FITCH АГЕНТТІГІ АЛМАТЫ ҚАЛАСЫНА ҰЗАҚ МЕРЗІМДІ ДЕФОЛТ РЕЙТИНГІН "BBB" ДЕҢГЕЙІНДЕ БЕЛГІЛЕДІ, БОЛЖАМЫ "ТҰРАҚТЫ"

/Fitch Ratings, Мәскеу, 13.09.19, KASE аудармасы және тақырыптамасы/ – Fitch Ratings қазақстандық қала Алматы үшін шетелдік және жергілікті валютадағы эмитент дефолтының ұзақ мерзімді рейтингтерін 'BBB' деңгейінде жариялады, болжамы "Тұрақты". Алматы – Қазақстанның бұрынғы астанасы және ең ірі қаласы, тұрғындар саны 1,8 миллион адам (мемлекет тұрғындарының 10 %, 2018 ж. мәліметтері). Елдің ЖІӨ 20 % жуық, Қазақстанның маңызды экономикалық және қаржылық орталығы. Үш жылға бекітілетін қала бюджеті, қолма-қол ақшаның келіп түсуіне негізделген. Қала отандық кпитал нарығында облигациялар шығара алады, алайда банктік несиелер ала алмайды және кепілдік бере алмайды. Төменде Fitch Ratings ағылшын тіліндегі хабарламасының түпнұсқасы берілген. Fitch Ratings has published Kazakhstani City of Almaty's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of 'BBB' with Stable Outlook. Almaty is the largest city in Kazakhstan with a population of 1.8 million residents in 2018 (10% of the national population) and its former capital. Contributing around 20% to the country's GDP the city is an important economic and the financial center of Kazakhstan. The city's budget accounts are based on cash while the law on the budget is approved for three years. The city can issue bonds on the domestic capital market, but is prohibited from bank borrowings and issuance of guarantees. KEY RATING DRIVERS The ratings reflect the following rating drivers and their relative weights: High Revenue Robustness Assessed as Midrange Almaty is the largest economy in the country, which generates a diversified and stable tax base and makes the city a net contributor to the national fiscal system. Due to its high tax capacity Almaty is one of few local and regional governments (LRGs) that are subject to compulsory equalisation contributions to the national budget. The city's revenue base is dominated by non-modifiable taxes, which accounted for 82% of total revenue in 2018, up from an average 66% in 2014-2017. Tax revenue is not exposed to economic cycles and is dominated by personal income tax (PIT) and social tax, which contributed 67% to the city's revenue in 2018. The majority of transfers the city receives from the national budget (Kazakhstan; BBB/Stable) are earmarked for particular projects. Revenue Adjustability Assessed as Weaker Local governments in Kazakhstan do not have rate-setting power over taxes as the central government has full fiscal authority over tax rates and the amount of tax revenue allocated between government tiers. At the same time, Almalty provides an equalisation transfer to the national budget, which accounts for around 20% of the city's expenditure. In the event of a revenue shock for the city, the central government may at its discretion decrease the amount of transfers. The absence of any fiscal autonomy and inability to increase revenue in response to economic downturns justifies a 'Weaker' assessment of revenue adjustability. Expenditure Sustainability Assessed as Midrange The city has historically demonstrated sound control over expenditure as evidenced by spending closely tracking revenue during the last five years. Almaty's expenditure responsibilities are set in national budgetary law and mirror those of the central government, but on a lower scale. The city's expenditure is dominated by moderately counter-cyclical items. The largest items are education (21% of total spending in 2018) and utilities (20%). The city is not required to adopt anti-cyclical measures, which would inflate social spending in a downturn. Expenditure Adjustability Assessed as Weaker Fitch assesses the city's ability to curb spending in response to shrinking revenue as low as most of its spending responsibilities are mandatory. In Fitch's view the city's large capex as a share of total spending does not add to spending flexibility as it is the central government that ultimately decides what projects/sectors to invest in. The ability to cut expenditure is also constrained by the low level of per capita expenditure compared with international peers'. Liabilities and Liquidity Robustness Assessed as Midrange The 'Midrange' assessment reflects a moderate national framework for debt and liquidity management and a developing debt capital market in Kazakhstan. National budgetary law sets limits on annual debt service (both principal and interest payments), which must not exceed 10% of the city's revenue for a given financial year. The state regulatory body sets a limit on debt volume for a given year. For Almaty the debt limit was set at KZT55.6 billion for 2018, which corresponded to 13% of operating revenue. The forms of debt available to the city are subsidised budget loans from the central government, which dominates the city's debt portfolio, and domestic bonds. Local governments in Kazakhstan have no right to issue guarantees, which makes debt of government-related entities (GREs) the only form of contingent liabilities for the city. As of beginning-2019 only two municipal companies had debt, which was in limited amounts and self-serviced by the companies. Liabilities and Liquidity Flexibility Assessed as Weaker The state regulatory body sets limits on the amount of cash reserves, which may be deposited in the city's accounts with the National Bank of Kazakhstan (NBRK). The term of deposits cannot exceed one week while annual interest rate is set at 0.25%. In 2018 Almaty did not place any liquidity with NBRK. The amount of the city's outstanding liquidity fluctuated between KZT43.5billion in 2014 (10% of total expenditure) and the minimum of KZT14.5billion in 2018 as the city depleted a substantial portion of cash to finance its deficit. As LRGs in Kazakhstan have no right to borrow from banks the city could not rely on bank credit lines as a source of liquidity. Debt Sustainability Assessment: 'aaa' Fitch classifies the City of Almaty as a Type-B LRG, as it covers debt service from cash flow on an annual basis. Fitch's rating case expects the debt payback ratio (net adjusted debt-to-operating balance) - the primary metric of debt sustainability assessment - will remain below five years over the next four years, which justifies the city's debt sustainability 'aaa' assessment. The secondary metrics - fiscal debt burden (net adjusted debt-to-operating revenue) and actual debt service coverage ratio (ADSCR, operating balance/debt service, including short-term debt maturities) - also support our strong debt sustainability assessment. According to Fitch's rating case, the payback ratio will remain below 3x up to 2023. The rating case expects that fiscal debt burden, which is currently low (2018: 16%), should grow toward 60% in 2019-2023, due to large payments under a Light Rail Tram PPP project in Fitch's adjusted debt. Even so the fiscal debt burden would correspond to a 'aa' assessment. The ADSCR will remain strong at materially above 4x during the four years of our rating case, in line with a 'aaa' assessment. DERIVATION SUMMARY Fitch assesses Almaty's standalone credit profile (SCP) at 'bbb+', which reflects a combination of a 'Weaker' risk profile (a result of three 'Weaker' and three 'Midrange' assessments of key risk factors) and a 'aaa' assessment of debt sustainability. The SCP also factors in a comparison with international peers. Fitch applies a single-notch asymmetric risk downward adjustment for the city's weak reporting and transparency practices that lag behind international standards. As a result, the city's IDRs are equalised with the Kazakhstani sovereign's 'BBB'. Its Short-Term IDR of 'F2' reflects a 'Midrange' assessment of robustness of liabilities and liquidity and a liquidity coverage ratio of more than 1.3x. KEY ASSUMPTIONS Fitch's key assumptions within our base case for the issuer include: – Tax revenue growth in line with nominal GDP growth – Non-tax revenue to remain flat in 2019-2023 – Growth of transfers received in line with national inflation of the previous year – Growth of expenditure (except for spending on salaries) in line with national inflation of the previous year – Growth of expenditure on salaries in line with national inflation of the previous year plus 6pp to reflect historically higher-than-inflation growth – Stress on current transfers received by -8.6pp annually in 2019-2023 to reflect historical volatility of this revenue source – Stress on operating expenditure by 1pp annually in 2019-2023 to reflect potentially higher inflationary pressure – Capitalised payments on Light Rail Tram PPP project included in Fitch- adjusted debt for 2019-2023 RATING SENSITIVITIES A reassessment of Almaty's risk profile - which is unlikely over the medium-term - or an improvement in reporting and transparency practices coupled with a strong debt payback at below 5x under Fitch's rating case could lead to a positive rating action, provided the sovereign is also upgraded. A downgrade of the sovereign or deterioration of the city's debt payback to above 5x under Fitch's rating case would lead to a downgrade. * Полная версия пресс-релиза размещена на сайте Fitch Ratings. [2019-09-17]