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IMF Country Report No. 20/171

REPUBLIC OF UZBEKISTAN

REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE DIRECTOR FOR THE REPUBLIC OF UZBEKISTAN

May 2020

In the context of requests for disbursement under the Rapid Credit Facility and purchase under the Rapid Financing Instrument for the Republic of Uzbekistan, the following documents have been released and are included in this package:

  • A Press Release including a statement by the Chair of the Executive Board.

  • The Staff Report prepared by a staff team of the IMF for the Executive Board’s consideration on May 18, 2020, following discussions that ended on April 30, 2020, with the officials of the Republic of Uzbekistan on economic developments and policies underpinning the IMF arrangement under the Rapid Credit Facility and Rapid Financing Instrument. Based on information available at the time of these discussions, the staff report was completed on May 12, 2020.

  • A Debt Sustainability Analysis prepared by the staffs of the IMF and the International Development Association.

  • A Statement by the Executive Director for the Republic of Uzbekistan.

The IMF’s transparency policy allows for the deletion of market-sensitive information and premature disclosure of the authorities’ policy intentions in published staff reports and other documents.

Copies of this report are available to the public from

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© 2020 International Monetary Fund

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REPUBLIC OF UZBEKISTAN

REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND PURCHASE UNDER THE RAPID FINANCING INSTRUMENT

May 12, 2020

Executive Summary

Context. The COVID-19 pandemic has severely impacted Uzbekistan. Growth is projected to slow to 1.5 percent in 2020, while lower exports and remittances are expected to widen the current account deficit to almost 10 percent of GDP. Addressing the external shock and the domestic impact of COVID-19 is expected to require additional external financing of about US$ 4 billion (7 percent of GDP). At the same time, weaker than expected revenues and additional crisis-related expenditures are expected to widen the fiscal deficit from near balance to about 4 percent of GDP. Uncertainty about the severity and length of the global downturn and the impact on Uzbekistan’s economy is large.

Financial Assistance. Uzbekistan’s authorities have requested financial assistance under the RCF and RFI to cope with the impact of the COVID-19 pandemic and partly cover immediate external financing needs. The RCF and RFI funds will be used for budget support, to finance spending for healthcare, and to support vulnerable households and firms. Uzbekistan is a presumed blender based on income criteria. Staff assesses that Uzbekistan meets the eligibility requirements for an RCF and an RFI and supports the request for a disbursement of 50 percent of quota (SDR 275.6 million or about US$ 375 million), which along with the use of international reserves and financing from other IFIs should be sufficient to address urgent balance of payments and fiscal financing needs. Financing would comprise a disbursement of 16.7 percent of quota under the RCF and a purchase of 33.3 percent of quota under the RFI. The authorities are committed to transparency and accountability and have provided assurances on effective use of resources through appropriate reporting, monitoring, and auditing.

Policies. The authorities’ policies aim at mitigating the economic and social impact of the crisis, including by temporarily relaxing fiscal and financial policies to absorb the shock, and supporting an economic recovery, while maintaining macroeconomic and financial stability. A temporary increase in the fiscal deficit to accommodate emergency spending on healthcare and social support and to allow automatic stabilizers to work is appropriate. Over the medium-term, Uzbekistan will pursue fiscal consolidation and continue tax and public financial management reforms. The Central Bank of Uzbekistan (CBU) will continue to ensure exchange rate flexibility to deal with external shocks and limit foreign exchange intervention to avoid disorderly market conditions. Monetary policy will aim to ensure that inflation remains on a downward path in line with CBU targets. The CBU will provide appropriate liquidity support to the financial system and has room to relax capital conservation and liquidity buffers if needed.

Risk of debt distress. Low

Capacity to repay the Fund. Adequate

Approved By

Thanos Arvanitis, Chris Lane

Discussions with the authorities were held remotely during April 27–30, 2020. The staff team comprised L. Dwight (head), E. Cabezon (MCD), and G. Kostina (head of local office), with support from A. Yaaqoubi, L. Nigmatullina, and G. Gedrimaite.

Contents

  • CONTEXT

  • IMPACT OF THE SHOCK, OUTLOOK, AND RISKS

  • POLICY DISCUSSIONS

  • A. Fiscal Policy

  • B. Monetary and Exchange Rate Policy

  • C. Financial Sector Policy

  • D. Structural Agenda

  • MODALITIES, ACCESS, CAPACITY TO REPAY, AND SAFEGUARDS

  • STAFF APPRAISAL

  • FIGURES

  • 1. Inflation and Monetary Policy

  • 2. External Sector

  • TABLES

  • 1. Selected Economic Indicators, 2017–2025

  • 2. National Accounts, 2017–2025

  • 3a. Balance of Payments, 2017–2025 (millions of US dollars)

  • 3b. Balance of Payments, 2017–2025 (percent of GDP)

  • 4a. General Government, 2017–2025 (billions of Som)

  • 4b. General Government, 2017–2025 (percent of GDP)

  • 5. Central Bank Survey, 2017–2025 (billions of Som)

  • 6. Monetary Survey, 2017–2025 (billions of Som)

  • 7. Financial Sector Indicators, 2015-present

  • 8. External Financing Requirements, 2017–2022 (millions of US dollars)

  • 9. Projected Payments and Capacity to Repay the Fund (millions of SDRs)

  • APPENDIX

  • I. Letter of Intent

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REPUBLIC OF UZBEKISTAN

REQUESTS FOR DISBURSEMENT UNDER THE RAPID CREDIT FACILITY AND RAPID FINANCING INSTRUMENT—DEBT SUSTAINABILITY ANALYSIS1

May 12, 2020

Approved By

Thanos Arvanitis, Chris Lane (IMF) and Marcello Estevão (IDA)

Prepared by the International Monetary Fund and the International Development Association