Tuesday, January 9 2018 13:56
Karine Melikyan

Fitch improved outlook on Yerevan`s rating from "Stable" to "Positive"

Fitch improved outlook on Yerevan`s rating from "Stable" to  "Positive"

ArmInfo. Fitch Ratings has  improved the outlook on the rating of the city of Yerevan from  "Stable" to "Positive", once again confirming the long-term issuer  default ratings ("IDR") in foreign and local currency at <B +> and  the Short-term IDR in foreign currency <B>. Rating drivers of  long-term IDRs and short-term foreign currency IDRs are not affected,  which is the reason for their confirmation. As reported on the Fitch  Ratings website, improvement of the forecast and confirmation of the  credit rating of Yerevan is dated December 22, 2017. For the first  time, Fitch Ratings assigned Yerevan a rating on December 2, 2016.

The Fitch report notes that following the results of 9 months of  2017, Yerevan's budgetary indicators were at an acceptable level: the  budget surplus before the debt movement was at the level of 4% of all  revenues (2016: the budget surplus was 1.5%). This was due to  expenditures made at 53% of the annual budget expenditures, while the  collected revenues accounted for 56% of the annual figures put into  the budget. The agency notes that Yerevan's expenses are likely to  accelerate in the fourth quarter of 2017, which will bring the budget  figures closer to the previously forecasted small deficit. As of the  end of September 2017.  Yerevan did not have any debt or guarantees.   The city retains a debt-free status since the formation of the  municipality in 2008. The provisions of the national legal system  that determine the issuance of debt or the provision of guarantees  limit the attraction of significant borrowings by the city. As of  October 1, 2017 the liquidity position of the city was good with cash  in the amount of 2.5 billion AMD (2016: 1.4 billion AMD). The city  holds cash on treasury accounts, as placing funds on deposits in  commercial banks is legally prohibited.

KEY RATING DRIVERS Yerevan's ratings are constrained by those of  Armenia (December 15, 2017 confirmation at the level of "B +" / with  a revision of the forecast from "Stable" to "Positive") (B+/Stable),  in particular the country's institutional framework for local and  regional governments, which Fitch assesses as weak. The ratings also  factor in the city's capital status, satisfactory budgetary  performance, supported by steady transfers from the central  government, and zero debt.

Fitch expects the city to continue posting satisfactory fiscal  performance with a lower single-digit operating margin in 2017-2019  (2016: 1.6%). The city's operating margin decrease is due to negative  shocks resulting from the protracted slowdown of Armenia's economy in  2014-2015. We project a likely margin consolidation at this level. We  also expect Yerevan to run close to balanced budget in 2017-2019 in  line with historical result (2012-2016: average deficit 0.15%).   Fitch rating notes that  Yerevan's interim fiscal performance was  satisfactory, with a surplus before debt variation of 4% of total  revenue at end 9M17 (2016: surplus 1.5%). This was driven by spending  53% of annually appropriated expenditure, while collected revenue was  56% of the annual budgeted figures. Fitch notes that the city's  expenditure is likely to accelerate in 4Q17, bringing fiscal  performance closer to the previously projected minor deficit. 

According to our base case scenario, the city will continue receiving  financial support from the central government in line with its  historical track record, as current transfers averaged 74% of the  city's operating revenue in 2012-2016.

The city's interim capex by end-3Q17 was in line with 2015-2016, at  7% of total expenditure (2016: 7%). We projected lower capex than the  track record of recent years (2012-2014: average 24%), reflecting the  completion of sizeable infrastructure investments in 2012-2014. Most  capex is funded by central government transfers and donor grants.   Fitch expects the city to continue low capex trend (about 7%-9% of  total spending), to be funded by asset sales and capital transfers  from the central government.

As of end-September 2017 the city was free from any debt or  guarantees. Yerevan has maintained debt-free status since forming a  community in 2008. Statutory provisions of the national legal  framework guiding debt or guarantees issuance restrict the city from  incurring significant debt. The city's interim liquidity position was  healthy, with cash of AMD2.5 billion as of 1 October 2017 (2016:   AMD1.4 billion). The city holds its cash in treasury accounts as  deposits with commercial banks are prohibited under the legal  framework. 

Yerevan is likely to benefit from economic recovery in Armenia. In  its macro forecast Fitch expects full-year growth of the national  economy at about 4.3% to the previous year, with acceleration to 3.6%  in 2018-2019 due to favorable conditions for increasing remittances  and export growth.

As the country's capital and most populated city, Yerevan is  Armenia's largest market with a developed services sector.  At the  same time, Yerevan's welfare indicators remain relatively low in the  international context, due to the moderate GDP per capita in Armenia,  "the Fitch report says.  RATING SENSITIVITIES Changes to the  sovereign ratings will be mirrored on the city's ratings, as Yerevan  is capped by the ratings of Armenia.  In the absence of sovereign  downgrade a significant deterioration of fiscal performance or  material growth in direct risk, would lead to a downgrade. 

Note that on December 1, 2017 the Yerevan Municipality and the  European Investment Bank signed an agreement on the provision of 7  million euros to increase energy efficiency in Yerevan. According to  Mayor Taron Margaryan, the signed agreement with the EIB is  unprecedented in its kind, since for the first time the community of  Yerevan signs a non-sovereign loan agreement. Thus, Yerevan became  the first community to receive a loan from an international  organization without state guarantees. "This, of course, is the best  proof of the confidence of the international organization provided to  Yerevan," he said.

According to the assumption of AmRating analysts, the assignment of  the rating to the Armenian capital is probably conditioned by the  likely plans of the Yerevan mayor's office to enter the loan  obligations market, which has not been reported yet. 

Yerevan became the first community to receive a loan from an  international organization without a state guarantee - this is the  best proof of the confidence rendered to Yerevan.

READ ALL COMMENTS

Кнарик Оганесян
7млн. евро при прямом целевом использовании не только поспособствуют повышению энергетической эффективности, но также улучшат показатели энергетической безопасности.

POST A COMMENT
Input digits     


News
Pashinyan:  Armenia will close the 2019 with economic growth within  7%, against 4.9% budgeted  Pashinyan:  Armenia will close the 2019 with economic growth within  7%, against 4.9% budgeted  
Three programs to increase the birth rate will be launched in Armenia  starting from 2020Three programs to increase the birth rate will be launched in Armenia  starting from 2020
Grape procurement process completed in Tavush region of ArmeniaGrape procurement process completed in Tavush region of Armenia
Deputy Foreign Minister of Chile: High-level cooperation with Armenia  in the economic sector is a necessityDeputy Foreign Minister of Chile: High-level cooperation with Armenia  in the economic sector is a necessity
Result exceeded expectations! Arshaluys Margaryan tells how Armenian financial authorities promoted Armenian Eurobonds in international marketsResult exceeded expectations! Arshaluys Margaryan tells how Armenian financial authorities promoted Armenian Eurobonds in international markets
Schneider Group Company proposes to hold a Schneider Group Company proposes to hold a "From Lisbon to  Vladivostok" conference   in Armenia
Vladimir Zharikhin does not exclude the possibility of opening  freight traffic through the Abkhaz railwayVladimir Zharikhin does not exclude the possibility of opening  freight traffic through the Abkhaz railway
At a forum in Chisinau on topic At a forum in Chisinau on topic "Strength of financing in national  currency", CBA representative introduced Armenian experience to  participants
Armenia and World Bank discuss further areas of cooperationArmenia and World Bank discuss further areas of cooperation
Ardshinbank: another step towards customerArdshinbank: another step towards customer
VTB Bank (Armenia) opened its 72nd branch -VTB Bank (Armenia) opened its 72nd branch -"Ararat"
EFSE provides multi-currency loan to ARARATBANKEFSE provides multi-currency loan to ARARATBANK
Executive Director of Armswissbank Gevorg Machanyan received the  honorary title  Executive Director of Armswissbank Gevorg Machanyan received the  honorary title  "Friend of Echmiadzin"
Statistical Committee: Production of alcoholic beverages grows in  ArmeniaStatistical Committee: Production of alcoholic beverages grows in  Armenia
In the GDP structure of Armenia, the service sector continues to lead  in terms of growthIn the GDP structure of Armenia, the service sector continues to lead  in terms of growth
EDB forecasts economic growth in Armenia at the end of 2019 at 6%EDB forecasts economic growth in Armenia at the end of 2019 at 6%
"Contour Global Hydro Cascade" company will make additional AMD 27.5  billion investment in  modernization of Vorotan Cascade of HPP 
In January-August 2019, the metallurgical industry of Armenia  launched a trend towards growthIn January-August 2019, the metallurgical industry of Armenia  launched a trend towards growth
Freight volume in Armenia in January-August 2019 decreased by 54%  with the growth of passenger transportation by 4.3%Freight volume in Armenia in January-August 2019 decreased by 54%  with the growth of passenger transportation by 4.3%
Revenues of Armenia`s communications sector in January-August 2019  accelerated growthRevenues of Armenia`s communications sector in January-August 2019  accelerated growth
TPL system in Armenia to use digital technologiesTPL system in Armenia to use digital technologies
EBRD to provide EUR 4.6 million grant to Armenia to continue Gyumri  city road rehabilitation programEBRD to provide EUR 4.6 million grant to Armenia to continue Gyumri  city road rehabilitation program
Aluminum foil production declines in ArmeniaAluminum foil production declines in Armenia
According to the new WB forecast: in Armenia, the current account  deficit to GDP ratio in 2019-2021 will decrease from 7.2% to 6.3%According to the new WB forecast: in Armenia, the current account  deficit to GDP ratio in 2019-2021 will decrease from 7.2% to 6.3%
In Armenia, wind and solar power plants significantly increased power  generationIn Armenia, wind and solar power plants significantly increased power  generation
Armenian industrial sector accelerated annual growth in  January-August 2019 from 4.4% to 9.5%Armenian industrial sector accelerated annual growth in  January-August 2019 from 4.4% to 9.5%
Armenian State Revenue Committee announces start of car registration  at Gyumri vehicles custom house Armenian State Revenue Committee announces start of car registration  at Gyumri vehicles custom house 
WB forecast for Armenia: Ratio of state budget deficit to GDP in 2019  is expected at the level of 0.5%, increasing to 2% in 2020WB forecast for Armenia: Ratio of state budget deficit to GDP in 2019  is expected at the level of 0.5%, increasing to 2% in 2020
More modest growth in exports and imports is forecasted by WB for  Armenia`s foreign trade in 2019 More modest growth in exports and imports is forecasted by WB for  Armenia`s foreign trade in 2019 
Government needs to be sure that there are no corruption risks:  Armenian Deputy Prime Minister on the reasons for the  underfulfillment of capital expenditures in 2019 Government needs to be sure that there are no corruption risks:  Armenian Deputy Prime Minister on the reasons for the  underfulfillment of capital expenditures in 2019 


Exchange rates
11.10.2019
RUB7.420.06
USD476.730.03
EUR525.36-0.44
GBP596.0611.82
CAD359.280.91
JPY44.09-0.29
CNY67.400.00
CHF477.64-3.05


Experts
Head of PSRC: Whatever the agreement, the domestic tariff is  dependent on the price at the borderHead of PSRC: Whatever the agreement, the domestic tariff is  dependent on the price at the border
IMF: Armenia needs to achieve sustainable inclusive growthIMF: Armenia needs to achieve sustainable inclusive growth
Artur Atoyan: Problems of fish farmers are solved by the communist  method, that is, they are not solved at allArtur Atoyan: Problems of fish farmers are solved by the communist  method, that is, they are not solved at all
HSBC Bank Armenia digitalizes cooperation with retail clients HSBC Bank Armenia digitalizes cooperation with retail clients 
AmRating agency in cooperation with European Rating-Agentur Expert RA  GmbH has issued regular research on Armenia`s banking systemAmRating agency in cooperation with European Rating-Agentur Expert RA  GmbH has issued regular research on Armenia`s banking system
Yulia Ustyugova: Armenia can get access to IMF “insurance line”Yulia Ustyugova: Armenia can get access to IMF “insurance line”
Armand Arton: The question whether citizenship should be granted in  return for investments is rather rhetoricalArmand Arton: The question whether citizenship should be granted in  return for investments is rather rhetorical
Former head of the Ministry of Finance: <Confrontation> with Lydian may cost much to ArmeniaFormer head of the Ministry of Finance: with Lydian may cost much to Armenia
Vardan Aramyan: It will be unreasonable if the government goes to revise the allowable national debt ceiling in GDPVardan Aramyan: It will be unreasonable if the government goes to revise the allowable national debt ceiling in GDP
HSBC Bank Armenia increases efficiency and focuses on digital servicesHSBC Bank Armenia increases efficiency and focuses on digital services
Bulgarian Minister: The level of Armenian-Bulgarian economic  cooperation is still unsatisfactoryBulgarian Minister: The level of Armenian-Bulgarian economic  cooperation is still unsatisfactory
Expert: Recruitment market in Armenia from the point of view of  supply and demand is sleepingExpert: Recruitment market in Armenia from the point of view of  supply and demand is sleeping
Expert: Despite the adequacy of Armenian banks` capitals, the  opportunities for its optimal use are severely limitedExpert: Despite the adequacy of Armenian banks` capitals, the  opportunities for its optimal use are severely limited
Association of Organic Agriculture is being created in ArmeniaAssociation of Organic Agriculture is being created in Armenia
Pailak Tadevosyan: Governments change in Armenia, but taxation  approaches do not changePailak Tadevosyan: Governments change in Armenia, but taxation  approaches do not change
Rouben Indjikian: Everyone should follow the established unified and fair rules of the gameRouben Indjikian: Everyone should follow the established unified and fair rules of the game
Mher Arakelyan:  Armenia`s payment business has great prospectsMher Arakelyan:  Armenia`s payment business has great prospects
Rating-Agentur Expert RA GmbH and AmRating issued an industry report  on Armenia`s banking systemRating-Agentur Expert RA GmbH and AmRating issued an industry report on Armenia`s banking system
Igor Nazaruk: Each planted sprout has the right to a successful prospect if it is cherished and taken care ofIgor Nazaruk: Each planted sprout has the right to a successful prospect if it is cherished and taken care of
Ara Khzmalyan: Armenia is comfortable to Russian touristAra Khzmalyan: Armenia is comfortable to Russian tourist

Search by date

Government Bonds

Issue volume

10 billion

Volume of T-bills for placement

200 million

Volume of submitted competitive applications

200 million

Volume of satisfied bids

200 million

Yield at cut-off price

 5.8314%

Maximum yield

 5.8314%

Мinimum yield

 5.8314%

Weighted average yield

 5.8314%

Number of participants

2

The maturity date of T-bills

03.02.2020

ArmEx

 

СПРОС (Покупка)

USD

Средневзв. Цена

482,00

ПРЕДЛОЖЕНИЕ (Продажа)

  USD

Средневзв. Цена

-

СДЕЛКИ

USD

Цена откр.

482,00

Цена закр.

482,00

Мин. Цена

482,00

Макс. Цена

482,00

Ср/взв. Цена

482,00

-0.16

Кол-во сделок

1

Объем (инвал.)

200 000

0бъем (драм)

96 400 000

Commented
$ 270 Million to be invested in the construction of the first  skyscraper in Yerevan$ 270 Million to be invested in the construction of the first  skyscraper in Yerevan
The AGBU Women Entrepreneurs Program Launched in Artsakh: FRUITFUL  ARMENIA Foundation is the partnerThe AGBU Women Entrepreneurs Program Launched in Artsakh: FRUITFUL  ARMENIA Foundation is the partner
Forecast: Armenia has good prospects for expanding its presence in  the Polish marketForecast: Armenia has good prospects for expanding its presence in  the Polish market
Armenian government`s delegation headed by Prime Minister will take  part in the St. Petersburg International Economic Forum on June 6-7Armenian government`s delegation headed by Prime Minister will take  part in the St. Petersburg International Economic Forum on June 6-7
Concessionaire of Zvartnots International Airport promises to become  one of the best operators in the worldConcessionaire of Zvartnots International Airport promises to become  one of the best operators in the world
Arthur Javadyan: Central banks are not responsible for economic  growthArthur Javadyan: Central banks are not responsible for economic  growth
Forecast: Electricity exports to the Middle East through Iran are a  key component of Armenia`s geo- economic strategyForecast: Electricity exports to the Middle East through Iran are a  key component of Armenia`s geo- economic strategy
ArmInfo IC: In Armenia,  CMTPL loss ratio increased up to 64.5% in Q1  2019ArmInfo IC: In Armenia,  CMTPL loss ratio increased up to 64.5% in Q1  2019
From January 1, 2020, the cost of customs clearance of cars from  non-EEU countries in Armenia will increase by at least 4-5 fold:  whether the market for used cars is going upFrom January 1, 2020, the cost of customs clearance of cars from  non-EEU countries in Armenia will increase by at least 4-5 fold:  whether the market for used cars is going up
Overdue loans accelerate growth in banking system of ArmeniaOverdue loans accelerate growth in banking system of Armenia
RA Prime Minister: European Union is not ready to finance 100% of  development programs implementation in ArmeniaRA Prime Minister: European Union is not ready to finance 100% of  development programs implementation in Armenia
Converse Bank offers online loans at a low effective interest rateConverse Bank offers online loans at a low effective interest rate
Renco company will attract additional shareholders and partners to  the project of building a new thermal-power plant in ArmeniaRenco company will attract additional shareholders and partners to  the project of building a new thermal-power plant in Armenia
T.Avinyan: The Government is open for cooperation and encourages  active dialogue and interaction in all areas T.Avinyan: The Government is open for cooperation and encourages  active dialogue and interaction in all areas 
Agreement on construction of a new unit with combined gas cycle  signed in YerevanAgreement on construction of a new unit with combined gas cycle  signed in Yerevan
Veolia Jur: Regulatory charges are false and unfoundedVeolia Jur: Regulatory charges are false and unfounded
Armenian Prime Minister: We are gaining momentum for economic takeoffArmenian Prime Minister: We are gaining momentum for economic takeoff
Through the mobile banking application of Ardshinbank you can get a  loan in seconds.Through the mobile banking application of Ardshinbank you can get a  loan in seconds.
By the end of 2018, By the end of 2018, "Galburdjian Group" will launch the production of  sesame oil in Armenia
Expert: Armenia has a problem with effective use of water resources,  rather than small hydropower stationsExpert: Armenia has a problem with effective use of water resources,  rather than small hydropower stations
Investment forum Investment forum "Energy Week 2018" to be held in Armenia
Expert: It is necessary to start implementing the program for the  construction of a new nuclear unitExpert: It is necessary to start implementing the program for the  construction of a new nuclear unit
The Armenian government suggests raising the minimum pension by 60%The Armenian government suggests raising the minimum pension by 60%