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

22.12.2017
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 an acceptable level of debt burden on the consolidated budget revenues, given its expected growth in the future.

The development of Ternopil city in 2017 continued to be influenced by the overall situation in the economy, which was in the stage of recovery and political instability. Considering 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 and the commissioning of housing.

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.

According to the results of the first half of 2017, the volume of budget revenues increased by 45.5% as compared with the same period of 2016, amounting to UAH 1 268.6m. This was facilitated by an increase in tax revenues by 38.4% to the amount of UAH 466,1 m and non-tax revenues by 4.4% to the amount of UAH 48.0m, income from capital transactions by 11.7% to the amount of UAH 6.7 m, as well as transfers from higher level budgets by 55.0% to the amount of UAH 745.5m. The budget of Ternopil city was consolidated with a surplus in the amount of UAH 23.1, versus UAH 34.2m in the previous year. The decrease in this indicator is due to an increase in the local budget expenditures by 48.7% to the amount of UAH 1 245.6m.

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 the first half of 2017 increased by 2.7 pp up to 9.6% and continued to be at an acceptable level.

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 the first half of 2017, data on the implementation of the program of the city social and economic development and the city budget in forthe first half of 2017, 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
(044) 362-90-84
press(at)ibi.com.ua