Fitch affirmed Yerevan s ratings at with a forecast of 

ArmInfo.Fitch Ratings  affirmed the ratings of the city of Yerevan, Armenia: long-term  issuer default ratings (IDR) in foreign and national currency at the  "B +" level with a "Positive" forecast and short-term IDR in foreign  currency at the level of "B".

The message on the confirmation of the  rating of Yerevan Fitch posted on its website on November 30.  Confirmation of ratings reflects the agency's unchanged rating  scenario regarding acceptable city budget indicators against the  background of a weak institutional environment for local and regional  authorities in the country, which are also supported by stable  transfers from the central government. The ratings also take into  account the capital status of Yerevan and the zero level of debt. The  "positive" outlook reflects the outlook on sovereign ratings.KEY  RATING FACTORSInstitutional environment (assessment of the factor  ): Yerevan's ratings are still constrained by Armenia's  ratings ( / forecast) and, in particular, by the  institutional environment in the country for local and regional  authorities, which Fitch regards as weak. This environment has a  shorter stable development history than many comparable international  issuers. The weak institutional environment determines the lower  predictability of the budget policy of local and regional authorities  in Armenia, reduces their planning horizon, and affects long-term  development plans.Budget execution indicators (assessment of the  factor ): In accordance with the unchanged rating scenario,  Fitch expected that Yerevan's budget indicators would remain  acceptable with an operating margin, expressed as a low single digit,  in 2018-2020. (vs. 2.9% in 2017). Fitch predicts an improvement in  the operating margin of the city against the background of economic  growth projected in Armenia in the medium term. The intermediate  total surplus was 15% of all revenues at the end of September 2018,  while the city collected approximately 60% of annual revenues. Fitch  also expects that the budget of Yerevan will be close to the balanced  one in 2018-2020, which is at the level of historical results  (against a surplus of 0.7% in 2017).Yerevan's budget figures continue  to depend on financial assistance from the government, and Fitch  believes that the city will continue to receive financial support  from the government in accordance with historical practice. Current  transfers accounted for 72% of the city's operating income in  2017.Capital expenditures of Yerevan at the end of 2017 accounted for  7.3% of total expenditure, which is at the low level of the previous  year, when they decreased to 7% compared with the average level of  19.5% in 2013-2015. Fitch predicts a gradual improvement in the  implementation of capital expenditures to 8-9% of all expenditures in  2018-2020.The main part of the capital expenditure of the city is  financed by transfers from the government and donor grants, as well  as through the sale of assets.Debt and other long-term liabilities  (assessment of the factor ): As of the end of September  2018, Yerevan still did not have any debt or guarantees. The city  retains its 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 city to  attract significant borrowing. At the end of September 2018. The  city's intermediate liquidity position was good with average monthly  cash balances in accounts in the amount of 7.5 billion drams (against  1.9 billion drams in 2017). The city holds cash on treasury accounts,  which at the end of September 2018 provided interest income of 178  million drams.Economy (assessment of the factor ):  Yerevan is likely to experience a positive impact from the resumption  of economic growth in Armenia, predicted in the medium term. In its  macroeconomic forecast, Fitch expects growth in the national economy  in 2018 by 4.7% and 4.1% in 2019. Being the capital and the city with  the largest population, Yerevan is the largest market in Armenia with  a developed service sector. At the same time, welfare indicators for  Yerevan remain relatively low in the international context, since  Fitch estimates Armenia's GDP per capita in 2017. at $ 3,928 based on  market exchange rate.Management and Administration (assessment of the  factor ): The Government of Yerevan follows a balanced  budget policy aimed at ensuring balanced budgets. At the same time,  the central government remains the key source of funding for the  city. Due to institutional constraints, the planning horizon of a  city is rather short - limited to one fiscal year, which hampers the  city's forecasting capabilities and complicates strategic planning..  

On September 23, 2018 extraordinary elections were held to the city  council of Yerevan after the change of power in Armenia. Despite the  change of the ruling political coalition, the city authorities  continue to work efficiently, ensuring the uninterrupted provision of  services and budget management.

FACTORS WHICH CAN IMPACT RATINGS IN THE FUTURE

In the event of a change in sovereign ratings, a similar action will  be carried out on the city's ratings, since Yerevan's ratings are  constrained by Armenia's ratings.According to AmRating analysts, the  assignment of the rating to the capital of Armenia is determined by  the plans of the Yerevan mayor's office to enter the market of loan  obligations. It should be noted that on December 1, 2017, the Yerevan  Mayor's Office and the European Investment Bank signed an agreement  on providing 7 million euros for increasing energy efficiency in  Yerevan. The agreement signed with the EIB is unprecedented of its  kind, since for the first time the community of Yerevan signs a  non-sovereign loan agreement. Yerevan became the first community to  receive a loan from an international organization without state  guarantees - this is the best proof of the confidence placed in  Yerevan.Note that for the first time, Fitch Ratings assigned Yerevan  a rating on December 2, 2016: long-term issuer default ratings (IDRs)  in foreign and national currencies at the level of and  short-term IDRs in foreign currency . The forecast at that time  was .  Later, on December 22, 2017, Fitch Ratings, confirming  these ratings, improved the outlook from "Stable" to "Positive".