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Statement at the Conclusion of the 2012 Article IV Consultation Mission to Uzbekistan

7 December 2012

Statement at the Conclusion of the 2012 Article IV Consultation Mission to Uzbekistan


Press Release No. 12/475
December 7, 2012

An International Monetary Fund mission led by Mrs. Veronica Bacalu, Deputy Division Chief in the IMF Middle East and Central Asia Department, visited Tashkent on November 28−December 7, 2012 to conduct discussions in the context of the Article IV consultation.1 Daniela Gressani, Deputy Director of the Middle East and Central Asia Department, participated in the discussions at the beginning of the mission.

The IMF team and the Uzbek authorities discussed recent economic developments, exchanged views on the near and medium-term outlook, as well as the impact of global slowdown on the economy of Uzbekistan.

At the conclusion of the mission, Mrs. Bacalu issued the following statement:

“The economy of Uzbekistan continues to grow rapidly. Strong fiscal and external positions, stable banking system, low public debt, and prudent external borrowing have shielded the country from the adverse impact of the global crisis. GDP grew by 8.3 percent in 2011 and by 8.2 percent through September 2012, boosted by high prices of major export commodities, and policies focused on domestic consumption and state-led investment. Growth has been led by services, transport and communication, agriculture, and industry. The external position remains strong and the current account is in surplus despite the recent drop in gold exports.

“Monetary policy has been tightened considerably since mid-2011. An increase in net foreign assets was sterilized through the accumulation of government deposits, including in the Fund for Reconstruction and Development, and intensified liquidity-mopping operations by the Central Bank of Uzbekistan.

“The banking system of Uzbekistan continues to perform well. Banks’ capital adequacy ratio remains high by international standards.

“After peaking at 13.8 percent in November 2011, annual inflation, based on alternative CPI measurement by Fund staff, has declined to 10.7 percent in October 2012.2 The inflation rate reflects increases in administrative prices of fuel, utilities, and bread, which rightly aim at achieving cost recovery, as well as currency depreciation and demand pressures stemming from pension and wage increases.

“The mission expects GDP to grow by 8 percent in 2012 with strong economic growth projected over the medium term. Growth will continue to be supported by policies to boost domestic consumption and investment under the government’s industrialization program. External and fiscal positions are expected to stay strong.

“Accelerating structural reforms would help increase productivity and ensure sustainable and inclusive growth. Initiatives undertaken in 2012 to improve business environment and facilitate private sector development are welcome and should be implemented vigorously.

“Going forward, the mission recommended the authorities to focus on lowering inflation and to ensure sustainable and inclusive growth over the longer term. The mission advised keeping tight monetary policy while pursuing a more flexible exchange rate. Materialization of downside global risks would warrant less tightening. In addition, the recommended policies include: avoiding fiscal loosening; undertaking measures to further deepen financial sector intermediation; accelerating reforms, particularly in the system of foreign exchange and foreign trade regulations, in tax administration, public finance management and governance; and improving the quality and dissemination of economic data.

“The mission underlines that the Fund staff stands ready to assist Uzbekistan in its reform efforts, including through technical assistance.

“The mission is grateful to the authorities and other counterparts for their hospitality and constructive dialogue.”

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

2 By the authorities’ methodology, annual inflation hovered at around 7 percent during this period.