Fitch affirms Malopolska

Fitch Ratings said it affirmed the Polish Region of Malopolska's national long-term rating at AA-(pol) with a stable outlook.

The agency said the rating reflects Malopolska's satisfactory operating performance and high liquidity, growing economy and focus on regional development. Malopolska's revenue flexibility improved significantly in the last two years and its operating performance was "exceptionally good," according Fitch, with high operating balance at 28.5% and 18.5% of operating revenue in 2004 and 2005, respectively. The operating balance comfortably covered debt servicing expenditure by 5.5x in 2005.

However, the rating also takes into account the region's financially weak health-care sector and growing expenditure on regional railway transport due to pressure from PKP Regional Transport for greater financing from the region's budget, the agency said.

The stable outlook reflects Fitch's expectation that the region will maintain satisfactory operating performance and sufficient financial flexibility, which will allow it access to European Union financing.

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