OREANDA-NEWS. Fitch Ratings has assigned the Kazakhstan City of Astana Long-term foreign and local currency 'BBB-' ratings and Short-term foreign currency - a 'F3' rating, the press service of Kazakh stock exchange (KASE) reported. Fitch also assigned it a National Long-term 'AA(kaz)' rating. All the ratings' Outlooks are Stable.

The ratings reflect the city's well-diversified and growing economy, stable growth in tax revenue, strong budgetary performance and low debt burden. However, the ratings also factor in the city's dependence upon the central government both in terms of funding provided and the regulatory decisions taken, and limited financial possibilities of the city.

The Stable Outlook reflects Fitch's expectation that the investment-driven economic growth will fuel revenue growth and maintain operating balance at the high present level. Also, the ratings factor in continued strong support from the central government for capital expenditure.

Astana's economy has demonstrated rapid growth over the last five years, consistently exceeding the national average. Per capita gross city product (GCP) is almost three times higher than the national average. The city has recorded sound levels of operating and current margins and the high level of capital spending has been supported by transfers form the republic funds. The share of capital spending is extremely high and increasing from 55.5% of total expenditure in 2002 to 66.5% in 2006.

The city has received strong financial support from the central government in terms of funding provided for investment purposes. The share of transfers received by the city has grown substantially over the last 5 years from 9% in 2000 up to 54% in 2006, while the share of tax revenue has declined correspondingly. The central government is financing several large-scale development projects in the city, related to power supply, infrastructure development and construction. The amount of transfers will be high until the
completion of the city development programme in 2012, when financing by the central government will decrease substantially.

The debt burden is moderate, reaching 23% of the operating revenue by end-2006, while the debt servicing equals 5% of the current revenue. The bulk of the city outstanding debt is interest free loans from the central government. The city has had limited borrowing flexibility since legislation implemented in 2003, which prohibited it from issuing bonds or borrowing from banks. However, the recent changes in national regulation allowed borrowing at the financial market for the city, starting from 2008.

The City of Astana is the capital of Kazakhstan and is located in the central part of the country. The City contributes 10% to the national gross domestic product (GDP) and makes up 3.6% of Kazakhstan's total population.