Credit-Rating confirms the rating of Odesa at uaАА-, determines investment attractiveness at uaINV5 (the highest level) Credit-Rating confirms the rating of Odesa at uaАА-

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Expert Opinion

28.01.2008

Municipal borrowings expected to grow in 2008

Credit-Rating anticipates a surge in overall volume of municipal borrowings in 2008. Such cities as Zaporizhya, Vinnitsa, Lutsk, Cherkassy and others have already experienced bond issuances. Credit-Rating expects more 10 oblast centres and cities of regional importance, which have not attracted funds from the market before, to use such leverage. Moreover, size of some borrowings will also grow. Although loans of up to UAH20m prevailed in the structure of bond issuances and loan agreements in 2007, 2008 expects the size of loans to advance to UAH30-60m. Large loans will be attracted predominantly by cities with continuous rating and credit history.

Cities` growing attention to the market of borrowings stems from the fact that the revenues of local budgets are not expected to increase significantly in 2008. The 2008 budget gains will not grow as result from increased taxes as it was in 2007. The revenues of the local budgets will mainly filled with individuals` tax (which is principal source of incomes for municipalities), due to gradual increase of minimal wage. More efficient utilization of municipal property may become other source of incomes for municipal budgets.

The expected rise in expenditures of local budgets is mainly entailed by increased funding of budgetary institutions (of education, health care, culture, etc.). This rise will be underpinned by high social standards approved in 2008 State budget. Moreover, growth in energy supply prices will weigh on local budgets in 2008.

Credit-Rating`s head for municipal sector Elena Samoylova notes that high specific gravity of social expenses in Ukraine`s 2008 State budget will determine a social vector in interbudget relations. Under these circumstances, in order to implement investment projects the cities will attract funds from the financial market. The funds will be invested in housing and utilities sector and transport infrastructure, which results from further aggravations in these sectors, namely high deterioration of main funds coupled with necessity in its updating and renovation.

Information on all credit ratings assigned in accordance with the National Rating Scale may be found in REUTERS and BLOOMBERG  information systems.

For more information, please contact:
Information and Communication Department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.com.ua

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