Press releases

print 30.06.2005

uaA+ credit rating assigned to upcoming bond issue of the Kharkov city administration

Today independent rating agency “Credit Rating” announced about awarding of a long term “uaA+” rating to the preplanning issuance of Kharkov City Council bonds in the amount of 100 million UAH for the 3 year period of circulation. The forecast of the rating is stable.

Positive factors that were taken into account in the rating:

The city of Kharkov budget profit increase during 2000-2004 (at the end of 2004 the budget profit made up 1 061,5 million UAH and it exceeds in 2,3 times the results in 2000); in 2005 the preplanned budget profit increase is to reach 1087,8 million UAH;
Profit budget implementation of the city during 2000-2003;
High economic development tempos of the city – growth of industrial manufacturing, retail sale, direct foreign investments during the last 5 years made up 15-25 % a year;
Stable indexes increase in the social sphere of the city – high salary increase alongside with the constant unemployment rate decrease, for the period of April1, 2005 the unemployment rate in Kharkov was 0,9% (compare with 3,5% unemployment rate at average in Ukraine); all these factors altogether make favorable conditions for further budget income increase especially from (in the form of) taxes on physical entities profit;
High standard of municipal management;
Low level of debt load on city budget- the emission amount and payments on its service will make 10% of the profit part of the budget in 2005.

Negative factors that were included in the rating:

Low level of profit forecasts due to the dependency on changes in the budget interrelation system and the income allotment proportion between the budgets at different levels that are reviewed at the state level;
Substantial dependency of the profit part of the city budget on transfers from the State budget (about 30 % of all profits in 2004);
Not total fulfillment of the expenditures part of the budget from the point of view of development of the budget during 2000-2004, and in the first quarter in 2005 and the necessity to modernize engineering, transportation, infrastructure of the city, municipal housing infra-structure, financing of ecological problems;
Problems in activities at the main enterprises in the city (State enterprise “Malishev Plant”, Open Joint Stock Company “Kharkov Tractor Plant Ordgenekidze Plant”) that led to salary indebtedness growth, the letter increased on 19,4 % during the I quarter in 2005 in comparison with the beginning of the year (almost up to 20 million UHA), and the “density” of the mentioned enterprises makes up more than 55% in the indebtedness structure;
Political risks which are connected with the next year election compaign.