Fitch affirms Yerevan’s IDR in foreign and national currencies at “B+”, “Stable” outlook

05.06.2017 17:05
Fitch affirms Yerevan’s IDR in foreign and national currencies at “B+”, “Stable” outlook

YEREVAN, June 5. /ARKA/. Fitch Ratings has confirmed Yerevan’s long-term issuer default ratings (IDR) in foreign and national currencies at “B+” with “Stable” outlook and also short-term foreign currency IDR at “B”.

The rating agency says Yerevan’s rating is suppressed by Armenia’s rating “B+” with “Stable” outlook, particularly the country’s institutional environment for local and regional authorities, which is considered by Fits as weak.

The city’s status of capital and its acceptable budget performance indicators supported by stable transfers from the central government as well as the lack of any debt are taken into account here.

The agency forecasts that Yerevan’s budget indicators will remain acceptable in 2017-2019 with a lower one-digit operational margin (2016 – 1.6%).

Fitch specialists say correction of the city’s operational revenue to adverse shocks, which is connected with the protracted slowdown in Armenia’s economy in 2014 and 2015 is likely to continue.

The agency also expects that the budget of Yerevan will be close to balanced in 2017-2019, at the levels already recorded by the capital city before (in 2012-2016 – 0.15%).

In 2016, the city’s operational revenue amounted to AMD 77.3 billion, just as predicted by the agency, with stable inflow of transfers and tax revenue.

Yerevan continued receiving financial assistance from the central government.

Fitch says current transfers will remain stable – at about 75% (in 2015 at 76%) of the city’s operational revenue.

Its capital spending continued shrinking in 2016 – they fell to 5.7% or 7% of the total spending after the average rate of 24% in 2012-2014.

Fitch specialists say they have expected such reduction, since the city has completed significant investments in infrastructures, which came as public transfers and donor grants.

The rating agency expects that the city will continue financing capital spending from the central government’s sales of assets and capital transfers.

Yerevan residents make up 36% of Armenia’s population, but Yerevan welfare indicators are low in the international context.

Fitch estimated Yerevan’s per-capital GDP at AMD 1.8 million ($3,770) in 2015. ---0---

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