Good news came in the Ministry of Finance of the republic from London. Famous international agency Fitch Ratings has increased Karelia Long-term local and foreign currency ratings from 'Â+' to 'ÂÂ-'. Fitch has also increased a National Long-term rating of the republic from 'À(rus)' level to 'À+(rus)'. The Republic is rated Long-term local and foreign currency on the international scale and National Long-term – 'Stable'.
The weighty opinion of the agency is very important for us. In fact, Fitch assigns ratings to developed regions of the country, such as Moscow, St.-Petersburg, Republic of Tatarstan, Nizhni Novgorod, Republic of Komi, Leningrad region and some other. In comparison with them Karelia looks in a worthy manner.
- We have made a step forward in increasing our rating, - head of the department of incomes and public debt Elena Belyaeva speaks. - Now our potential investors can draw a conclusion on reliability of Karelia, as a partner, and be sure that we execute all our obligations in time. It not mere words, it is provided with actions implemented both in the sphere of debt management, and in development of economy and that is very important now, and analysts emphasize it, - in the field of utility sector development.
In six years of issue of bonds the republic has not admitted any delay of payment. Promissory notes to commercial banks are covered in due time. This norm is even registered in the law of the republic on the budget.
Increase of Karelia's ratings certifies improvement of parameters of the budget execution caused by growth of tax and non-tax incomes and control over budget spending. The 'Stable' forecast reflects expectations of the international agency that economic growth will provide gain of incomes, which, in turn, will allow the republic to support high level of budgetary parameters and keep the debt burden at an operated level.
The Positive Outlooks reflect Fitch's expectations of a recovery in budgetary performance in 2007 due to accelerating economic growth and lower spending needs resulting from increased budget spending efficiency and the high quality of management. The Republic has overcome the pressures put on the budget by the 2006 social sector and administrative reforms and has also compensated for the adverse effect of lower corporate profits in the same year.
On the agency's evaluation, the region’s administration has demonstrated good financial management. The Republic has been able to achieve high capital spending efficiency, as capital spending on utility companies has allowed the region to significantly reduce the accumulated depreciation of the main assets relative to the national average. Lower accumulated depreciation is expected to result in lower spending needs and cost savings in the utility sector.
Fitch notes that Karelia has developed a sophisticated debt management system, which includes control over all kinds of the Republic’s contingent liabilities and a limit on total debt of 50% of own revenue (the national legislation permits 100%).