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Expert Opinion

30.04.2009

Credit-Rating: repayment of communal heat suppliers’ debts with the local budget funds may prompt lowering municipal ratings

In Credit-Ratings view, the fact that Ukrainian cities attract borrowed funds for repayment of debts accrued for natural gas supply may prompt uncontrolled rise in debt burden of local budgets.

The payment procedures for natural gas has been approved by the Governments decree #392 dated April 22, 2009, according to which the cities should raise special-purpose loans via issuance of exchange bills and further transfer the funds to heat suppliers so that would repay their indebtedness towards NAK Naftogaz. Under this procedure the cities not only must accept the debts, which accrued following rise in energy process and populations debts for utilities, but also removes restrictions on raising loans to local budgets, which were previously stated in the Budget Code of Ukraine.

Under volatile environment in the financial market and poor dynamics in budget incomes, this additional burden on expenditures of local budgets, specifically repayment of interest on funds attracted, will jeopardize financial security of regions. Credit-Rating, in its turn, may lower municipal rating in case the debts in local budgets will rise drastically.    

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 analytic department
Sergey Rozumyak +38 044 490 25 50
SRozumyak@credit-rating.ua
Denis Rudenko
DRudenko@credit-rating.ua

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