Central Bank of Uzbekistan steps up reserve diversification with large US bond investment

The Central Bank of Uzbekistan purchased more than $500 million worth of US bonds in November, according to data released by the regulator.

As of December 1, Uzbekistan’s foreign exchange and gold reserves held securities worth $1.52 billion. Compared with the previous month, their volume increased by $503.3 million, and since the beginning of this year it has grown fifteenfold.

As a result, the share of securities in the regulator’s official reserves rose from 1.72% to 2.49%.

In late November, Deputy Chairman of the Central Bank of Uzbekistan Abrormirzo Olimov announced plans for further diversification of the country’s foreign exchange and gold reserves. In particular, the regulator intends to invest in “a broader range of fixed-income instruments”.

These include sovereign bonds, bonds of supranational organizations, derivatives, and other high-quality securities. All financial instruments must have a credit rating of at least “A”.

“We started [diversifying the reserves] with fixed-income US Treasury bonds, as they are traditionally considered risk-free assets. But there are other instruments as well – corporate bonds and securities of international financial institutions. To begin investing in such types of bonds, we need to complete the integration of the IT automation system,” the Deputy Chairman noted.

According to him, with the support of the World Bank’s RAMP program, a request for proposals (RFP) was developed for the implementation of asset management software solutions. “Once we complete the RFP, we will be able to invest in other assets,” Olimov concluded.

In May 2024, the Central Bank for the first time in its history invested $35 million in foreign government securities. With the support of the World Bank, an investment portfolio was formed to diversify the reserves. In October, the regulator purchased US Treasury bonds worth $65 million, and by the end of last year their total volume exceeded $101 million.

In January, Deputy Chairman Abrormirzo Olimov said that the Central Bank planned to continue purchasing US government bonds. To diversify the country’s foreign exchange and gold reserves, the regulator will invest in risk-free assets, while ruling out the possibility of buying cryptocurrencies.

In September, the Central Bank allowed the purchase of bonds from developed countries in addition to US securities. Sanjar Valiev, head of the Department for International Reserves Management, told Spot that the regulator may consider acquiring only government bonds, not shares of foreign companies.