Uzbekistan’s public debt decreased in relation to GDP

74.8% of the foreign currency portfolio of the state foreign debt portfolio is in US dollars, 8.2% is in Japanese yen, 7.7% is in SDR (special drawing rights), 4.7% – in euro, 1.8% – in Uzbek soum. 2.8% – the contribution of external debt in other currencies.

In general, 2 factors may have influenced the reduction of Uzbekistan’s foreign debt in the first III quarters. First, the first half of the year is usually a period of debt repayment, and external borrowing is not actively carried out. The debt to cover the budget deficit is also attracted in most cases in the IV quarter.

Secondly, against the backdrop of the global inflationary situation, the tightening policy of the FRT and the European Central Bank and the increase in interest rates have sharply increased the cost of debt and capital in international markets. This is not a positive situation for developing countries like Uzbekistan and makes it difficult to attract foreign debt.

“Due to global instability, the cost of borrowing in the world has increased, and the financial buffer of Uzbekistan has become limited. The budget deficit is increasing. The current situation requires focusing on inflation, reducing budget expenditures and attracting more private funds,” the Finance Minister Timur Ishmetov said.

According to the latest World Bank (WB) forecasts, the Uzbek government is expected to continue to adhere to its borrowing restrictions. Public debt and total external debt may gradually decrease to 32 and 55 percent of GDP by the end of 2024, respectively.

Earlier, the Minister of Finance gave information about the 2023 state budget draft in the Legislative Chamber.

“By the end of 2022, the state debt is expected to be 29 billion 215 million dollars, and next year (2023) it is expected to be 32 billion 62 million dollars. It is forecasted that the share of foreign debt in GDP will be 36 percent next year, as well as this year,” Ishmetov said.

In 2023, the total value of signed agreements on attracting foreign debt on behalf and under the guarantee of Uzbekistan will amount to $4.5 billion, of which $2 billion will be used to support the state budget, budget deficit (this is less by $500 billion than last year), 2.5 billion dollars (which is more by 500 million dollars than last year) will be attracted for financing investment projects.

According to the law “On State Debt”, the maximum amount of the state debt should not exceed 60% of the GDP. However, the 60% standard is only a recommendation given by international financial organizations and is not based on accurate and serious calculations.

As of October 1 of this year, the state debt of Uzbekistan was $26.2 billion. During the first 3rd quarter, due to global inflation, the increase in interest rates in the world limited the active borrowing of the government of Uzbekistan, as in previous years. Nevertheless, in the last quarter, a large amount of debt funds were attracted to cover the budget deficit, and by the end of the year, the total state debt of Uzbekistan may have increased to $29.2 billion.