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UKRAINE: Assistance to carry out a Credit Rating of the city of Mariupol

Attracting private participation in infrastructure in Ukraine is challenging, especially in the eastern regions in the vicinity of an ongoing conflict with eparatists. Private sector engagement in infrastructure is a priority for Ukraine’s government, which is implementing reforms to encourage it.

Cities, however, are responsible for many critical infrastructure projects. But subnational governments often lack the capacity to manage their finances, which discourages investors. In these cases, a reliable, credible credit rating can make a difference. Credit ratings shed light on the strengths and weaknesses in municipal finances, providing a tool for governments to improve their financial operations.

IFC has been looking to credit ratings in selected Ukrainian cities to gauge their ability to access financing for municipal infrastructure projects. Three mid-sized, regional cities in central and eastern Ukraine—Mariupol, Zaporizhzhia, and Kryvyi Rih—requested assistance in obtaining credit ratings to improve access to financial markets for infrastructure projects. The municipality of Mariupol, a city of about 450,000, lies only 20 kilometers from the conflict zone.

PPIAF-supported advisory services to these three cities to obtain a credit rating from an internationally renowned credit rating agency. PPIAF provided guidance in navigating the credit rating process, helped the cities obtain an international foreign and local currency credit rating, and organized a workshop for city officials, the rating agency, IFC, and other stakeholders to discuss the rating results.

All three cities received a rating on par with Ukraine's sovereign rating, though below investment grade at B. The credit ratings were published to provide greater transparency and awareness about the cities’ finances and operations. The rating took into account strong, own-account revenue bases, decreasing dependence on state budget transfers, and the flexibility to manage operational and capital expenditures. It also considered vulnerable risk profiles in revenue and expenditure structure, adjustability, and liquidity.

The credit ratings improve the cities’ access to long-term commercial finance and enhance municipal internal budget planning. All three are engaged in IFI-financed projects, where the ratings provide valuable information to potential partners.

The ratings are already leading to significant savings for one Ukrainian city. Kryvyi Rih, for example, has used the credit rating to access better terms for a loan to improve energy efficiency in public schools.

Approved date2019-12-11
SectorTransport
StatusCompleted
Country
RegionEurope & Central Asia
InstrumentSNTA