Analysts from the ACRA rating agency have released a report entitled ‘Far Eastern Federal District — long-term debt financing needed’ in the run up to the Eastern Economic Forum 2019, providing a detailed analysis of sources of investment for Russia’s Far Eastern regions. The report was prepared as part of a partnership with the Roscongress Foundation. The calculations are based on data taken from Rosstat, the Federal Treasury, the Ministry of Finance of the Russian Federation, the Cbonds data vendor, and the regions of the Far Eastern Federal District.
One of the key findings of the report was that the Far Eastern regions will not be able to independently cover the planned expenditures for the current year, despite running budget surpluses in 2018 and seeing a growth in their own incomes at the beginning of 2019. The Far Eastern Federal District’s net requirement for debt financing has been estimated at around RUB 180 billion for the period from 2019 to 2021, with Khabarovsky Krai, Republic of Sakha (Yakutia) and the Republic of Buryatia the most in need of financing. Transfers from the federal budget account for a large share of the funding sources for the Far Eastern regions, with almost all of them exceeding the nationwide average of 19% in 2018 — the figure was over 40% in some cases.
In this context, ACRA has underlined the significant unrealized potential of the Far Eastern regions in terms of bond financing. The Far Eastern Federal District today accounts for only around 5% of bonds issued by regional authorities and traded on the bond market, with the Republic of Sakha (Yakutia) being the only region in the Far East to regularly issue bonds. According to calculations made by ACRA’s analysts, issuing bonds will be cheaper than the option of bank loans preferred by the Far Eastern regions in recent years.
«The regions of the Far East are facing a number of serious challenges, including a basic lack of investment in infrastructure, serious dependence on direct federal budgetary injections, and the uneven distribution of investments. The development of financing by way of issuing long-term bond loans that have been worked out in detail can help to solve these problems. This will facilitate investment in the development of infrastructure and contribute towards the improved debt structure of the region,» said the CEO of ACRA Igor Zelezetsky.
The ‘Far Eastern Federal District — long-term debt financing needed’ report is the first joint project between ACRA and the Roscongress Foundation as part of a collaboration in expert and analytical affairs. At present, the Foundation’s Information and Analytical System comprises over 20 ACRA reports on regional and sector-wide topics. ACRA and Roscongress are set to continue their joint work in conducting analytical reports and preparing topical discussions as part of the agenda for the Foundation’s key events.
The ‘Far Eastern Federal District — long-term debt financing needed’ report can be found in the Analytics section of the ROSCONGRESS.ORG Information and Analytical System.
