IMF Staff Concludes Virtual Visit to Uzbekistan

IMF News, September 21, 2020

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Mission led by Mr. Ron van Rooden conducted a virtual staff visit to Uzbekistan during August 24–September 17, 2020.
End-of-mission statement conveys preliminary findings of the IMF staff; the mission will not result in a Board discussion.
The IMF stands ready to continue to support Uzbekistan with policy advice, technical assistance, and financial assistance if needed.

The COVID-19 pandemic has hit Uzbekistan hard, adversely affecting people and the economy.
Authorities responded with containment measures and measures to protect lives and livelihoods, including the Anti-Crisis Fund set up at the onset of the crisis.
Fiscal measures highlighted:
- Sizable additional spending on health care and social assistance.
- Support for small businesses, including tax relief.
Monetary measures highlighted:
- The Central Bank of Uzbekistan (CBU) lowered its policy rate from 16 to 14 percent.
- The CBU provided ample liquidity to the banking system and encouraged banks to allow affected sectors to defer loan repayments.

Growth:
- Economic growth has slowed markedly but is still expected to be moderately positive in 2020.
- Growth is expected to pick up to about 5 percent in 2021, provided the pandemic gradually abates in 2021.
- Continued growth notably in the construction sector.
Inflation:
- Inflation is described as "still high at just over 11 percent."
- With a relatively tight monetary policy stance, inflation is expected to decline further toward the CBU’s inflation targets.
Fiscal balance and public debt:
- The consolidated fiscal deficit is projected to increase from about 2½ percent of GDP in 2019 to almost 6 percent of GDP this year.
- Including policy lending, the consolidated deficit is projected to be almost 7½ percent of GDP this year.
- The authorities are committed to gradually bringing the consolidated deficit back to around 2 percent of GDP in the years ahead to keep public debt manageable.
External financing:
- International financial support, including from the IMF, the World Bank, the Asian Development Bank and others, will help cover financing needs arising from the crisis.

Maintain adequate fiscal support in 2021, including support for vulnerable households, while recognizing that stimulus measures can be rolled back gradually as the economy recovers.
Keep the CBU focused on further reducing inflation and safeguarding financial stability.
Ensure firm commitment to medium-term fiscal sustainability to keep public debt manageable.

Continue advancing reforms to achieve stronger, sustainable, and inclusive economic growth and raise living standards.
Specific reform priorities noted:
- Strengthen economic institutions, including enhancing capacity at the Ministry of Economic Development and Poverty Reduction, the Ministry of Finance, and the CBU.
- Reform state-owned banks and state-owned enterprises, including improving their governance.
- Reform the agricultural sector.
- Reduce the role of the state in the economy, open up markets and enhance competition, and improve the business environment.
The crisis underscores the need for further reform progress; implementing reforms is more challenging during the crisis, but authorities have continued to make progress.

Uncertainty is described as "exceptionally large."
Downside risks: an intensification or longer duration of the pandemic would pose large downside risks to the outlook.
Recovery assumptions: the projection that growth will pick up to about 5 percent in 2021 is conditional on the pandemic gradually abating in 2021.

Press Release No. 20/296 — September 21, 2020 — IMF Communications Department