Republic of Uzbekistan:Requests for Disbursement Under the Rapid Credit Facility and Rapid Financing Instrument—Debt Sustainability Analysis
Author:
International Monetary Fund. Middle East and Central Asia Dept.
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Publication Date:
19 May 2020
eISBN:
9781513544786
Language:
English
Keywords:
ISCR; CR; financing; fiscal policy; state; financing needs; State budget law; Uzbekistan's economy; disbursement of SDR; macroeconomic outlook; Credit; Debt sustainability analysis; Government debt management; public debt-to-GDP ratio; Composite Indicator score; risk rating; dynamics equation; change in the public debt-to-GDP ratio; Stress testing; Fiscal stance; market financing
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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

Abstract

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

Based on the Joint Bank-Fund Low-Income Country Debt Sustainability Analysis (LIC-DSA), Uzbekistan has a low risk of external and overall debt distress, which is unchanged from the previous DSA of May 2019, with debt burden indicators below relevant thresholds in the baseline and under most stress scenarios. The debt sustainability analysis suggests that the most significant risks could result from worse-than-expected external flows (mostly lower remittances) and significantly lower exports. The risks have increased relative to the 2019 DSA as result of the COVID-19 pandemic and the increase in government guarantees for state-owned enterprises (SOEs) in 2019. The COVID-19 outbreak exacerbates the risk of weaker exports and remittances, higher primary deficits, and also the risk of the government having to pay for SOEs’ nonguaranteed debt service in case of a prolonged slowdown.

Over the medium term, the public debt-to-GDP ratio is expected to increase moderately, while the total external debt-to-GDP ratio is expected to decline moderately. In addition, foreign exchange reserve buffers and low rollover risk—due to the long-term maturity of debt—mitigate potential distress concerns. In the aftermath of the COVID-19 outbreak, the government should carefully manage external borrowing to maintain Uzbekistan’s strong external position.

Uzbekistan: Joint Bank-Fund Debt Sustainability Analysis 1/

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Debt coverage is the same as the 2019 DSA, which includes central government, state and local governments, extra-budgetary funds , social security, and SOEs ‘ guaranteed debt. No n-guaranteed debt of SOEs is not covered in the DSA due to data limitations. Non-guaranteed debt of SOEs accounts for about 7 percent of GDP. The authorities are working to improve statistics with technical support from the IMF.

Uzbekistan’s Composite Indicator score is 3.21 based on October 2109 WEO and CPIA 2018 and its debt carrying capacity is strong as in the 2019 DSA.

Including World Bank budget support. The World Bank is supporting the Government’s response to the COVID crisis through emergency project ($95 million) and budget financing (up to $700 million) to increase health and social spending, and through the reprioritization within existing approved projects to support the economic recovery once the virus has been contained.

This was driven by a large investment specific project and faster reforms that accelerated IFIs disbursements.

Table 1.

Uzbekistan: External Debt Sustainability Framework, Baseline Scenario, 2020–40

(In percent of GDP, unless otherwise indicated)

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Sources: Country authorities; and staff estimates and projections. 1/ Includes both public and private sector external debt. 2/ Derived as [r – g – ρ(1 + g) + Ɛα (1 + r)]/(1 +g + ρ+gρ) times previous period debt ratio, with r – nominal interest rate; g – real GDP growth rate, ρ – growth rate of GDP deflator in U.S. dollar terms, Ɛ=nominal appreciation of the local currency, and α= share of local currency-denominated external debt in total external debt. 3/ Includes exceptional financing (i.e., changes in arrears and debt relief); changes in gross foreign assets; and valuation adjustments. For projections also includes contribution from price and exchange rate changes. 4/ Current-year interest payments divided by previous period debt stock 5/ Defined as grants, concessional loans, and debt relief. 6/ Grant-equivalent financing includes grants provided directly to the government and through new borrowing (difference between the face value and the PV of new debt). 7/ Assumes that PV of private sector debt is equivalent to its face value. 8/ Historical averages are generally derived over the past 10 years, subject to data availability whereas projections averages are over the first year of projection and the next 10 years. 9/ Residual in 2019 is a result of large errors and ommisions, reserve accumulation, and other outflows (mostly households’ FX accumulation), while the residual in 2020 is attributed to the use of reserves finance external financing needs.
Figure 1.
Figure 1.

Uzbekistan: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2020–30

(In percent)

Citation: IMF Staff Country Reports 2020, 171; 10.5089/9781513544786.002.A002

Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. Stress tests with one-off breaches are also presented (if any), while these one-off breaches are deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.2/ The magnitude of shocks used for the commodity price shock stress test are based on the commodity prices outlook prepared by the IMF research department.
Table 2.

Uzbekistan: Public Sector Debt Sustainability Framework, Baseline Scenario, 2020–40

(In percent of GDP, unless otherwise indicated)

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Sources: Country authorities; and staff estimates and projections. 1/ Coverage of debt: The general government, and government-guaranteed debt. Definition of external debt is Residency-based. 2/ The underlying PV of external debt-to-GDP ratio under the public DSA differs from the external DSA with the size of differences depending on exchange rates projections. 3/ Debt service is defined as the sum of interest and amortization of medium and long-term, and short-term debt. 4/ Gross financing need is defined as the primary deficit plus debt service plus the stock of short-term debt at the end of the last period and other debt creating/reducing flows. 5/ Defined as a primary deficit minus a change in the public debt-to-GDP ratio ((-): a primary surplus), which would stabilizes the debt ratio only in the year in question. 6/ Historical averages are generally derived over the past 10 years, subject to data availability, whereas projections averages are over the first year of projection and the next 10 years.
Figure 2.
Figure 2.

Uzbekistan: Indicators of Public Debt, 2020–30

(In percent)

Citation: IMF Staff Country Reports 2020, 171; 10.5089/9781513544786.002.A002

Sources: Country authorities; and staff estimates and projections.1/ The most extreme stress test is the test that yields the highest ratio in or before 2030. The stress test with a one-off breach is also presented (if any), while the one-off breach is deemed away for mechanical signals. When a stress test with a one-off breach happens to be the most exterme shock even after disregarding the one-off breach, only that stress test (with a one-off breach) would be presented.
Table 3.

Uzbekistan: Sensitivity Analysis for Key Indicators of PPG External Debt, 2020–30

(In percent)

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Sources: Country authorities; and staff estimates and projections.

A bold value indicates a breach of the threshold.

Variables include real GDP growth, GDP deflator (in U.S. dollar terms), non-interest current account in percent of GDP, and non-debt creating flows .

Includes official and private transfers and FDI.

Table 4.

Uzbekistan: Sensitivity Analysis for Key Indicators of Public Debt, 2020–30

(In percent)

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Sources: Country authorities; and staff estimates and projections.

A bold value indicates a breach of the benchmark.

Variables include real GDP growth, GDP deflator and primary deficit in percent of GDP.

Includes official and private transfers and FDI.

Figure 3.
Figure 3.

Uzbekistan: Drivers of Debt Dynamics – Baseline Scenario

Citation: IMF Staff Country Reports 2020, 171; 10.5089/9781513544786.002.A002

1/ Dfference between anticipated and actual contributions on debt ratios.2/ Dstribution across LICs for which LIC DSAs were produced.3/ Given the relatively low prN/ate external debt for average low-income countries, a ppt change in PPG external debt should be largely explained by the drivers of the external debt dynamics equation.Source: IMF staff estimates.
Figure 4.
Figure 4.

Uzbekistan: Realism Tools

Citation: IMF Staff Country Reports 2020, 171; 10.5089/9781513544786.002.A002

Source: IMF staff estimates.
1

This joint World Bank/IMF Debt Sustainability Analysis (DSA) has been prepared in the context of the 2020 request for emergency financing from the IMF. The macro framework underlying this DSA is the same as that included in the staff report of the 2020 RCF and RFI request which reflects recent global and domestic developments. The current macroeconomic framework reflects currently available information. However, up d ates with respect to the economic impact and policy response to the COVID-19 crisis are rapidly evolving and risks are tilted to the downside.

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Cover IMF Staff Country Reports
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
Author:
International Monetary Fund. Middle East and Central Asia Dept.
Volume/Issue:
Volume 2020: Issue 171
Publisher:
International Monetary Fund
ISBN:
9781513544786
ISSN:
1934-7685
Pages:
46
DOI:
https://doi.org/10.5089/9781513544786.002
  • Figure 1.
    View in gallery
    Figure 1.

    Uzbekistan: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2020–30

    (In percent)

  • Figure 2.
    View in gallery
    Figure 2.

    Uzbekistan: Indicators of Public Debt, 2020–30

    (In percent)

  • Figure 3.
    View in gallery
    Figure 3.

    Uzbekistan: Drivers of Debt Dynamics – Baseline Scenario

  • Figure 4.
    View in gallery
    Figure 4.

    Uzbekistan: Realism Tools

Figure 1.

Uzbekistan: Indicators of Public and Publicly Guaranteed External Debt Under Alternative Scenarios, 2020–30

(In percent)
Figure 2.

Uzbekistan: Indicators of Public Debt, 2020–30

(In percent)
Figure 3.

Uzbekistan: Drivers of Debt Dynamics – Baseline Scenario
Figure 4.

Uzbekistan: Realism Tools