IMF Mission Completes Staff Visit to Uzbekistan
IMF News, September 30, 2024
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Bibliographic details
- Published: September 30, 2024
Mission scope and headline judgment
- IMF staff team led by Mr. Yasser Abdih met with Uzbekistan’s authorities from September 16 to 24, 2024.
- End-of-Mission press releases convey preliminary findings after a visit; the 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.
- Headline: Uzbekistan’s economic performance remains strong; the outlook is positive, with both risks and opportunities. Safeguarding macro-financial stability and continuing structural reforms are essential to sustain strong growth, rebuild buffers, and guard against external shocks.
Near-term macroeconomic developments and outlook
- Growth and output:
- Real GDP grew by 6.4 percent year-over-year (y/y) in the first half of 2024.
- Real GDP growth is expected to remain strong at above 5.5 percent this year and next, supported by continued robust investment and structural reforms.
- Inflation:
- Headline CPI inflation rose from 8 percent y/y at end-April to about 10.5 percent in recent months, reflecting needed increases in administered energy prices in early May.
- Core CPI inflation increased by about one percentage point since June 2024 to 7 percent in August.
- Staff projects CPI inflation to start gradually declining, reflecting tight monetary and fiscal policies and the fading effects of energy price increases.
- Monetary policy recommendation: maintain tight monetary policy until data clearly suggest a lasting decline in inflation towards the CBU target of 5 percent; stand ready to raise the policy rate if inflation surprises to the upside.
- External sector and reserves:
- Remittances grew by 32 percent y/y in the first seven months of 2024.
- International reserves stood at 9.5 months of next year’s imports by end-August.
- Current account deficit forecast: about 6¼ percent of GDP in 2024 and 6.1 percent in 2025, helped by strong exports and remittances, reversal of large one-off machinery and equipment imports in 2023, and fiscal consolidation.
- Risks and opportunities:
- Risks: regional geoeconomic challenges, commodity price volatility, an unexpected global slowdown, contingent liabilities from state-owned enterprises or public-private partnerships (PPPs), uncertain second-round effects of the May 2024 energy price increases, and wage increases in September-October 2024.
- Opportunities: stronger financial and remittance flows and higher gold prices.
Fiscal policy, public financial management, and fiscal risks
- Fiscal consolidation:
- 2024 and 2025 consolidated fiscal deficit targets of 4.0 and 3 percent of GDP, respectively, are expected to be achieved as authorities rationalize expenditure—particularly energy subsidies while protecting the vulnerable—improve targeting of social spending, and reduce policy lending.
- Despite high gold prices and rapid economic growth, the revenue-to-GDP ratio is projected to decline due to lackluster performance of VAT and non-gold corporate tax revenue.
- Policy recommendation: revisit tax incentives that attract investment to reduce their adverse impact on the tax base over time; strengthen the powers of the tax administration to enforce the tax code (especially to conduct effective on-site tax audits), with appropriate safeguards to protect taxpayer rights.
- Public financial management (PFM) reforms:
- Government resumed publication of a fiscal strategy statement and drafted a PFM reform strategy for 2025-2030, expected to be approved by November 2024.
- PFM strategy objectives: strengthen medium-term budget planning and strategic prioritization, improve spending efficiency and public investment management, and enhance budget execution and the quality of fiscal reports.
- Government published a comprehensive statement of fiscal risks and made progress towards defining a cap on PPPs.
- Policy recommendation: introduce a legally binding annual cap on the investment value of all projects signed under the PPP and Investment laws in appropriate legislation to be effective January 1, 2025, to allow time for PFM work to be finalized and contain fiscal risks from a growing PPP pipeline.
Financial sector and structural reforms
- Financial sector:
- Recommendation: bring bank supervision in line with international standards.
- Authorities decided to undergo a comprehensive IMF-World Bank Financial Sector Assessment Program (FSAP) in 2025.
- Staff recommends continuing to phase out policy lending to improve credit allocation efficiency and increase credit availability to the private sector.
- Structural reforms and state-owned enterprises:
- Progress: privatization of Ipoteka Bank in 2023; authorities on track to privatize two large state banks, SQB and Asakabank.
- Recommendations: continue restructuring and enhancing governance of state banks and enterprises, enhance competition by leveling the playing field for private and public enterprises, and eliminate barriers to entry.
- WTO accession progress: completed bilateral market accession negotiations with 18 out of 33 members and aligning regulations with WTO standards.
- Governance reforms: passage of the conflict-of-interest law and training for implementation in December this year; whistleblower protection law advancing; work on asset declaration law continues.
Selected Economic Indicators, 2023–25 (as reported)
- National income:
- Real GDP growth (percent change): 2023: 6.3; 2024 Est: 5.6; 2025 Proj: 5.7
- Nominal GDP (in trillions of Sum): 2023: 1,192; 2024 Est: 1,421; 2025 Proj: 1,679
- GDP per capita (in U.S. dollars): 2023: 2,820; 2024 Est: 3,051; 2025 Proj: 3,379
- Population (in millions): 2023: 36.0; 2024 Est: 36.9; 2025 Proj: 37.7
- Prices (annual percent change):
- Consumer price inflation (end of period): 2023: 8.8; 2024 Est: 10.4; 2025 Proj: 7.9
- GDP deflator: 2023: 12.7; 2024 Est: 12.9; 2025 Proj: 11.8
- External sector (percent of GDP):
- Current account balance: 2023: -7.7; 2024 Est: -6.3; 2025 Proj: -6.1
- External debt: 2023: 54.8; 2024 Est: 56.9; 2025 Proj: 55.6
- Exchange rate (in sums per U.S. dollar; end of period): 2023: 12,339; 2024: …
- Real effective exchange rate (ave 2015=100, decline = depreciation): 2023: 58.6
- Government finance:
- Consolidated budget revenues: 2023: 27.0; 2024 Est: 26.6; 2025 Proj: 26.0
- Consolidated budget expenditures: 2023: 31.9; 2024 Est: 30.6; 2025 Proj: 28.9
- Consolidated budget balance: 2023: -4.9; 2024 Est: -4.0; 2025 Proj: -3.0
- Adjusted revenues 1/: 2023: 26.2; 2024 Est: 25.2; 2025 Proj: 24.7
- Adjusted expenditures 1/: 2023: 30.2; 2024 Est: 28.7; 2025 Proj: 27.3
- Adjusted fiscal balance: 2023: -3.5; 2024 Est: -2.5
- Policy-based lending: 2023: 0.9; 2024 Est: 0.5
- Overall fiscal balance: (not separately quantified in table)
- Public debt: 2023: 32.5; 2024 Est: 34.3; 2025 Proj: 32.8
- Money and credit:
- Reserve money: 2023: 4.9; 2024 Est: 7.8; 2025 Proj: 8.2
- Broad money: 2023: 12.2; 2024 Est: 20.3; 2025 Proj: 18.1
- Credit to the economy: 2023: 23.2; 2024 Est: 16.7; 2025 Proj: 18.2
Press Release No. 24/351 — IMF Mission Completes Staff Visit to Uzbekistan, September 30, 2024.