OREANDA-NEWS. On November 08, 2007 Fitch Ratings has affirmed Kazakhstan's City of Almaty Long-term foreign and local currency 'BB+' ratings and a Short-term foreign currency 'B' rating. Fitch also assigned it a National Long-term 'A+(kaz)' rating. All the rating Outlooks are Stable, reported the press-centre of KASE.

The ratings reflect the city's well-diversified and growing economy, stable growth in tax revenue, high level of capital spending and low debt burden. However, the ratings also factor in the city dependence upon the central government in terms of decisions on inter-regional equalization transfers, and limited financial flexibility of the city.

The Stable Outlook reflects Fitch's expectation that economic growth will underpin stable revenue growth, allowing the City to compensate for increasing expenditures and maintain an operating balance at satisfactory level. Fitch expects the debt burden to remain low.

Almaty has a strong, service-oriented economy with per capita gross city product (GCP) almost three times higher than the national average. The city has recorded positive operating and current margins and high level of capital expenditure, up to 30,5% of total spending in 2006 from 7,2% in 2000. A large proportion of capital investment has been financed by the city's capital revenues and capital transfers from the central government. Capital revenue and capital transfers covered 93% of capital expenditure in 2006. The central government has financed several large-scale development projects in the city, related to power supply, infrastructure development and  construction. The debt burden is low, reaching only 14% of current revenue in 2006, while debt servicing has declined to 2,3% in 2006 from 5,5% in 2002. The bulk of the city outstanding debt is interest free loans from the central government for residential construction.

Kazakhstan's budgetary framework is characterised by strong bias towards centralised decision making and funds distribution. The city has had limited financial possibilities since legislation implemented in 2003 prohibited it from issuing bonds or borrowing from banks. Besides the city is free of indirect risk due to national regulation restriction for guarantees issue for subnational entities. However, recent changes in national regulation will permit borrowing at financial market for the city starting from 2008. The city of Almaty tax capacity is much higher than country average and the city is required to transfer to the republican budget a significant share of the city's revenue for further redistribution among sub-national entities. The withdrawals to the central budget averaged 38% of total city's budget expenditure in 2004-2006.

The City of Almaty is the largest city in Kazakhstan and is located in the south-eastern part of the country. The city contributed 19,9% to national gross domestic product ("GDP") in 2006 and makes up about 8% of Kazakhstan's total population.