Kraljevo, Novi Sad and Valjevo the First Local Governments to Receive A Credit Rating
February 25, 2010
Kraljevo, Novi Sad and Valjevo were declared as the winners of the Municipal Credit Rating competition organized by USAID's Municipal Economic Growth Activity today in Belgrade in the presence of U.S. Agency for International Development's (USAID) Mission Director Michael Harvey and State Secretary in the Ministry of Finance Slobodan Ilic. USAID's Program will financially support the establishment of a credit rating from the international agency Moody's Investors Service for these three local governments, which should be ready this summer.
Sixteen towns and municipalities competed in presenting their creditworthiness in front of an audience of capital market participants. These partner municipalities were selected to participate in the competition based on their size, population, quality of financial management and ability to support economic growth. During the month of February, these municipalities were evaluated by a independent panel of judges on the basis of their financial statistics from the past four years, their financial projections for the next five years, and the quality of their financial management.
Local government credit ratings can serve as a signpost for investors and lendors: the credit rating shows the quality of the business environment in a particular local community, their financial and fiscal policies, and also considers risks to investors and lenders. A good credit rating allows local governments to incur debt under favorable conditions, which can assist them in financing major infrastructure projects. An international credit rating also facilitates the sale of municipal bonds, the establishment of public-private partnerships and attracts investors to a particular community. This will be the first time that a Serbian local government receives a credit rating, while the country itself currently holds a BB- long-term rating and a B short-term rating by Standard & Poors, which is considered a recommendation for investment.
Participants in the competition included Novi Sad, Niš, Leskovac, Subotica, Zrenjanin, Kruševac, Pančevo, Šabac, Kraljevo, Čačak, Smederevo, Sombor, Valjevo, Sremska Mitrovica, Užice and Inđija. All sixteen local governments will also have the opportunity to attend a study tour this summer to a neighboring country with an established local government credit market to learn about financing through municipal bonds and accessing the capital market.