Why is this important
The IMF’s recommendations define key benchmarks for further reforms: strengthening the budget base, maintaining price stability, increasing transparency, and reducing the state’s role in the economy. These measures directly affect the business climate, the dynamics of the private sector, and the country’s preparation for WTO accession. The implementation of the IMF recommendations will strengthen macroeconomic stability, improve management efficiency, accelerate the development of the private sector, and prepare the country for accession to the WTO.
What happened
- The International Monetary Fund issued a statement following its mission to Uzbekistan: the fund recommended that the country stop providing new tax benefits, expand its tax base, and increase the share of tax revenues in GDP.
- The mission also assessed the actions of the Central Bank, financial sector reforms, and progress on joining the WTO.
- According to the IMF, the implementation of the medium-term revenue strategy, the Tax Committee reform, and the strategy to combat the shadow economy will help strengthen the budget.
Measures of influence
The main recommendations of the fund were:
- restriction of the provision of new tax benefits;
- implementation of a methodology for measuring tax expenditures and publication of this data in the budget;
- improving the quality of on-site tax audits;
- expansion of the powers of tax authorities while simultaneously protecting the rights of taxpayers.
Financial sector
- The Fund called the Central Bank’s retention of the key interest rate at 14% since March, despite the decrease in inflation, justified. The regulator is advised to maintain a tight monetary policy until inflation stabilizes.
- The IMF also positively assessed the measures taken in April to increase exchange rate flexibility, which contribute to inflation targeting and protect the economy from external shocks.
- Against the backdrop of active economic growth, the IMF calls for accelerating reforms in the financial sector: reducing directive and concessional lending and expanding the Central Bank’s plan for banking supervision, supplementing it with a comprehensive roadmap, taking into account FSAP recommendations and the participation of the Ministry of Finance and other regulators.
- The IMF highly appreciated Uzbekistan’s progress towards joining the WTO (which is planned to be completed by March 2026), as well as the approval of the Law “On Conflicts of Interest” and the promotion of draft laws on the protection of informants and asset declaration.
State enterprises and the private sector
According to the fund’s assessment, the dynamic development of the private sector and the reduction of the state’s role depend on the following measures:
- privatization and restructuring of large state-owned enterprises;
- improvement of corporate governance;
- provision of state support only in the presence of realistic restructuring plans;
- strengthening of competition;
- improvement of the business climate.
Context
- Since 2017, Uzbekistan has been consistently implementing economic liberalization: modernizing the tax system, reforming the state sector, reducing the state’s share in the economy, strengthening oversight in the financial sector, and combating the shadow economy.
- The IMF regularly conducts missions to assess progress and offer updated recommendations that are taken into account when forming medium- and long-term economic policies.
- In the short term, these measures can create additional fiscal discipline and keep inflation under control, while in the long term, they can increase economic stability and improve the investment climate.
