## REPUBLIC OF UZBEKISTAN FISCAL TRANSPARENCY EVALUATION UPDATE

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**Canonical URL:** [REPUBLIC OF UZBEKISTAN FISCAL TRANSPARENCY EVALUATION UPDATE](https://www.imf.org/-/media/files/publications/cr/2019/1uzbea2019001.pdf)

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### Summary of Progress in Fiscal Transparency
- IMF conducted a fiscal transparency evaluation (FTE) for Uzbekistan in June 2018; the FTE found Uzbekistan met at least the basic standard of practice in 16 of the 36 principles defined in the IMF Fiscal Transparency Code.
- Update based on practices in place at the time of a Fiscal Affairs Department visit during March 25 to April 5, 2019.
- Key advances in the 2019 budget message:
  - Presentation of more detailed information on allocation of public funds across major spending areas and a statement of medium-term policy intentions.
  - Inclusion, for the first time, of medium-term macroeconomic and fiscal projections and a discussion of fiscal risks.
  - Timely publication of the Citizen’s Budget providing an accessible summary of fiscal prospects and policy.
- Impact of reforms since June 2018:
  - Improved fiscal transparency practices against eight of the Code’s standards.
  - In seven principles previously assessed as not being met, six now meet the basic level of practice and one meets the good level of practice.
  - Establishment of a dedicated division for compiling government finance statistics (GFS) improved statistical integrity from the basic to good level.
  - Uzbekistan now meets at least the basic standard of practice in 23 of the Code’s principles.
- Further planned or ongoing enhancements:
  - August 2018 Presidential Decree on ensuring budget openness and public participation in the budget.
  - Road map to expand coverage and quality of fiscal reports, enhance fiscal risk disclosure, and ensure greater parliamentary scrutiny.
  - Work commenced to identify all off-budget fiscal activities for inclusion in future budget and GFS reports.
  - Efforts to expand GFS coverage to reflect all general government fiscal transactions, including those of non-market state-owned enterprises (SOEs).

### Key Changes — Pillar I: Fiscal Reporting
- 1.4.1 Statistical Integrity (Basic to Good)
  - A GFS and Fiscal Transparency Division was established in the Main State Budget Department in October 2018.
  - The division compiles and disseminates GFS on a GFSM 2014 basis and collects source information from the Treasury, budget organizations, state trust funds, extra-budgetary funds, and unitary enterprises.
  - While GFS reports are broadly in line with GFSM classification, some deviations remain (e.g., classified expenditures such as those related to national security are reported as other expenditures in the economic classification).

### Key Changes — Pillar II: Fiscal Forecasting and Budgeting
- 2.1.3 Medium-term Budget Framework (Not Met to Basic)
  - The 2019 budget message included medium-term macroeconomic and fiscal projections for the budget and two forward years; three-year projections for revenues, expenditures and budget balance were presented for the state budget, state targeted funds, and consolidated balance of the state budget and state targeted funds, as well as for state debt.
  - Breakdowns of revenues by tax category and expenditures by a broad economic category were included for the first time, though economic categories are not fully aligned with GFSM 2014 and are only presented for the current and budget years.
  - Extending detailed breakdowns to the two forward years would see Uzbekistan meet the good level of practice; including medium-term expenditure projections by ministry would see Uzbekistan meet the advanced level of practice.
- 2.3.1 Fiscal Policy Objectives (Not Met to Good)
  - The 2019 budget introduced numerical fiscal objectives:
    - limit on state debt of 50 percent of GDP, with measures to be implemented to ensure sustainability should state debt exceed 40 percent of GDP;
    - objective limit on the consolidated deficit of the state budget and state targeted funds of 2 percent of GDP.
  - The deficit and debt limits are not legally binding.
  - Medium-term projections in the budget are consistent with the fiscal objectives.
  - Recommendation: future budgets should report on performance in meeting fiscal objectives.
  - The fiscal strategy statement details main fiscal policy objectives including ensuring sustainable public finances, efficient use of budget funds, raising living standards, infrastructure development priorities, and main directions for tax and budget policy over the medium-term.
- 2.3.2 Performance Information (Not Met to Basic)
  - The 2019 budget documentation included information on inputs and some outputs for major policy areas (e.g., number of schools funded, teachers employed, cost of salaries; outputs such as pre-school coverage and access to certain health services).
  - To meet the good level of practice, subsequent budgets should report on performance against achievement of these output objectives.
- 2.3.3 Public Participation (Not Met to Basic)
  - A Citizen’s Budget was published for the first time in July 2018 (summarizing the approved 2018 budget) and in 2019 was released alongside the 2019 budget.
  - The Citizen’s Budget provides an overview of macroeconomic and fiscal outlook, structure of revenues and expenditures, summary of major fiscal policy areas, summary of changes in tax policy, and details on spending and outputs by functional category (not yet fully consistent with UN COFOG).
  - The government has committed to developing formal mechanisms for citizen engagement in the budget process; implementation would see Uzbekistan meet the good level of practice.

### Key Changes — Pillar III: Fiscal Risk Analysis and Management
- 3.1.1 Macroeconomic Risks (Not Met to Basic)
  - The 2019 budget message included sensitivity analysis of fiscal forecasts to three main economic variables:
    - decline in prices for key commodity exports;
    - a devaluation in the exchange rate, with account taken of the impact on inflation;
    - an acceleration in domestic inflation.
  - Inclusion of this analysis moves assessment from not met to basic level of practice.
- 3.1.2 Specific Fiscal Risks (Not Met to Basic)
  - The 2019 budget included a summary fiscal risk statement covering:
    - macroeconomic risks;
    - risks associated with certain tax policy changes;
    - government guarantees on borrowing of certain SOEs;
    - financial sector exposures.
  - Gaps remain: no discussion/assessment of fiscal risks from the SOE sector more generally; maximum exposure associated with loan guarantees reported only for domestic guarantees (external loan guarantees, representing the bulk of guaranteed debt, are reported separately in external debt statistics).
  - Recommendation: expand fiscal risk statement to cover all material fiscal risks and quantify them to reach the good level of practice.
- 3.2.5 Financial Sector (Not Met to Basic)
  - The fiscal risk statement disclosed explicit financial sector support, key banking sector soundness indicators, details of the bank deposit insurance scheme, and quantification of total deposits covered under the scheme.
  - The statement notes past government capital injections to state-owned banks; amounts are not in the fiscal risk statement but are available in separate Presidential Resolutions authorizing them.
  - Planned regular assessments of financial sector stability by the Central Bank would further improve this rating to the good level of practice.

### Key Quantitative and Chronological Facts
- IMF FTE June 2018: met at least the basic standard in 16 of the 36 principles.
- Fiscal Affairs Department visit: March 25 to April 5, 2019.
- Establishment of GFS and Fiscal Transparency Division: October 2018.
- Presidential Decree on budget openness and public participation: August 2018.
- Citizen’s Budget first published: July 2018.
- Uzbekistan now meets at least the basic standard of practice in 23 of the Code’s principles.
- Numerical fiscal objectives introduced in 2019 budget:
  - state debt limit: 50 percent of GDP;
  - trigger for measures: state debt exceed 40 percent of GDP;
  - consolidated deficit limit: 2 percent of GDP.

*Fiscal Affairs Department, International Monetary Fund, April 2019.*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1uzbea2019001.pdf_