Fitch Ratings international agency rated Yerevan for the first time, assigning it Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of “B+” with stable outlook.

At the same time, Yerevan received Short-Term Foreign Currency IDR of “B”.

According to Fitch Ratings, Yerevan’s ratings reflect a weak institutional framework for Armenian sub-nationals, as reflected by the sovereign rating (B+/Stable) constraint. Moreover, the ratings reflect Yerevan’s status as the capital, satisfactory budgetary performance, supported by steady transfers from the central government, and a debt-free status.

Fitch expects Yerevan to maintain satisfactory fiscal performance. The agency projects the city’s operating revenue will total AMD 78bn in 2016, up 3% yoy.

Yerevan receives current transfers from the central government, which averaged 74% of operating revenue in 2011-2015. Thus, over the medium term, current transfers are likely to remain stable at about 75%, while locally collected taxes will contribute about 15% of operating revenue.

The agency projects likely decrease of capital spending - slightly to about AMD 7bn-AMD 8bn in 2016-2017 as opposed to AMD 9bn in 2015. Meanwhile, Fitch also expects them to rise to about AMD 10bn in 2018.

According to Fitch, Yerevan’s capital expenses will remain funded by asset sales and transfers from the state budget.

The agency states Yerevan’s main challenge is the low predictability of medium- and long-term policies, which are subject to central government decisions.

“Yerevan benefits from its capital status. It’s the country’s economic and financial centre and largest market with a developed services sector. Yerevan is the country's largest metropolitan area, where 36% of Armenia's population resides. However, the city’s wealth metrics are low in the international context. The city’s unemployment rate is high, averaging at 17.6%,” Fitch analysts stated.

It is worth reminding that Fitch Ratings and Yerevan Municipality signed an agreement in autumn that provided for the agency to assign the city an international financial rating.