the city social and economic development and the city budget in 2016, statistics data, other necessary internal information, as well as the information from the public sources, which the Rating agency considers credible.

Municipal department

For more information please contact:
Press service of IBI-Rating
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