The main factors affecting the rating

The rating reflects the operating results of the city of Warsaw, its high ability to finance investments from its own resources, an exemplary liquidity position of the budget and a low level of debt service in relation to operational funds. The rating also takes into account the level of indebtedness of municipal companies.

The debt policy is implemented in a safe manner and guarantees its timely repayment in subsequent periods. The debt planned by the entity should not significantly affect its ability to settle long-term liabilities.

The current income of the unit in 2013-2018 increased from PLN 11,144.86 million in 2013 to PLN 16,283.60 million in 2018, which implies a cumulative annual growth rate (CAGR) of 7.90%. Part of this increase, however, is related to grants related to the government program to support families bringing up children (the „Family 500+” program). The city’s tax revenue ranged from 49.11% to 52.65% of current revenue. On average, 24.77% of tax revenues were local taxes.

The average cost of the city’s debt is 4.22%, while the average debt repayment period – the time period in which the city would repay its liabilities assuming that it would allocate its entire operating surplus in accordance with the plan for 2018 at 2.47 years. However, if we expand the analysis and take the average surplus from 2013-2018, the value of this indicator will still stay under 3 years.


The main factors of the rating change

The city has a stable budget base. The level of operating surplus grew steadily throughout the analyzed period. The relatively low surplus planned in the third quarter of 2018 was related to cautious forecasting of income and expenses. An analysis of the city’s budgets in the last 11 years suggests that approx. 20% of the revenue item generates approx. 85% of the budget (similarly in the expenditure of 20% of the largest items, it generates 70% of all expenditure). Despite the narrowing down of the source of these revenues, they are based on a significant extent (on average 75% in 2013-2018) on the city’s own revenues.

Despite the completion of investment projects in the last 5 years exceeding PLN 8,847 million, the level of debt is lower than at the beginning of this period by PLN 799.1 million. Debts planned by the entity in subsequent periods should not significantly affect its ability to settle long-term liabilities.

Factors determining the upgrade of the rating: according to the methodology adopted by INC Rating, Polish local government units cannot receive a rating higher than the rating of Poland, assigned as the country’s average rating issued by the rating agencies Moody’s, S&P and Fitch.

Factors determining the rating downgrade: an over-plan increase in the level of debt, with a permanent reduction in the operating margin below 10% and an upward trend in the relation of operating income and expenses, caused by an increase in expenditure on remuneration.



Krzysztof Waśko
Lead Analyst
+48 61/851 38 83

Long-term international credit rating Warszawa, City of