Why is this important
The BB- rating is lower than the sovereign (BB/Stable) level due to the risks of transparency and dependence on the republican budget. Low debt (covering rate below 9x by 2029) is a key advantage of the capital. However, the limited flexibility of expenses and frequent changes in tax legislation create a vulnerability for the city’s finances.
What happened
- Fitch confirmed Tashkent’s long-term ratings in foreign and national currencies at BB-;
- The forecast remains stable;
- Independent Credit Profile (SCP) — bb-;
- The financial profile is valued at aa due to low debt;
- Short-term foreign currency rating — B.
Fitch Key Findings
Strengths:
- Low debt: the coverage ratio is projected to be below 9x by 2029;
- Debt burden less than 100%;
- Operating balance 2025-2029: an average of 1.411 trillion soums;
- Revenues will reach 14.7 trillion soums by 2029.
Weaknesses:
- Dependence on the state budget: 30% of revenues in 2024;
- Unstable tax base: 56% of income — taxes, legislation changes frequently;
- Limited flexibility of expenditures: more than 80% of the budget — mandatory items (salaries, social payments), subject to inflation (average 12% for 2020-2024);
- Weak debt management system and limited access to domestic capital markets;
- The liquidity balances (770.7 billion soums at the end of 2024) are predominantly targeted.
Transparency and ESG
Tashkent’s rating is one level lower than the sovereign (BB/Stable) due to risks associated with data disclosure and debt reporting by state-owned enterprises. Fitch assigned the city an ESG Relevance Score of 5 for “data quality and transparency” — indicating the significant impact of this factor on the loan profile.
Ranking Change Terms
Increase is possible at:
- Improving reporting transparency;
- Debt burden reduction below 6x.
The forecast may decrease if:
- The growth of the debt ratio is higher than 8x.
Context
The BB- rating for the capital of a state with a BB rating is a rare phenomenon. Typically, the largest cities receive a rating at or above the level of a sovereign city. The gap is explained by the weakness of institutions: insufficient transparency of reporting on state-owned enterprises’ debts and dependence on republican budget transfers.
Dependence on the state budget (30% of revenues) creates a risk: if the republican budget reduces transfers, Tashkent will face deficit. The tax base is unstable due to frequent changes in legislation, which makes long-term planning difficult.
Limited flexibility of expenditures (80% of the budget — mandatory items) means that the city cannot quickly reduce expenditures when revenues fall. Salaries and social payments are subject to inflation (average 12% for 2020-2024), which increases pressure on the budget.
Low debt is Tashkent’s main advantage. A debt coverage ratio below 9x means that the city’s operating balance exceeds debt obligations by 9 times. This provides a reserve of strength for attracting borrowed funds to the infrastructure.
A weak debt management system and limited access to capital markets make it difficult to attract financing. Tashkent cannot issue municipal bonds in the domestic market due to underdeveloped infrastructure and low investor demand.
ESG Score 5 for transparency is a high level of factor impact on the rating. This means that improved data disclosure can lead to higher ratings.
