Press Release No. 17/296

Statement at the Conclusion of an IMF Staff Visit to Uzbekistan

July 24, 2017

• The reform of the foreign exchange system would need to be backed up by restructuring state-owned enterprises and state-controlled banks
• Budget policy has stayed a prudent course in 2017, and the consolidated state budget is now projected to reach a surplus of 0.2 percent of GDP
• The mission welcomed the authorities’ determination to work toward improving the quality and transparency of economic statistics.

An International Monetary Fund (IMF) mission led by Mr. Albert Jaeger visited Tashkent during July 17–24, 2017, to discuss economic developments and the authorities’ reform plans. At the conclusion of the visit, the mission issued the following statement

“The mission welcomed the authorities’ comprehensive plans to reform the economy, based on the 2017-21 strategy for further developing Uzbekistan approved by President Shavkat Mirziyoyev. If implemented in a timely and effective manner, these plans could significantly strengthen the economy’s ability to create good jobs and sustainable growth.

“The mission especially welcomed the authorities’ plan to frontload reforms of the foreign exchange system.

“Unifying exchange rates and allowing a market-based allocation of foreign exchange resources would allow the Central Bank of Uzbekistan (CBU) to pivot to a stability-oriented monetary policy capable of effectively controlling inflation. The reform would also promote job creation and growth by increasing external competitiveness, attracting foreign direct investment (FDI), and improving the allocation of domestic resources. Given Uzbekistan’s ample foreign exchange reserves, the reform can be implemented from a position of strength.

“The reform of the foreign exchange system would need to be backed up by restructuring state-owned enterprises and state-controlled banks, removing other bottlenecks to international trade and FDI, and streamlining laws, regulations, and practices that

unnecessarily raise transaction costs for businesses, especially for small and medium-sized enterprises crucial for promoting job creation.”

“The IMF stands ready to provide further technical cooperation and policy advice to support the authorities’ reform plans.

“Implementation of reforms will have to take place against the backdrop of inflationary pressures, which are mainly propelled by rapid money and credit growth. The mission therefore welcomed the CBU’s recent tightening of monetary policy, including by raising the refinancing rate from 9 to 14 percent.

“While the banking system remains well-buffered, there were concerns about strains on liquidity and underlying loan quality. In response to these concerns, the authorities have preemptively re-capitalized state-controlled banks, raised liquidity requirements, and reviewed and adapted the CBU’s liquidity provision and bank intervention frameworks.

“Budget policy has stayed a prudent course so far in 2017, and the consolidated state budget is now projected to reach a surplus of 0.2 percent of GDP. To be consistent with the new exchange rate and monetary policy regime, the 2018 fiscal stance will need to remain tight.

“The mission welcomed the authorities’ determination to work toward improving the quality and transparency of economic statistics. The authorities’ decision to adopt a new CPI to measure inflation, starting in 2018, should already help improve the quality of a key statistical indicator. The mission also welcomed the authorities’ intention to join the IMF’s enhanced General Data Dissemination System (e-GDDS).

“It was tentatively agreed that the next Article IV consultation will take place in fall 2017.

“The mission thanks the authorities for their warm hospitality and constructive discussions.”