Print
IBI-Rating has affirmed the credit rating and the rating of investment attractiveness of Kharkiv city
17.11.2021
National rating agency ІВІ-Rating informs on affirming of the credit rating of Kharkiv city at uaА+ grade with «evolving» outlook, and the rating of investment attractiveness at invAA grade.
Such ratings grades represent the city’s high ability to pay off its financial liabilities and excellent investment attractiveness. The «evolving» outlook, with the highest probability, implies of rating changes during the year. Currently, such rating outlook is applied to all clients of the Agency. It is due to increased uncertainty regarding the actions of authorities and business entities in case of aggravation of the epidemiological situation in Ukraine and the world.
When updating the ratings, the following were taken into account:
1. The structure of the city's economic complex and the dynamics of key indicators
Kharkiv city has a powerful industrial complex, characterized by a significant proportion of high-tech and innovative enterprises, whose products are sold, including for export. Foreign trade turnover in goods of enterprises of the city of Kharkiv city in January-June 2021 increased compared to the same period in 2020 by 38.8% and amounted to USD 1,250.85 million.
Retail turnover of enterprises (legal entities) in Kharkiv city, the main type of economic activity of which is retail trade, in the first half of 2021 amounted to UAH 26.3 billion (against UAH 24.5 billion in 6 months of 2020). The volume of sales of goods per capita amounted to UAH 18.46 thousand, which is significantly higher than the figure for Ukraine as a whole.
Small business has a significant influence on the development of the Kharkiv city’s economy. The number of individual entrepreneurs in the city as of 01.07.2021 was 119 309, who employed 44 699 employees. According to the results of the first half of 2021, the volume of tax payments to the budget of Kharkiv city from individual entrepreneurs amounted to UAH 1,500.4 million (23.3% of the total tax receipts).
2. Effectiveness of financial policy and budget indicators
The budget of the Kharkiv CTC in the first half of 2021 received UAH 8,220.4 million (against UAH 6,815.7 million in the same period in 2020). The share of own revenues in the budget of the Kharkiv CTC based on the results of the first half of 2021 amounted to 82.62% (80.85% in 6 months of 2020).
The volume of own income per capita for the first half of 2021 amounted to UAH 4.76 thousand, which exceeds the figure for Ukraine as a whole. The indicator of the tax capacity of the budget (personal income tax per capita) of the Kharkiv CTC is higher than the national average, which is why a horizontal equalization mechanism is applied - funds are transferred to the state budget in the form of a reverse subsidy.
The share of protected items in the volume of expenditures of the general budget fund for 2021 is 72.8%. Kharkiv city needs to attract additional funding, first of all - for the modernization of urban infrastructure and housing and communal services. In order to implement investment projects, Kharkiv city actively cooperates with investors, including international ones. Kharkiv City Council provides guarantees to utilities that implement infrastructure projects with the involvement of foreign investors.
The actual amount of the balances of loans, under which guarantees were provided by the local council, as of July 1, 2021, is UAH 621.15 million. The ratio of the direct debt of the city council to the own Kharkiv city’s budget annual revenues is moderate, and the consolidated debt burden is significant, which increases the sensitivity of the city budget to currency risks. In turn, the risks are partially mitigated by the long-term repayment period of the principal amount of debt under sub-lending agreements and the absence of peak loads. It should also be noted, that at present all utilities independently and timely fulfill their loan obligations.
3. Natural geographic potential and the availability of a material base for business development
A feature of the economic and geographical position of Kharkiv city is its location at the intersection of a number of important transport routes. Today the city is a very large transport junction: railways and highways lead to Donbass, Crimea, Caucasus, the ports of the Black, Azov and Baltic seas, and many large industrial centers located outside Ukraine.
Kharkiv city has a powerful human potential - it is a key scientific unit of the country with an extensive system of research institutes and higher educational institutions. Kharkiv city ranks second place after Kyiv by the number of scientific and scientific-technical organizations in the country. At the same time, the competition for business and the cost of labor resources are lower in comparison with the capital. The city has an extensive transport, industrial, trade and business infrastructure, which creates favorable conditions for business development.
4. Business environment and investment policies of local authorities
Local authorities are actively working on supporting entrepreneurship, creating a positive image of the city and implementing investment projects aimed at its development. In 2019, the Synergy Science Park was opened in Kharkiv city, whose mission is to develop scientific, technical and innovative activities, as well as a business incubator, where scientists will be helped to commercialize their ideas and developments. Also in the city there is a communal institution «Office of Reforms», which is engaged in the introduction of new technologies in all spheres of life: building communication between city authorities and citizens, creating a «smart» city, introducing smart technologies and electronic governance. Kharkiv city actively supports and develops cluster initiatives - there are currently 8 clusters in the city. Active work is underway to promote the investment potential of the city. There is an experience of successful cooperation with foreign investors on a number of infrastructure projects.
In order to conduct the analytical research, the materials obtained from Kharkiv city have been used, including: indicators of the social and economic development, statistical data, treasury statements, program materials, other necessary internal information, as well as the information from the public sources, which the Rating Agency considers credible.
ІBI-Rating is the largest Ukrainian rating agency. It has been operating since 2005 and has the status of an authorized rating officer from the National Commission for the Securities Market. The Agency provides professional credit rating and counseling services. It is only agency in Ukraine that has 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
Such ratings grades represent the city’s high ability to pay off its financial liabilities and excellent investment attractiveness. The «evolving» outlook, with the highest probability, implies of rating changes during the year. Currently, such rating outlook is applied to all clients of the Agency. It is due to increased uncertainty regarding the actions of authorities and business entities in case of aggravation of the epidemiological situation in Ukraine and the world.
When updating the ratings, the following were taken into account:
1. The structure of the city's economic complex and the dynamics of key indicators
Kharkiv city has a powerful industrial complex, characterized by a significant proportion of high-tech and innovative enterprises, whose products are sold, including for export. Foreign trade turnover in goods of enterprises of the city of Kharkiv city in January-June 2021 increased compared to the same period in 2020 by 38.8% and amounted to USD 1,250.85 million.
Retail turnover of enterprises (legal entities) in Kharkiv city, the main type of economic activity of which is retail trade, in the first half of 2021 amounted to UAH 26.3 billion (against UAH 24.5 billion in 6 months of 2020). The volume of sales of goods per capita amounted to UAH 18.46 thousand, which is significantly higher than the figure for Ukraine as a whole.
Small business has a significant influence on the development of the Kharkiv city’s economy. The number of individual entrepreneurs in the city as of 01.07.2021 was 119 309, who employed 44 699 employees. According to the results of the first half of 2021, the volume of tax payments to the budget of Kharkiv city from individual entrepreneurs amounted to UAH 1,500.4 million (23.3% of the total tax receipts).
2. Effectiveness of financial policy and budget indicators
The budget of the Kharkiv CTC in the first half of 2021 received UAH 8,220.4 million (against UAH 6,815.7 million in the same period in 2020). The share of own revenues in the budget of the Kharkiv CTC based on the results of the first half of 2021 amounted to 82.62% (80.85% in 6 months of 2020).
The volume of own income per capita for the first half of 2021 amounted to UAH 4.76 thousand, which exceeds the figure for Ukraine as a whole. The indicator of the tax capacity of the budget (personal income tax per capita) of the Kharkiv CTC is higher than the national average, which is why a horizontal equalization mechanism is applied - funds are transferred to the state budget in the form of a reverse subsidy.
The share of protected items in the volume of expenditures of the general budget fund for 2021 is 72.8%. Kharkiv city needs to attract additional funding, first of all - for the modernization of urban infrastructure and housing and communal services. In order to implement investment projects, Kharkiv city actively cooperates with investors, including international ones. Kharkiv City Council provides guarantees to utilities that implement infrastructure projects with the involvement of foreign investors.
The actual amount of the balances of loans, under which guarantees were provided by the local council, as of July 1, 2021, is UAH 621.15 million. The ratio of the direct debt of the city council to the own Kharkiv city’s budget annual revenues is moderate, and the consolidated debt burden is significant, which increases the sensitivity of the city budget to currency risks. In turn, the risks are partially mitigated by the long-term repayment period of the principal amount of debt under sub-lending agreements and the absence of peak loads. It should also be noted, that at present all utilities independently and timely fulfill their loan obligations.
3. Natural geographic potential and the availability of a material base for business development
A feature of the economic and geographical position of Kharkiv city is its location at the intersection of a number of important transport routes. Today the city is a very large transport junction: railways and highways lead to Donbass, Crimea, Caucasus, the ports of the Black, Azov and Baltic seas, and many large industrial centers located outside Ukraine.
Kharkiv city has a powerful human potential - it is a key scientific unit of the country with an extensive system of research institutes and higher educational institutions. Kharkiv city ranks second place after Kyiv by the number of scientific and scientific-technical organizations in the country. At the same time, the competition for business and the cost of labor resources are lower in comparison with the capital. The city has an extensive transport, industrial, trade and business infrastructure, which creates favorable conditions for business development.
4. Business environment and investment policies of local authorities
Local authorities are actively working on supporting entrepreneurship, creating a positive image of the city and implementing investment projects aimed at its development. In 2019, the Synergy Science Park was opened in Kharkiv city, whose mission is to develop scientific, technical and innovative activities, as well as a business incubator, where scientists will be helped to commercialize their ideas and developments. Also in the city there is a communal institution «Office of Reforms», which is engaged in the introduction of new technologies in all spheres of life: building communication between city authorities and citizens, creating a «smart» city, introducing smart technologies and electronic governance. Kharkiv city actively supports and develops cluster initiatives - there are currently 8 clusters in the city. Active work is underway to promote the investment potential of the city. There is an experience of successful cooperation with foreign investors on a number of infrastructure projects.
In order to conduct the analytical research, the materials obtained from Kharkiv city have been used, including: indicators of the social and economic development, statistical data, treasury statements, program materials, other necessary internal information, as well as the information from the public sources, which the Rating Agency considers credible.
ІBI-Rating is the largest Ukrainian rating agency. It has been operating since 2005 and has the status of an authorized rating officer from the National Commission for the Securities Market. The Agency provides professional credit rating and counseling services. It is only agency in Ukraine that has 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