23 May 2012, Wednesday, 11:10

S&P: Rating of Bashkortostan is “BB+”, forecast is “positive”

author: Alfia Sharafutdinova

Long-term credit rating of Bashkortostan is confirmed at the level of “BB+” and the forecast is “positive”. This is the opinion of analysts from the international rating agency “Standard & Poor’s” (S&P).

“Low predictability of budget showings and restricted financial flexibility, anticipated by control from the side of federal government, increased concentration of economics in oil-refining industry, long-term pressing on budget items of expense and low level of prosperity according to international standards are the main restrictive factors of the republican rating. In our opinion these drawbacks can be compensated by low debt level, high indices of liquidity and well-balanced financial policy of the Republic” – said in the agency’s release.

Predictability of financial showings RB still remains low because of the control of the federal government over Republican incomes and expenses and because of the developing character of inter-budget relations, S&P specialists say. Besides, the fact that oil mining and oil processing enterprises still remain the main tax-payers for the regional budget makes the Republic dependable upon changes in economics and upon the policy, conducted by big monopolists.

The level of prosperity in Bashkortostan remains low, experts of the rating agency say. In 2011 the index of internal regional product per capita was less than eight thousand US dollars, i.e. substantially lower than the average all-Russian index.

“The pressure of expenses – both current and capital – remains high” – S&P experts believe – “In 2011 Republican expenses on budget payments and social sphere went on growing and in combination with inter-budget transfers for wages at the municipal level exceeded 40% of regional budget’s expenses. Further growth of these expenses is expected in 2012 too”.

“At the same time we expect that in 2012-2014 the rates of growth of internal regional product in Bashkiria will be higher than the average all-Russian showings. This fact will contribute to neutralization of influence of negative changes in tax legislation upon growth of corporate income tax proceeds. Our basic scenario presumes certain aggravation of Republican financial indices in 2012-2014 because of pressure on the budget items of expense. Nonetheless, taking well-balanced approach of Bashkir leadership to management of expenses, we believe that the Republic will be able to preserve current budget surplus at the level of 5-7%” – said in the S&P press-release.

In accordance with such scenario the full debt of the Republic will most likely remain rather low and won’t exceed 25% till 2014.

“The forecast “positive” demonstrates our positive scenario and our assumptions that Bashkortostan will keep high rates of growth of current expenses and well-balanced approach to financial management and due to that will be able to hold the pressure of expenses on budget better and will preserve high financial showings” – S&P says.

themes: ratings