Istanbul, İzmir have strong self-financing capacity, supporting investments: Moody’s

LONDON

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Sizeable investment programs are sustainable for Istanbul and the Aegean city of İzmir thanks to their robust operating performance, effective financial management, strong economies and large and valuable asset bases, said Moody’s in a note on May 5. 

The municipalities of Istanbul (Baa3 negative) and İzmir (Baa3 negative) are planning infrastructure development programs in 2016-17 estimated at 17.9 billion Turkish Liras ($6.3 billion) and 4 billion liras ($1.4 billion), respectively. This would absorb 54 percent of Istanbul’s total spending over the period and 49 percent of İzmir’s, said the statement.  

Moody’s said Istanbul and İzmir’s high capital expenditure reflected their strong population growth. Both cities will focus on investments in transportation infrastructure, utilities and environmental projects, while their debt will grow moderately, it added. 

Both municipalities will borrow more in 2016-17 as their capital investments accelerate, increasing their debt as a proportion of revenues. 

“We expect Istanbul’s debt to grow to about 76 percent of operating revenue by end 2017 from 53 percent in 2015, while İzmir’s will rise to about 51 percent from 47 percent. Growing tax revenues provide funding support. Istanbul and İzmir’s comparatively high revenue-generating capacity and sound financial management will help them fund their ambitious infrastructure plans,” said Moody’s. 

Istanbul’s traditionally high gross operating margin is expected to rise to 48 percent of operating revenue by 2017 from 47 percent in 2015, while İzmir’s will climb to 46 percent from 40 percent. 

“We expect both cities’ self-financing capacity to remain strong,” it added.