IMF recommends budget spending caps and tax reforms for Uzbekistan

To maintain economic balance, the IMF recommended that the Uzbek government minimize spending increases beyond the levels established in the annual budget. Experts noted that while gold prices might lead to higher than expected revenues, these gains should not trigger extra–budgetary spending. Regarding potential economic shocks from Middle Eastern instability, the IMF advised against universal subsidies and price regulations, which are often costly and difficult to reverse. Instead, any support measures should be temporary and strictly targeted toward vulnerable populations.

A significant portion of the recommendations focused on reforming the national tax policy to meet the growing needs of the population in education, healthcare, and infrastructure. The IMF urged authorities to reverse the declining trend of the tax–to–GDP ratio observed since 2020. Specifically, the fund called for an increase in excise tax rates on certain goods and the gradual elimination of corporate tax exemptions, such as tax holidays and preferential rates. The mission also suggested removing non–legislated customs duty exemptions and preventing the further issuance of new profit tax incentives.

Starting with the 2027 budget, the IMF staff proposed the introduction of a nominal primary deficit limit that excludes mineral resource revenues. This mechanism is intended to help the government manage the volatility of income derived from the mining sector more effectively, serving as a supplement to the current overall budget deficit target of 3%.

The fund also highlighted the importance of strengthening revenue administration through the implementation of tax and customs reform strategies for the 2025–2030 period. To support businesses, the IMF recommended ensuring the prompt and automatic refund of Value Added Tax (VAT) by using a new risk–based assessment system for electronic invoices. This approach would prevent the accumulation of refund arrears while maintaining rigorous oversight.

Finally, the IMF welcomed recent progress in debt management and the publication of fiscal statistics according to international standards. However, it pointed out areas for further improvement, such as increasing automation within the Treasury to allow for more timely budget execution reporting. To enhance transparency, the fund suggested that data regarding tax expenditures – the cost of various tax breaks – should be published alongside the annual budget. Strengthening the oversight of public–private partnerships (PPPs) and standardizing contract terms were also identified as essential steps to reduce future fiscal risks.

The International Monetary Fund (IMF) has released a staff mission statement providing a comprehensive set of recommendations to ensure the long–term fiscal stability of Uzbekistan. While praising the reduction of the budget deficit in 2025, the fund emphasized the need for cautious fiscal management in 2026 to mitigate inflationary pressures caused by high domestic demand, elevated oil prices, and global trade disruptions.