Часть 1. Moody’s assigns Ba2 foreign-currency rating to forthcoming Eurobond issue Krasnoyarsk region (russia)

MOODY’S ASSIGNS Ba2 FOREIGN-CURRENCY RATING TO FORTHCOMING EUROBOND ISSUE KRASNOYARSK REGION (RUSSIA)

Moody’s Investors Service assigned a Ba2 foreign currency rating to the forthcoming Eurobond issue of the Krasnoyarsk Region (Krai). The foreign currency rating is set at Russia’s sovereign ceiling of Ba2. Moody’s stated that the rating recognizes the relative importance of the region within the Russian Federation, as a result of its mineral wealth and the industries which sprung up around it. It also reflects the prudent way in which Krasnoyarsk’s budget has been managed in recent years. The rating takes into account also the future challenges facing the region, such as the ongoing industry restructuring, аs well as substantial investments in infrastructure, which are necessary in view of the region’s remote location in Western Siberia. Going forward, these investments are expected to be funded increasingly through debt. However, based on the positive track record of the region in past years, Moody’s expects the administration to continue managing its budget prudently in the future.

The heavy slant towards commodities provided a buffer for the region during the economic transition period, as it was possible to export these commodities outside Russia after their traditional markets had shrunk. Growth in these areas provided some counterbalance to the decline in other segments of the economy (defense, light industry, and heavy engineering). Budget management in this volatile environment has been prudent, demonstrated by the fact that the increase in expenditures was kept in line with the revenue growth. As a consequence, there were no deficits in the years prior to 1996. Even during that difficult year, the deficit was kept low, due to selective expenditure cuts.

According to Moody’s, the major challenges for the region will be a continuation of the restructuring process and improvements to infrastructure, as communication, with other parts of Russia remains difficult. Distances to major markets are great and this is reflected in high transportation costs. Moody’s added that these factors could negatively affect future investment in non-export industries, which could face greater obstacles in attracting private investment than some of the more accessible regions.

Krasnoyarsk Krai is situated in Western Siberia, stretching from the Arctic Ocean to the mountain regions of Southern Siberia. The Krai has a population of 3.l million, 85% of which live close to the Trans-Siberian Railway (mainly in three large towns: Achinsk, Krasnoyarsk and Kansk).