Press Statement by IMF Staff and the Government and the Central Bank of the Republic of Uzbekistan

Press Release No. 06/298
December 21, 2006

The following statement was issued in Tashkent on December 13, 2006 at the conclusion of a staff mission of the International Monetary Fund (IMF):

"A mission of the International Monetary Fund (IMF) visited the Republic of Uzbekistan from November 30 through December 13, 2006 to hold discussions with the Government of Uzbekistan within the framework of 2006 Article IV consultations. The mission was headed by Ms. Sena Eken, assistant director in the Middle East and Central Asia Department of the IMF.

"The discussions between the Government and the IMF mission focused on economic developments in 2005-2006, the outlook for 2007 and the medium term, and the economic reform program of the Government. The discussions were very open and constructive. The mission expressed special gratitude for an excellent cooperation.

"The mission recognizes that the economic performance during the past two years was generally strong, with high GDP growth of no less than 7 percent according to official data, large trade and external current account surpluses mainly due to increases in exports, and sharp increases in gold and foreign exchange reserves, which now amount to 12 months of imports. Inflation started coming down recently.

"On the policy side, the authorities implemented prudent fiscal policies which resulted in budgetary surpluses despite the reduction in tax rates. The strong balance of payments fueled monetary aggregates and created challenges for monetary policy. In response, the Central Bank of Uzbekistan tightened monetary policy appropriately in 2006. Structural reforms continued at a gradual pace with welcomed progress in fiscal reforms.

"The mission notes that the economic outlook for 2007 is favorable with continued strong performance projected for economic growth and the balance of payments. The mission is encouraged by the intention of the authorities to further reduce inflation and to this end continue to tighten monetary policy and to pursue prudent fiscal policies.

"To ensure continued high rates of economic growth over the medium term in an environment of financial stability, the mission emphasized the need to address the outstanding policy challenges, including to reduce inflation, eliminate constrains to further development of the banking system, and ease barriers to foreign trade. In this regard, the mission made a number of recommendations, including: a more flexible exchange rate policy; discontinuation of non-core functions undertaken by banks; and reduction of tax and administrative costs related to foreign trade. These recommendations will be thoroughly considered by the Government in the formulation and implementation of economic policies.

"The mission emphasized to the authorities that the Fund staff stands ready to assist Uzbekistan in its reform efforts, including through technical assistance.



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