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The Credibility
of the City of Moscow
Sergey Pakhomov
Chairman
City of Moscow State Debt Committee
City of Moscow
State Debt
Committee
2
City of Moscow
State Debt
Committee
Section 1
Moscow Economy and Finance
3
City of Moscow
State Debt
Committee
Moscow Economic Highlights
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
Moscow is one of Russia’s 89 Subjects
Modern city with 10.4 million of residents accounting for
7% of Russia’s total population, generates 20%
Russia’s GDP
44% of financial institutions and 83% of banks are
concentrated in Moscow
Accounts for 38% of Russia’s total foreign direct
investments
GDP / GCP
Budget revenue
Other Subjects
Other Subjects of
Unemployment at 1.6%
of Russian
Russian
Federation
Federation
more than five times
80%
65%
lower the national
Moscow
average of 9%
35%
Moscow
20%
4
Moscow and Russia key
macroeconomic indicators
GDP, GCP growth rates
20%
City of Moscow
State Debt
Committee
Industrial growth
20%
15%
15%
10%
10%
5%
5%
0%
0%
2000
2001
Moscow
2002
2003 E
Russia
2004 E
2000
2001
Moscow
2002
2003 E
2004 E
Russia
» High growth rate
5
City of Moscow
State Debt
Committee
Moscow GCP Dynamics
100%
90%
80%
Net taxes on
products
70%
60%
Manufacturing
50%
40%
30%
Services
20%
10%
0%
1994
1997
2000
2003
» Service oriented economy
» Service sector growth
6
City of Moscow
State Debt
Committee
Composition of budget revenues
As at January 1, 2002
Retail trade
and catering
16,3%
Industry
17,2%
Finance
6,4%
Agriculture
0,1%
Construction
5,9%
Communications
4,5%
Materials/supplies
3,0%
Transport
31,6%
Other
sectors
13,3%
Housing
and
utilities
1,8%
» budget revenues are divercified
7
City of Moscow
State Debt
Committee
Dynamics of budget revenues
bln. RUR.
400
bln. US$
15
300
10
200
5
100
0
Budget
revenue
(rbl.)
Budget
revenue
(US$)
0
1997
1998
1999
2000
2001
2002
2003
2004 P
» stable budget revenues
8
City of Moscow
State Debt
Committee
Section 2
City of Moscow indebtedness
9
City of Moscow Economy and
Indebtedness

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
City of Moscow
State Debt
Committee
GCP of US$ 86 billion (2003 E) – 20% Russia
GDP
Budget revenue of US$ 12.9 billion (2004 P)
Total current debt at US$ 2,7 billion (April 2004)
accounts for 21.1% of budget revenue and 2.5% of
GCP
Current credit rating: S&P – BВ+ (upgraded
02.02.04); Moody’s – Bа1 (upgraded 14.01.04);
Fitch – BВ+ (upgraded 23.10.03)
10
City of Moscow
State Debt
Committee
City budget capital expenditure
RUB, bln.
400
Budget
revenue
300
Budget
expenditure
200
Budget capital
expenditure
100
Budget deficit
0
2000
2001
2002
2003
2004 P
» capital expenditure is partly financed by borrowings
11
City of Moscow Debt Structure
*
City of Moscow
State Debt
Committee
100%
90%
80%
Domestic bonds
70%
60%
50%
Domestic bank
loans
40%
Eurobonds
30%
20%
Foreign bank loans
10%
0%
1997
*
1998
1999
2000
2001
Debt managed by City of Moscow State Debt Committee
2002
2003
2004 P
2005 E
12
City of Moscow
State Debt
Committee
Section 3
Development of Moscow Domestic
Bond Market
13
Moscow Bonds and Russian Capital
Market
Moscow – the largest
Russian regional bond
issuer (present market
share – RUB 47 bln
or 50% of all registered
issues of Sub-Federal
bonds)
City of Moscow
State Debt
Committee
Regional Market Share
Moscow
region
13,3%
SaintPetersburg
10,7%
KhantyMansi
Autonomous
Region
4,3%
Moscow
50%
Other
14,2%
Yakutia
3,5%
YamalNenets
Autonomous
Region
4,0%
14
Domestic Bond Market Development
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City of Moscow
State Debt
Committee
Total volume of bonds in circulation – RUB 47 bln
Number of underwriters and market-makers – 25
institutions
Yield spreads of the most liquid issues – 1-2,5%
over Federal bonds
Domestic debt daily average turnover on MICEX
(since 2004) – RUB 886 mln
15
Dynamics of Moscow Domestic
Bonds Circulation
50
RUB. bln.
40
30
20
10
0
06/01 09/01 12/01 03/02 06/02 09/02 12/02 03/03 06/03 09/03 12/03 03/04 06/04
City of Moscow
State Debt
Committee
0
Moscow Domestic Bonds
Auctions in 2002 – 2004
RU25032MOS
RU25034MOS
RU26038MOS
RU25031MOS
RU25033MOS
RU25030MOS
RU25029MOS
RU25028MOS
RU25026MOS
RU25027MOS
RU25025MOS
12
RU25024MOS
14
RU25023MOS
16
RU25022MOS
RU25021MOS
RU25020MOS
RUB bln.
16
City of Moscow
State Debt
Committee
18
30%
Bonds for placement
Bids
Yeld
25%
20%
10
8
15%
6
10%
4
2
5%
0%
17
Moscow Domestic Bonds:
Turnover Dynamics on MICEX
City of Moscow
State Debt
Committee
6 000
Monthly turnover, RUB, mln
5 000
OTC market
MICEX cleared
4 000
3 000
2 000
1 000
0
Apr 01
Jul 01
Oct 01
Jan 02
Apr 02
Jul 02
Oct 02
Jan 03
Apr 03
Jul 03
Oct 03
Jan 04
Apr 04
Jul 04
18
Moscow Domestic Bonds:
Yield Performance in 2002 – 2004
City of Moscow
State Debt
Committee
20%
15%
RU24016MOS
RU25022MOS
RU25024MOS
RU25025MOS
RU25027MOS
RU25038MOS
10%
5%
Jan-02
Apr-02
Jul-02
Oct-02
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
19
Moscow Domestic Bonds:
Yield to Maturity
City of Moscow
State Debt
Committee
12%
Moscow
Russia
10%
8%
6%
4%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
20
Development of Moscow Domestic
Bond Market in 2003
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City of Moscow
State Debt
Committee
Volume of bonds in circulation has increased by 2.6
times
Auction sales has grown by more than 2.8 times

Number of Authorized Underwriters and Market-makers
for Moscow domestic bonds has grown by 1.4 times
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Demand for Moscow domestic bonds at auctions has
grown by 3 times

Stock exchange bond turnover has increased, liquidity
of bonds has remained high
21
City of Moscow
State Debt
Committee
Section 4
City of Moscow Debt Management
Strategy
22
Debt Management Strategy
City of Moscow
State Debt
Committee

Timely and full debt service and repayment
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Keeping debt size within safe limits to avoid
difficulties with its service and redemption
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Diversification of debt instruments and markets
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Maximum transparency of Moscow budget and debt
obligations
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Efficient debt management. Goal: debt optimization,
reduction of debt service expenditure
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Long-term planning of debt profile and on-line debt
control
23
Moscow Government Debt
Management Guidelines
City of Moscow
State Debt
Committee
The Government approved guidelines address
the following issues:

budget planning policy in relation to:
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long term planning of debt size, structure and profile
setting safe debt limits
procedure for debt origination and debt
management operations
rules for debt accounting
functioning of debt payment system
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Debt Safety Ratio For The City of
Moscow
City of Moscow
State Debt
Committee
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Annual current and future debt repayments
should not exceed the “capital resource” of
the City budgets for corresponding years

“Capital resource” is operational surplus of
the City budget: City’s current revenue
always exceeds current expenditure
25
Goals of Moscow Debt Management
Strategy
City of Moscow
State Debt
Committee

Obtaining necessary funds for development while maintaining
debt size at a safe level
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Increased transparency of debt and predictability of City’s
debt management
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Growing share of domestic bonds in debt structure
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Predominance of bonds as debt instruments
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Bond market development, increased market liquidity and
domestic debt duration
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Diversification of debt instruments
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Active debt management and even distribution of debt
service and debt repayment through future years to prevent
excessive strain on the City's budget
26
City of Moscow
State Debt
Committee
Section 5
Conclusion
27
Attractiveness of Moscow Bonds to
Investors
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City of Moscow
State Debt
Committee
Moscow has growing and diversified economy
Low debt fully controlled by the City Government
High credit rating constrained by the Sovereign
ceiling
Advanced debt management system providing dayto-day debt control
Unstained credit history: since 1997 Moscow State
Debt Committee has made due payments of interest
and principal for the total of over RUB 145 bln
Highly liquid and fast growing domestic bond market
28
Borrowing Targets for 2004

RUB 28.9 bln – Domestic bonds
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RUB 9.5 bln – Domestic loans

Euro 375 mln – Foreign debt
City of Moscow
State Debt
Committee
29
Goals of City of Moscow Debt
Management for 2005 – 2006

City of Moscow
State Debt
Committee
Substantial increase in domestic debt (up to 70%
of total debt RUB 100 bln)

Increasing issue size on domestic market up to
RUB 10 bln

Increasing the maturity of new rouble bonds for up
to 10 years
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Refinancing the Euro 400 Eurobond in 2006
Issuance of amortizing bonds on domestic
market
30
City of Moscow
State Debt
Committee
Borrowing Programme
2004
2005 (draft)
Loans
from the
RF
Loans
from the
RF
Domestic
loans
Domestic
loans
Domestic
bonds
Foreigh
loans
Total:
• Raised – RUB 54.9 bln.
• Repaid – RUB 28.8 bln.
Domestic
bonds
Total:
• Raised – RUB 36.9 bln.
• Repaid – RUB 20.0 bln.
Foreigh
loans
Debt Obligations of the City of
Moscow in the Internet

31
Information on
debt obligations
of the City of
Moscow can be
found on the
WEB:
http://www.MoscowDebt.ru/
City of Moscow
State Debt
Committee
The Credibility
of the City of Moscow
Sergey Pakhomov
Chairman
City of Moscow State Debt Committee
City of Moscow
State Debt
Committee