The International Monetary Fund has released another press release following its mission in Uzbekistan, which took place from September 16 to 24.

This year, the IMF expects the country's economy to grow by 5.6% due to sustained active investment rates and ongoing structural reforms. According to forecasts, inflation is anticipated to decrease in response to the necessary stringent measures in monetary and fiscal policy, as well as the diminishing impact of rising energy prices.

In turn, an increase in exports and remittances, along with a reduction in large one-time purchases of imported machinery and equipment, as well as budget consolidation, will contribute to a decrease in the current account deficit: down to 6.3% in 2024 and 6.1% in 2025.

“Risks to the forecast include regional geopolitical challenges, volatility in commodity prices, an unexpected global slowdown in economic growth, as well as the realization of contingent liabilities regarding state-owned enterprises and public-private partnerships (PPPs). An increase in financial flows and the volume of remittances, as well as rising gold prices, could create new opportunities,” the IMF notes.

The fund believes that the government will achieve the targeted consolidated budget deficit goals for 2024 and 2025 (4% and 3% of GDP respectively). Among the reasons are rationalizing expenditures, including reducing subsidies for energy sources, enhancing the targeting of social spending, and decreasing the volume of concessional lending.

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As risks to the revenue side of the budget, low VAT collection rates and corporate profit tax from companies outside the gold mining sector (NGMK and AGMK) are highlighted. Additionally, tax incentives and a declining level of tax discipline hinder the expansion of the tax base—especially in the service sector.

“Tax incentives for attracting investments should be reassessed to gradually reduce their negative impact on the tax base. At the same time, it is necessary to expand the powers of tax administration concerning ensuring compliance with the tax code (especially in conducting effective field tax audits), providing appropriate guarantees for the protection of taxpayer rights,” the experts emphasize.

Furthermore, the IMF recommends introducing an annual limit on the investment value of all projects signed under the laws on PPPs and investments starting from 2025.

The international organization urged the Central Bank to maintain a tight monetary policy until there is evidence of a sustained decline in inflation. The regulator should be prepared to raise the key interest rate if inflation turns out to be unexpectedly high, the IMF stresses.

“IMF staff also recommend that official authorities continue the gradual winding down of directive lending, which will enhance the efficiency of credit distribution while simultaneously increasing access to credit for the private sector,” the fund urged.

Regarding privatization, the IMF suggests that the government continue restructuring and improving the management of state enterprises and enhance competition by leveling the playing field for private and state companies and removing barriers to market entry.

It is also noted that work continues on laws protecting whistleblowers who expose corruption and on asset declaration.

Earlier, Spot reported that Uzbekistan will receive $800 million from the World Bank for a comprehensive structural reform program.