The City Of Poznań Got A Financial Assesment

Fitch agency did not change the high rating of Poznań: A-. This is the highest possible level for the Polish local government. This high rating means that the City is capable to meet its financial obligations. At the same time, however, the agency admitted that Polski Ład (a new governmental reform program) may be a threat to the city's budget.

In its assessment, Fitch agency takes into account the good financial management of the City, fot. Przemysław Turlej - grafika artykułu
In its assessment, Fitch agency takes into account the good financial management of the City, fot. Przemysław Turlej

The Fitch Ratings agency informed about Poznań's international long-term ratings for debt in foreign and domestic currency on December 3. Rating: A- is the highest possible rating of this agency that can be obtained by the Polish local government, and is equal to the country's creditworthiness.  

Fitch also maintained its previous opinion - the city's rating is currently limited by Poland's rating. Therefore, any change in a country's rating will be automatically reflected in the rating of Poznań. 

In its assessment, Fitch takes into account the City's good financial management, stable sources of income and stable financial liquidity. The agency emphasizes that the city provides residents with high-quality communal and additional services, beyond the obligatory tasks, and the fact that, unlike most Polish cities, Poznań has flexibility in increasing revenues from utility charges, rents and other charges. 

Poznań is the most economically strong regional Polish city. This is evidenced by one of the highest levels of GDP per capita in the country (twice as high as the national average) and one of the lowest unemployment rates among Polish cities. 

Fitch Agency: Polski Ład will have a negative impact on the income of local governments

According to the Fitch agency, the recently adopted Polski Ład, introducing major changes to the income system of local governments, will lead to a change in the financing system of Polish local governments. Municipalities will feel the most negative effects. The new system will affect the financial profiles of municipalities assessed by Fitch and, consequently, its ratings. 

For this reason, Fitch placed the City of Poznań on the observation list with a negative indication. The agency explains that this reflects the uncertainty as to how the implementation of Polski Ład will affect the financial profile of Poznań. According to Fitch, the tax reform will negatively influence the volume of local government revenues from participation in personal income tax, and the solutions provided for in the amended act on local government units' income will be insufficient to fully compensate for the expected decline in income from participation in PIT income. 

- The high rating of Poznań confirms that the city is well managed. And this assessment makes us very happy - says Jacek Jaśkowiak, Mayor of the City of Poznań. - Unfortunately, Fitch, an independent and one of the most famous agencies in the world, also points to the enormous threat posed by the new reform program to local governments. It will affect losses in income, which, in the opinion of the agencies, the government subsidy is not able to compensate. The most dangerous, however, is the destabilization of the finances of local governments, which may result in a decrease in the creditworthiness of our city and other municipalities and an increase in the costs of obtained financing. Already, the markets react negatively to the changes planned in Polski  Ład, which is reflected, i.a. in the fast weakening of the zloty currency. In this situation, we must work very carefully on the budget in order to maintain the stability and good financial condition of Poznań.

Fitch believes that local governments will be forced to take preventive measures, such as raising taxes and local fees and reducing current expenses, to compensate for the loss in revenues. Currently, Polish local governments are in the process of adopting budgets for 2022 and, according to the agency, they should include solutions to counter the effects of the tax reform. If this does not happen, then the independent credit profiles of municipalities will deteriorate and, consequently, their rating will be lowered.  

Ratings are opinions of independent, specialized institutions that determine the creditworthiness of the rated entity. They express the city's overall ability to meet its financial obligations. The main task of the city's rating is to inform current and future investors about its credibility and solvency. Having a creditworthiness assessment enables easier and wider access to financial markets and allows for obtaining external capital on more favourable terms.

Fitch Ratings is one of the most important rating agencies in the world, with high credibility and prestige on the international market of rating services. It assesses the creditworthiness of issuers from over 100 countries around the world, including most Polish counts. The creditworthiness of Poznań has been assessed since 2013.

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