Fitch rates Kirovskaya Oblast B

Fitch Ratings said it has assigned the Russian region Kirovskaya Oblast long-term foreign and local currency B ratings and a short-term B rating.

A national long-term BBB rating is also assigned.

All the outlooks are stable.

Fitch said the ratings reflect the region's strong industrial base - 30% of GRP in 2005 - that serves as the main driver of economic growth and tax revenue increase, as well as its moderate debt burden on the budget.

They also take into account the low proportion of tax revenues, which has been stable at an average of just under 50% of the overall budgetary revenue over the last five years. In addition, they consider the region's high expenditure rigidity with protected spending items reaching 66% of total expenditure and a historically low share of capital expenditure.

Fitch said the region demonstrated weak budgetary performance over the period of 2001-2005. Quicker operating expenditure growth over operating revenue growth resulted in low operating and current margins over the period 2001-2003 and in a negative operating balance in 2004-2005.

However, the financial support of the federal government has allowed the region to fund its social obligations as well as part of its capital expenditure program, the agency noted.

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