«IBI-Rating» has affirmed the credit rating of Kharkiv city at uaА+ grade

The independent authorized Rating agency IBI-Rating informs on affirming of the credit rating of Kharkiv city at uaА+ keeping the «stable» outlook.

The credit rating of Kharkiv city reflects the significance of the city as one of the major cities in Ukraine, as a regional business, cultural and educational centre, diversification of the economic complex of the city, which contributes to the rapid recovery of sources of filling of the city budget revenues, as well as its growth.

The development of Kharkiv city in 2016 continued to be influenced by the overall situation in the country’s economy, which was in the stage of recession and political instability. Given these processes, against the background of reducing unemployment, growth of average wages, a further reduction of the available population was observed in the city (due to both natural and migratory outflow), as well as a decrease in the average number of full-time employees, although the rates slowed down significantly as compared with previous years. In the above conditions, the city’s economy showed a gradual recovery after the recession in 2014-2015, which was accompanied by growing volumes of the industrial output sold (in absolute terms), FDIs and capital investments, as well as volumes of construction works performed and housing commissioned, which were the highest in the last three years.

Actions on decentralization of budgetary relations and delegation to cities of the powers, introduced by the Government in 2015, on collecting of certain state taxes and duties, and changes in the budget legislation in the part of the regulation of paying taxes to the local budgets, indexation of land valuation, as well as measures of administration of taxes and duties at the local level, enabled Kharkiv city to continue to increase the budget revenues, to keep the indicator of the budget provision at a higher level than the average level in Ukraine.

By the results of 2016, the amount of the budget revenues of Kharkiv city grew by 33.1% as compared to 2015, amounting to UAH 11 248.4m, of them own revenues increased by 38.6% amounting to UAH 6 022.1m. The annual target was overachieved by 4.0%. This was contributed by the increase of tax revenues (+40.4%) and non-tax revenues (+26.6%), revenues from capital transactions (+2.7%), as well as transfers from budgets of other levels (+27.3%). The city budget was consolidated with a surplus in the amount of UAH 150.1m versus the amount of UAH 584.0m of the previous year. At the same time, the indicator of the overall budget liquidity of Kharkiv city, as at 31.12.2016, was 9.9% being considered as acceptable.

The financial policy of the authorities of Kharkiv city allows to maintain indicators of debt burden on the budget revenues at an acceptable level: as at 31.12.2016, the indicator of direct debt burden accounted for 6.0%, while the indicator of consolidated debt burden accounted for 16.3% of the budget revenues in 2016 (net of transfers). The consolidated debt was formed by liabilities of Kharkiv City Council to the State Treasury of Ukraine on medium-term loans, whose repayment must be regulated at the legislative level, under the guarantee of the loan granted by the IBRD to the utility company, as well as debts of utility enterprises on other loans, including those granted by the international financial institutions.

A positive impact on the credit rating may have, as follows: a further increase in the budget revenues of Kharkiv city, exceeding of average nationwide values of most indicators of the social and economic development; decrease in the consolidated debt of the city. A negative impact on the credit rating may have, as follows: decreased budget revenues indicators, reduced liquidity, an increase of debt liabilities, further deterioration of the political or economic situation in Ukraine or in the region.

In order to perform the analytical research the materials obtained from Kharkiv city have been used, including: indicators of social and economic development, materials of statistical bulletins; annual Treasury statements, program materials, other necessary internal information, as well as the information from the public sources, which the Rating agency considers reliable.

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