Fitch upgrades Almaty to BB+

Fitch Ratings said it upgraded the Kazakhstan City of Almaty's long-term rating to BB+ from BB and affirmed the short-term rating at B.

The outlook is stable.

The agency said the upgrade reflects the positive impact that the growing and diversified local economy has had and will continue to have on the city's budget. Taxes contributed 83% of the city's operating income in 2005, and Almaty is home to the national financial sector with many domestic and foreign commercial banks, the National Bank of Kazakhstan and the country's only stock exchange. The debt burden is low, reaching only 6.3% of the current revenue in 2005.

The city's budgetary framework is heavily dependant on the central government's decisions, and the budgetary framework of Kazakhstan is characterized by strong bias towards centralized decision making and funds distribution, Fitch said. Although the city derives a significant share of its revenue from local tax sources, the budgetary framework is unpredictable with regards to transfer volumes, deficit funding and regulatory decisions, and the city is prohibited from issuing bonds or borrowing from banks. The only financing option is credits from the central government.

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