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S&P affirms Kyiv rating at 'B'
KYIV. Nov 1 (Interfax-Ukraine) – The international rating agency S&P Global Ratings has affirmed the Long-term Issuer Credit Rating of Kyiv at "B" with a stable outlook.
Kyiv will be able to maintain strong financial performance in 2021-2023, economic recovery will support income growth, make high cost growth manageable, the agency said in its statement.
It explained the stable outlook with expectations that more favorable economic conditions would directly influence the Ukrainian capital’s strong financial performance in 2021-2023, with the deficit amounting to an average of 1.2% of the city’s budget.
Accumulated account balances, a new line of credit, as well as the ability to place municipal bonds and thereby raise funds – all this will help Kyiv to pay off its debt obligations in 2021-2022, S&P analysts say.
The agency clarifies that it predicts that the Ukrainian capital’s direct debt, which includes $115 million in eurobonds, will remain low until the end of 2023: according to S&P estimates, it will grow from UAH 4.02 billion at the end of last year to UAH 4.23 billion at the end of this year and UAH 5.01 billion at the end of 2023. However, the agency believes that the city’s access to external sources of financing is limited due to the weakness of the domestic capital markets and the country’s banking sector.
The rating of Kyiv may decrease in the event of a decrease in the sovereign rating of Ukraine as a whole, S&P notes. In addition, a downgrade of the rating is possible if the Ukrainian capital’s leadership is unable to ensure a balanced budget, which will lead to a deficit and a rapid accumulation of debt, the agency said.
An increase in the rating of the Ukrainian capital is also possible if the sovereign rating of the state rises and the city’s leadership manages debt and liquidity efficiently, the press release emphasizes.
Agency analysts note that Kyiv is still constrained by an unstable and centralized system of regional finance. Weak payment culture and the default of previous years continue to affect the formation of the rating of the Ukrainian capital, agency’s analysts say.
According to S&P forecasts, the gross regional product of Kyiv per capita in 2021 will increase to UAH 308,400 from UAH 285,200 last year, in 2022 – to UAH 354,500, in 2023 – to UAH 382,600.
