Fitch Ratings has upgraded the City of Yerevan’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to ‘BB-’ from ‘B+’ with Stable Outlook.

Revenue Robustness: Weaker

Yerevan’s budget revenue is mainly composed of central government transfers (2018: 66% of total revenue), followed by taxes (15%), non-tax revenue (13%) and asset sales (6%).

Given the economic decline, Fitch has re-assessed Yerevan’s risk profile as ‘Weaker’ from ‘Vulnerable’.

Expenditure Adjustability: Weaker

Most of Yerevan’s spending responsibilities are mandatory, with inflexible items dominating the expenditure structure. Therefore the bulk of expenditure could be difficult to cut in response to potential revenue shrinking.

Liabilities and Liquidity: Weaker

Yerevan's liquidity position improved in 2018 to AMD7.8 billion from AMD1.9 billion in 2017, as the city posted a surplus budget with excess cash retained in reserves.

Yerevan holds its cash in treasury accounts as deposits with commercial banks are prohibited under the national legal framework for LRGs. For extra liquidity the city could borrow from the national treasury.

On November 22, Fitch Ratings upgraded Armenia’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘BB-’ from ‘B+’ with stable Outlook.