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«IBI-Rating» has affirmed the credit rating of Kharkiv city

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 the city of Kharkiv in 2017 continued to be under the influence of political and economic instability in the country, although in some segments of the economy there is a gradual recovery. In these processes, the Kharkiv labor market continued to show signs of improvement, which was accompanied by a further reduction in the level of unemployment and its staying at a low level, an increase in the average number of staff members and wages, and migration growth. At the same time, there was an increase in wage arrears that occurred at the expense of bankrupt enterprises, while the ratio of debt to the average monthly wage fund remains higher than the average for Ukraine.

Positive labor market trends are a consequence of the revival of business activity in the city, which was characterized by the growth in the volume of construction work and the commissioning of housing, the development of capital investment, the sale of industrial products, part of which was exported, which, along with the growth of import supplies, allowed to increase foreign trade turnover city enterprises.

The part of indicators of social and economic development of Kharkiv city continues to equal or exceed the average indicators per capita in Ukraine. 

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 the first half of 2017, the amount of the budget revenues of Kharkiv city grew by 38.4% as compared to the same time of the previous year amounting to UAH 7 475.8 mln, of them own revenues increased by 35.3% amounting to UAH 3 763.8 mln. The annual plan completed by 53.7%. This was contributed by the increase of tax revenues (+35.5%) and non-tax revenues (+35.0%), revenues from capital transactions (+26.7%), as well as transfers from budgets of other levels (+41.6%). The city budget was consolidated with a surplus in the amount of UAH 563.5 mln versus the amount of UAH 752.2 mln of the previous year. The indicator of the overall budget liquidity of Kharkiv city, as at 01.07.2017, was 15.5% being considered as acceptable.

The financial policy of the authorities of Kharkiv city allows to maintain indicators of debt burden at an acceptable level: the ratio of direct debt to the planned 2017 revenue budget (excluding transfers) as of July 1, 2017 amounted to 4.7%, consolidated – 13.0%. 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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