According to Felix Ejgel, a credit analyst with Standard & Poor's, the higher rating reflects an increase in reserves which exceeds by far expenses for the servicing and repayment of the debt. In his opinion, the republic's government pursues the policy of a low debt level and high financial indicators despite raises in wages paid to public sector workers, a great need to finance the infrastructure and a slower (than the country's average) economic growth. The latter factors have also helped the republic to get a high rating, the analyst believes.
In the agency's opinion, the level of Bashkortostan's ratings is restricted by low predictability of revenues and expenditures and their flexibility caused by the continuing tax reform and the reform of inter-budget relations, as well as its dependence on tax payments made by oil companies.
The level of the republic's ratings is also restricted by the need to enhance the openness of its financial and socio-economic policy, its high contingent liabilities and dependence on federal transfers. A low debt level, high liquidity and excellent financial indicators reduce the credit risk at this level of Bashkortostan's rating.
The forecast for the change in ratings is stable. Standard & Poor's believes that a balanced management of Bashkortostan's finances will make it possible to overcome pressure on budget spending caused by rising wages and the need to finance the infrastructure in the period of economic restructuring.
