IMF Staff Concludes Staff Visit to Uzbekistan
IMF News, December 21, 2023
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Bibliographic details
- Published: December 21, 2023
Mission overview
- IMF staff team led by Mr. Yasser Abdih met with Uzbek authorities during December 11–19, 2023.
- End-of-mission statement conveys preliminary findings of IMF staff; views are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.
Key findings on growth and outlook
- Uzbekistan’s economy has demonstrated remarkable resilience to recent global challenges.
- Real GDP growth:
- 2022: 5.7 percent (driven by remittance inflows in 2022 and higher external demand)
- 2023: expected to sustain at 5.7 percent (sizable fiscal expansion, high wage and export growth)
- Remittances:
- Large increase in 2022; remittances have fallen in 2023 toward pre-war-in-Ukraine trend.
- External current account:
- Strong imports and declining remittances contribute to a higher external current account deficit in 2023.
- International reserves:
- Expected to remain ample at eight- and one-half months of prospective imports.
- Inflation:
- By end-2023, the 12-month inflation rate is projected to decline by more than 3 percentage points—compared to the same period last year—to 9 percent, helped by a high real policy rate, a value-added tax rate cut, and lower international food and energy prices.
- Outlook for 2024:
- Remains positive but risks remain.
- Despite needed fiscal consolidation, growth is projected to remain above 5 percent.
- External current account deficit projected to increase modestly as gold exports decline to trend levels offsetting slower import growth related to public spending restraint.
Risks
- External risks:
- Possible deterioration of growth in key trading partners (notably China and Russia).
- Further tightening of external financial conditions.
- Domestic risks:
- Contingent liabilities from state-owned financial and non-financial enterprises (SOEs) and public-private partnerships (PPPs).
Fiscal policy recommendations
- Fiscal policy needs to return to a consolidation path after the expansionary stance in 2023.
- Staff’s estimate of the consolidated fiscal deficit (national definition):
- Expected to reach 5.5 percent of GDP in 2023, exceeding the 3 percent of GDP budget target due to additional wage hikes and higher social benefits, energy subsidies, and policy lending.
- Government aims:
- Reduce consolidated deficit to 4 percent of GDP in 2024 and 3 percent in 2025.
- Recommended measures to achieve consolidation:
- Better targeting of social benefits.
- Cutting policy lending.
- Reducing untargeted energy subsidies while protecting the vulnerable by introducing a social consumption norm.
- Removal of tax exemptions and efforts to reduce the shadow economy.
- Budget planning improvements:
- Strictly adhere to the budget calendar.
- Unify the investment budget irrespective of the financing source and prepare it together with the recurrent budget.
- Limit the frequency of within-year changes.
- Improve measurement and management of fiscal risks, especially from SOEs and PPPs.
Monetary policy and financial sector recommendations
- Monetary policy:
- Should remain tight to continue to reduce inflation.
- Needed increases in administered energy prices are expected to raise inflation, partly offset by tight monetary policy and sizable fiscal consolidation.
- Staff welcomes the commitment of the Central Bank of Uzbekistan (CBU) to keep monetary policy relatively tight until inflation decelerates clearly toward the target and to raise the policy rate if core inflation surprises to the upside.
- Continue efforts to strengthen monetary policy transmission, constrained by low financial intermediation, high dollarization, and sizable policy lending.
- Exchange rate flexibility is important to absorb potential shocks and safeguard reserves.
- Financial sector:
- Credit growth remains high despite tight monetary policy, particularly for car loans, microcredit, and mortgages.
- CBU measures: tightened loan-to-value ratios and introduced concentration limits for banks.
- Additional supervisory and macroprudential measures recommended to ensure banks assess borrower creditworthiness and limit risk of declining asset quality.
- Continued efforts needed to bolster corporate governance and transparency of state banks and further reduce policy lending to facilitate bank privatization, level the playing field, deepen financial intermediation, and improve access to financial services.
Structural reform priorities
- Achievements noted:
- Improved transparency of public procurement.
- Strengthened reporting and management of SOEs.
- Privatized a large bank and several state enterprises.
- Increase in energy prices for businesses implemented.
- Law on Competition became effective in October 2023.
- Reforms announced in September and October 2023: creation of an independent energy regulator, unbundling of the railway sector, and measures adopted towards addressing climate change.
- Further recommended measures:
- Increase energy prices to at least cost recovery levels.
- Enhance governance and transparency (including for SOEs).
- Further restructure and privatize state enterprises.
- Strengthen competition policies to reduce the state’s role in the economy.
- Accelerate World Trade Organization negotiations and cooperate with neighboring countries to improve transport routes to reduce transportation costs and open new markets.
Selected Economic Indicators, 2020–24 (as reported)
- National income
- Real GDP growth (percent change): 2020: 2.0; 2021: 7.4; 2022: 5.7; 2023: 5.2; 2024: (Proj.)
- Nominal GDP (in trillions of Sum): 2020: 606; 2021: 738; 2022: 897; 2023: 1,063; 2024: 1,230
- GDP per capita (in U.S. dollars): 2020: 1,776; 2021: 2,014; 2022: 2,301; 2023: 2,499; 2024: 2,668
- Population (in millions): 2020: 33.9; 2021: 34.6; 2022: 35.3; 2023: 36.0; 2024: 36.7
- Prices (Percent change)
- Consumer price inflation (end of period) 1/: 2020: 11.2; 2021: 10.0; 2022: 12.3; 2023: 9.0; 2024: 11.0
- GDP deflator: 2020: 11.4; 2021: 13.5; 2022: 14.9; 2023: 12.1
- External sector (Percent of GDP)
- Current account balance: 2020: -5.0; 2021: -7.0; 2022: -0.8; 2023: -4.7; 2024: -5.2
- External debt: 2020: 56.8; 2021: 57.8; 2022: 53.1; 2023: 53.3; 2024: 51.4
- Exchange rate (in sums per U.S. dollar; end of period): 2020: 10,477; 2021: 10,838; 2022: 11,225; 2023: …
- Real effective exchange rate (ave, 2015 =100, decline = depreciation): 2020: 65.5; 2021: 65.3; 2022: 61.6
- Government finance
- Consolidated budget revenues: 2020: 26.4; 2021: 27.7; 2022: 32.0; 2023: 31.4; 2024: 32.1
- Consolidated budget expenditures: 2020: 30.8; 2021: 33.2; 2022: 35.9; 2023: 36.9; 2024: 36.1
- Consolidated budget balance: 2020: -4.4; 2021: -5.5; 2022: -3.9; 2023: -4.0
- Adjusted revenues 2/: 2020: 25.5; 2021: 25.9; 2022: 30.5; 2023: 30.3; 2024: 30.3
- Adjusted expenditures 2/: 2020: 28.7; 2021: 34.7; 2022: 34.9; 2023: 34.1
- Adjusted fiscal balance: 2020: -3.3; 2021: -4.6; 2022: -4.2; 2023: -3.6
- Policy-based lending: 2020: 1.1; 2021: 1.5; 2022: -0.1; 2023: 1.2; 2024: 0.6
- Overall fiscal balance 2/: 2020: -6.0; 2021: -4.1; 2022: -5.8
- Public debt: 2020: 37.1; 2021: 35.8; 2022: 34.8
- Money and credit
- Reserve money: 2020: 15.4; 2021: 28.3; 2022: 5.5; 2023: 7.8
- Broad money: 2020: 17.7; 2021: 29.7; 2022: 30.2; 2023: 18.5; 2024: 22.4
- Credit to the economy: 2020: 34.4; 2021: 18.4; 2022: 21.4; 2023: 23.3; 2024: 16.5
IMF Staff Concludes Staff Visit to Uzbekistan, Press Release No. 23/472 (December 21, 2023).