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IBI-Rating has affirmed the credit rating and the rating of investment attractiveness of Kharkiv city

14.05.2019
National rating agency IBI-Rating informs on affirming of the credit rating of Kharkiv city at uaА+ grade, keeping the «stable» outlook and the rating of investment attractiveness at invАА grade.

Such rating grades represent excellent investment attractiveness and high ability of the city to pay off its financial commitments. The «stable» outlook, with the highest probability, implies immutability of the rating on the horizon for 12 months.

Mr. Dmytro Zadesenets, Director of the municipal department of the IBI-Rating agency, has announced: «Against the background of the majority of Ukrainian cities, Kharkiv has a fairly powerful industrial complex and a diversified economy, which ensures a positive trend in budget revenues and its financial capabilities. At the same time, the city authorities pursue an effective financial policy, maintaining the indicators of budget liquidity and debt burden at an acceptable level. At the same time, the need to renew the capital base of the urban economy remains significant, which is the basis for the growth in the activity of the city and utilities in the borrowing market».

Were taken into account:

1. The structure of the economic complex of the city and the dynamics of key indicators

Kharkiv has one of the largest and diversified economies among other cities of Ukraine. In 2018, was a further increase in a number of indicators of socio-economic development: the volume of industrial products sold grew by 14.1% to UAH 83.1 billion, the capital investments mastered - by 24.4% to UAH 13.8 billion, retail turnover – by 12.1% to UAH 42.9 million. In 2018, 438.6 thousand m2 of housing was commissioned, which is in 1.4 times higher than the corresponding figure in Ukraine per 1 inhabitant. In general, most indicators of the economy and the economic complex of the city (including in terms of per capita) exceed or correspond to the national average.

2. Competitive advantages and disadvantages in comparison with other cities of the country

In Kharkiv city are localized the key organs of government of the region. In addition, the city has good logistics, a large number of educational institutions (different profiles), and developed service, communal and social infrastructure. At the same time, competition for business and the cost of labor is lower, compared to the capital.

3. Efficiency of financial policy and budget indicators

In 2018, the city budget was executed with a surplus of UAH 114.9 million. Own budget revenues of the city against 2017 increased by 17.2% - up to UAH 9.4 billion; the share of tax revenues in the structure of the city’s own revenues was 92%. At the same time, these revenues are diversified by payers and sources, which ensures relative stability and predictability of budget revenues. The level of fiscal security in 2018 amounted to UAH 6.5 thousand, and continues to exceed the average value for local budgets. The city budget remains a donor budget, transferring a reverse subsidy to the state budget - UAH 213.5 million in 2018.

4. The sensitivity of the budget and the city economy to the impact of negative factors

The city has a need to attract additional funding, including the restoration of urban infrastructure, housing and communal services. This has already led to the attraction of a significant amount of debt financing by the municipal sector of the city and a corresponding increase in the volume of consolidated debt almost doubled in a year - to UAH 1.96 billion. In relative terms, the level of consolidated debt burden on the budget revenues (excluding transfers) increased by 4.8 pp and as of 01.01.2019 amounted to 20.8%. According to the agency, the impact of negative factors on the economy and financial viability of the city remains moderate - the industrial complex has largely adapted to the risks posed by the military conflict in eastern Ukraine and the introduction of trade restrictions between Ukraine and the Russian Federation.

Mr. Mykhailo Fatieiev, Deputy Mayor, Director of the Department of Economics and Municipal Property of the Kharkiv City Council, commented the decision of saving the rating grades: «The city of Kharkiv has a positive rating history, which testifies to its transparency. The credit rating from RA IBI-Rating has determined to Kharkiv on April 10, 2013, and it has been at a high investment level. This is due to effective management, balanced fiscal policy, high level of self-financing of investments and indicators of economic development, compared to most of Ukraine's cities».

ІBI-Rating is the largest Ukrainian rating agency. It has been operating since 2005 and has the status of authorized to conduct a rating from the National Securities and Stock Market Commission. Provides professional credit rating and advisory services. The only rating agency in Ukraine, which has a working bilateral partnership with the European rating agency BCRA, certified by ESMA.

Municipal department
For more information please contact:
Press service of IBI-Rating
(044) 362-90-84
press(at)ibi.com.ua