september, 2021 newsletter 25 - mf.uz

August, 2021

NEWSLETTER № 25Ministry of Finance of the Republic of Uzbekistan

September, 2021

1 1. Key developments

The economy is expected to expand by 6.2% in 2021 supported by agradual pace of fiscal consolidation and strong investment

On October 8, 2021, Fitch Ratings has affirmed sovereign credit rating of theGovernment of Uzbekistan’s at “BB-” with a stable outlook. (page 13)

1. Key developments.....................................1

2. Statistics at glance....................................2

3. Reforms Agenda.......................................3

4. Macroeconomic Environment....................4

5. Foreign Trade Turnover.............................5

6. Monetary Policy and Banking Sector.........6

7. Borrowing Statistics................................7

8. Domestic Treasury Securities...................8

9. Sovereign Eurobonds..............................10

10. Uzbek corporate Eurobonds..................11

11. Capital Market development ................13

12. World Economic Outlooks…..................15

13. International Ratings and Indices........16

Content

Economic growth is expected to rebound in 2021 as Uzbekistan strengthensits pandemic management

ADB raises Uzbekistan’s growth projections economy for 2021 and 2022.Uzbekistan’s economy is expected to grow by 5.0% this year and by 5.5% nextyear assuming a smooth coronavirus disease (COVID-19) vaccine rollout and therapid recovery for industry, services, investment, and private consumptioncontinues; (page 12)

GDP growth increased to 6.2 percent in 1H2021 after slowing to 1.7 percent in2020. Strong industrial and services growth tempered weaker agriculturalproduction. Robust increases in household incomes and domestic investment, andthe continuation of anti-crisis spending and tax relief measures, also contributedto this year’s strong growth; (page 12)

According to the IMF, the global economic recovery is continuing, even as thepandemic resurges. International Monetary Fund has significantly revisedUzbekistan's Real GDP growth projections from 5% (June est.) to 6.1% (Oct est.)in 2021 and from 5.3% (June est.) to 5.4% (Oct est.) in 2022. (page 12)

International relationships has been enhanced

On 29-30 September, 2021, over 50 international agreements signed at theUzbekistan Economic Forum 2021, cementing 5 years of irreversible reforms inCentral Asia’s most populous country. More than 1,200 leaders frominternational financial institutions and the private sector from around the worlddescended on the capital to exchange views on the path forward, discussupcoming opportunities and voice their support for the government’s reforms.(page 15)

Exporting firms will be further supported The procedure for returning up to 50% of the cost of transporting goods by

road, rail, air and postal transport. (page 15)

2. Statistics at a glance

Exchange rates as of September 1, 2021

Currencies Changes from 01.07.2021

USD/UZS = 10 653.18 +28.18

RUB/UZS = 144.71 -0.50

EUR/UZS = 12 570.75 -45.38

GBP/UZS = 14 652.38 -170.56

CNY/UZS = 1 646.96 +2.02

The inflation rate for September of this year declined to 10.8% (yoy). The decrease for thesame month has been observed for the third consecutive year 10.8% (2021), 11.7% (2020)and 16.0% (2019);

Official reserve assets of the country amounted to U.S.$ 35.4 bn as of September 1, showingan increase of U.S.$ 0.8 bn from the beginning of the year;

In January-August 2021, the total foreign trade turnover amounted to U.S.$ 25.0 bn, anincrease of U.S.$ 0.4 bn;

In January-August 2021, the volume of industrial products equaled UZS 269.8 tn(~U.S.$ 25.6 bn)𝟏 with a real growth rate of 9.2%(yoy);

In January-August 2021, the volume of provided services equaled UZS 174.8 tn(~U.S.$ 16.6 bn)𝟏 with a real growth rate of 20.3%(yoy);

In January-August 2021, the volume of construction amounted to UZS 66.4 tn(~U.S.$ 6.3 bn)1 with a real growth rate of 2.0%(yoy);

As of July 1, 2021, total state debt amounted to U.S.$ 24.2 bn (38.5% of GDP), of which,external state debt – U.S.$ 21.8 bn (34.7% of GDP), and domestic state debt – U.S.$ 2.4 bn(3.8% of GDP). Apparently, state debt-to-GDP ratio declined for the two quarters in a row,being 38.9% for 4Q2020, 1Q2021 - 38.6% and 2Q2021 for 38.5%, as a reflection of macro-prudential approach and fiscal rules in debt management since 2020.

As of October 1, 2021 MoF had outstanding treasury bills and bonds equal toUZS 4.0 tn (~U.S.$ 0.37 bn)2. According to planned schedule, in January-September 2021,auctions were conducted and the total volume of issued T-bills and bonds reached UZS 3.4 tn(~U.S.$ 0.33 bn)3.

Inflation, % (yoy) 1 11.7 10.8

Industry, UZS tn 223.6 269.8

Services, UZS tn 135.0 174.8

Construction works, UZS tn 55.5 66.4

Official Reserve Assets, U.S.$ bn 34.6 35.4

Foreign trade turnover, U.S.$ bn 24.5 25.0

State domestic debt, U.S.$ bn2 2.1 2.4

State external debt, U.S. $ bn2 17.3 21.8

Economic StatisticsAs of Sep 1,

2021

As of Sep 1,

2020Indicators

UZBEK 4 ¾ 20 02 24 USD 104.72% 2.69%

UZBEK 5 ⅜ 20 02 29 USD 108.96% 3.96%

UZBEK 3.7 25 11 30 USD 96.95% 4.10%

UZBEK 3.9 19 10 31 USD 97.35% 4.22%

UZBEK 14.0 19 07 24 UZS 101.04% 13.52%

UZBEK 14 ½ 25 11 23 UZS 101.30% 13.75%

Sovereign Eurobonds Price3

1 For September 2020 and 2021

Source: Central Bank of the Republic of Uzbekistan

3 As of September 1, 2021 Source: Bloomberg BVAL pricing

Currency

Note 1: Average official exchange rate for January – August 2021, USD/UZS = 10 552.3Note 2: Official exchange rate for 1 October 2021, USD/UZS = 10 691.9Note 3: Average official exchange rate for January – September 2021, USD/UZS = 10 565.5

YTM3

2

2 As of July 1, 2020 and July 1, 2021

3 3. Reforms Agenda

Measures for providing infrastructure for investment projects has been adopted

(25 August 2021)

Starting from 1 October 2021, the government will start to support investment projects worth more than UZS 200 bn (~U.S.$ 18.8 mn) by constructingexternal engineering and communications facilities (roads, power lines, gas pipelines, etc.);

For a project to qualify, (1) investor’s own contributions to the project must be not less than 25% of the project value; (2) a relevant feasibility study must indicate that the construction of relevant facilities at the expense of the investor is unreasonable. Cabinet of Ministers shall approve the Regulation on the procedure for providing foreign and domestic investors with the necessary external engineering and

communication networks for investment projects worth more than UZS 200 bn: the procedure for applying by applicants implementing an investment project for the provision of external engineering and communication networks; the procedure for examining the cost of investment projects and the adequacy of the costs required to provide infrastructure; criteria for assessing the economic and financial efficiency of the location of the investment project in the optimal area for connection to the centralised

network and the provision of external engineering and communication infrastructure; the procedure and deadlines for the conclusion of the relevant ministries and agencies on the provision of investment projects with external engineering

and communication networks; the procedure for monitoring the implementation of the investment project after the provision of external engineering and communication networks.

https://lex.uz/ru/docs/5600132

A part of transportation costs at export of products will be compensated

(4 October 2021)

The document establishes the procedure for returning up to 50% of the cost of transporting goods by road, rail, air and postal transport. The funds areallocated by the Export Promotion Agency under the Ministry of Investment and Foreign Trade through subsidies from the state budget.

The conditions for payment of compensation are: the exporter is registered in the Republic of Uzbekistan; products are manufactured in Uzbekistan and exported to countries not bordering the republic, with the exception of the Islamic Republic of Afghanistan,

as well as cases provided for by law; products are placed in the export regime in accordance with the established procedure, with the exception of sending products by mail, the cost of which

is up to U.S.$ 5 000 bn; in the export contract (brokerage agreement, invoice), transportation costs for the delivery of products in accordance with the terms of the international

rules of Incoterms are borne by the exporter, In the following compensation will be refused:

non-compliance of the exporter and the documents submitted by him with the conditions established for them or one of them; if the documents submitted by the exporter contain false and inaccurate information or cases of data distortion; if the funds provided for subsidies for the current year to compensate for transport costs in the parameters of the State Budget have been fully used.




4 3. Reforms Agenda

Measures for improving contractual relations has been adopted

(14 September 2021)

The President has issued a decree on improvement of contractual relations. The following measures are, among others, envisaged by the Decree: Starting from 1 December 2021 banks will no longer be prohibited to accept/transfer payments for goods and services made to their clients – suppliers by

third parties i.e. not purchasers under relevant supply contracts and the requirement for entities, 50% or more shares of which belong to the state, todemand prepayment on their supplies will be abolished.

From 1 January 2022: property put up for sale at an online auction in the course of court enforcement procedures will be transferred to a winning bidderfree from any debt claims and injunctions. If the funds received from the sale of the property are insufficient to repay the debts, the unpaid debts willremain with its former owner (the debtor); in case a legal entity or an individual entrepreneur does not pay taxes or customs payments on time, the taxor customs authorities respectively, will be able to request a servicing bank of the debtor to freeze a corresponding amount on the debtor’s bank accountsand, then, to recover it after 30 calendar days upon notifying the debtor; a party to a contract that accepts full or partial performance of contractualobligations by the other party or otherwise confirms the validity of the contract, will not be entitled to subsequently claim the contract to be invalid, ifsuch claim contradicts the principle of good faith.

https://lex.uz/docs/5633853

Changes in the Tax code

(14 September 2021)

A Law introducing changes to the Tax Code has been adopted. It, amongothers, provides for the following changes: a special tax regime has been established for some territories of the

Fergana region with the tax rate of 1% having been set for, amongothers, the corporate income tax for legal entities registered andreceiving their income within a relevant special territory; the personalincome tax for individuals on income received within a special territory;the turnover tax for legal entities and individual entrepreneurs on profitsfrom operations within a special territory; the social tax for legal entitieson salaries paid to individuals working within a special territory;

a number of tax incentives have been provided to tour operators, travelagents, and accommodation providers till 31 December 2021;

specific categories of newly established entities in Karakalpakstan havebeen temporarily exempted from the property tax, the land tax, theturnover tax, and the personal income tax for individual entrepreneurs.


Facilitation to payment of taxes

(14 September 2021)

Presidential Decree has been adopted on measures for creating favorableconditions for performing tax obligations. The following measures are, amongothers, envisaged to be taken under the Decree starting from 1 January2022:

if tax offenses have been revealed during a desk tax audit, financialsanctions will not be applied;

starting from 1 January 2022, financial sanctions will no longer be applied iftax reports have not been submitted on time.

a regulatory experiment will be conducted in the Khorezm region, underwhich the regional tax authorities themselves will form tax reports on theland tax, excise tax, VAT, and the turnover tax for taxpayers – legal entities,based on data at their disposal and data of other state bodies. After relevantreports are formed, they will be sent to taxpayers for the confirmation viarelevant electronic systems. Each taxpayer either approves a relevant reportor amends it and sends back to the tax authorities. If the experiment issuccessful, it will be expanded to the entire country.





Construction statistics

In January-August 2021, the

construction works amounted to

UZS 66.4 tn (~U.S.$ 6.3 bn)1 with a real

growth rate of 2.0% (yoy)2.

As of September 1, 2021, the

number of enterprises and organisations

in the construction sector amounted to

44.5 thousand units with 5.0 thousand

units increase compared with the last year.

Construction works

(January-August 2021, % in total)

Service statistics

Market services in January-August2021 reached UZS 174.8 tn(~U.S.$ 16.5 bn)1 with a real growth rateof 20.3% (yoy)2.

As of September 1, 2021 the largestshare of enterprises and organisationsoperating in the service sector constituted65.3% of the total number of organisations.In the structure of market services falls ontrade services (25.3%), transport (24.1%),financial services (21.9%), communicationand information services (5.9%).

4

Source: State Committee of the Republic of Uzbekistan on Statistics

Note 1: Average official exchange rate for January – August 2021, USD/UZS = 10 552.3Note 2: The information provided in service, industry and construction section is preliminary, the growth rates in these sectors are calculated based oncomparative price level indices that are relative indicators that characterize the change in the volume of products (goods and services) in the compared periods

4. Macroeconomic Environment

UZS 66.4 tn

(~U.S.$ 6.3 bn)

Services statistics


Trade, 25.3% Transport, 24.1%

Financial, 21.9% Other, 15.9%

Communication, 6.0% Education, 3.9%

Real Estate, 2.9%

UZS 174.8 tn

(~U.S.$ 16.5 bn)

Industry statistics

In January-August 2021, thevolume of the industrial products amountedto UZS 269.8 tn (~U.S.$ 25.5 bn)1, theindex of physical volume of industrialproduction in January-August 2021amounted to 9.2% (yoy)2.

In the structure of production

manufacturing amounted to

UZS 222.6 tn (~U.S.$ 21.0 bn)1, mining

and quarrying UZS 26.1 tn

(~U.S.$ 2.5 bn)1 electricity, gas, steam

and air conditioning

UZS 19.2 tn (~U.S.$ 1.8 bn)1 and water

supply, sewerage, waste collection and

disposal UZS 1.9 tn (~U.S.$ 0.2 bn)1.

Industrial output

(January-August 2021, UZS tn)

UZS 269.8 tn

(~U.S.$ 25.5 bn)

222.6

26.119.2

Manufacturing Mining and quarrying

Electricity, gas, steam

and air conditioning

supply

Water supply, sewerage,

waste collection and

disposal

1.9

Small enterprises, 56.0%

Large organisations, 25.2%

Informal sector, 18.8%

Inflation rate

10.8

14.4

8.7

7.7

5

7

9

11

13

15

17

19

Consumer Price Index Food products

Non-food products Services

Inflation rate

(as of October 1, 2021, yoy)The inflation rate for September of this

year declined to 10.8% (yoy). Thedecrease for the same month has beenobserved for the third consecutive year11.1% (2021), 11.7% (2020) and 16.5%(2019).

CBU has been conducting the stronganti-inflationary policy to curb inflation leveland establish a permanent inflation targetof 5% from 2023.

%

Top 10 countries in exports of goods and services

(January-August 2021, % share in total exports)

5. Foreign Trade Turnover5

Structure of Exports


Source: State Committee of the Republic of Uzbekistan on Statistics

Foreign Trade Turnover

In January-August 2021, the foreign trade turnover (FTT)constituted U.S.$ 24 964 mn, an increase by U.S.$ 383m,compared to the same period last year (an increase of 1.6%).

As of September 1, 2021, exports reached

U.S.$ 9 278 mn, while the total number of exporting entities

amounted to 5 527 units. Uzbekistan has a very diversified

export structure including manufactured goods, gold, service,

foods, animals and other goods.

Imports amounted to U.S.$ 15 686 mn with the

dominance of investment goods. In the structure of imports,

the main share is occupied by machinery and transport

equipment (33.6%) that serves for the long-term growth in the

future.

Machinery and transportequipment, 33.6%

Manufactured goods, 18.6%

Chemicals and similarproducts, 13.6%

Food and live animals, 9.6%

Services, 6.3%

Various finished goods, 6.1%

Non-food raw materials, 5.3%

Mineral fuels and similarmaterials, 4.8%

Other goods, 2.1%

U.S.$ 15 686 mn

Manufactured goods, 30.0%

Services, 17.4%

Gold, 14.9%

Food and live animals, 8.7%

Chemical products, 7.2%

Various finished products,5.5%Mineral fuels, 5.5%

Mineral fuels, 4.7%

Non-food raw materials, 3.8%

Other goods, 2.3%

U.S.$ 9 278 mn

Structure of Imports


Ukraine, 0.8%

Iran, 1.3%

Canada, 1.4%

Tajikistan, 3.2%

Afghanistan, 4.8%

Kyrgyzstan, 5.3%

Kazakhstan, 7.9%

Turkey, 12.1%

Russia, 13.7%

China, 17.0%

Italy, 1.7%

Lithuania, 1.9%

Turkmenistan, 2.0%

India, 3.2%

Germany, 2.8%

Turkey, 6.6%

South Korea, 7.4%

Kazakhstan, 11.1%

Russia, 20.4%

China, 20.5%

Top 10 countries in imports of goods and services

(January-August 2021, % share in total imports)

Broad Money (M2)

(to the end of month, UZS tn)

Official Reserve Assets

(as of September 1, 2021, U.S.$ bn)

Official Reserve Assets

6. Monetary Policy and Banking Sector6

IndicatorsSep 1,2020

Sep 1,2021

Highly liquid assets (bn UZS) 33 747 55 583

Immediate liquidity ratio

(minimum: 25%)62.5% 90.6%

Liquidity coverage ratio

(minimum: 100%)189.2% 152.4%

Net stable funding ratio

(minimum: 100%)108.6% 113.7%

Ratio of highly liquid assets

to total assets (in %)10.5% 14.2%

Official reserve assets of the countryincreased to U.S.$ 35.4 bn as ofSeptember 1, 2021 from U.S.$ 34.8 bn as ofJanuary 1, 2021 – an increase of U.S.$ 0.6 bn,compared to a U.S.$ 0.5 bn same periodincrease in the previous year.

In the composition of official reserveassets, foreign currency reserves constitutedU.S.$ 12.4 bn, gold U.S.$ 21.9 bn and SDRsU.S.$ 1.1 bn.

Liquidity in the banking system

UZS bn

Indicators 8M2020 8M2021

Regulatory Tier 1 capital to RWA 16.65% 14.93%

Regulatory Tier 1 capital 48 126 54 820

Risk-weighted assets 289 117 367 097

Liquid assets to total assets 12.92% 15.79%

Liquid assets 42 601 63 780

Total assets 329 621 403 819

Capital to risk-weighted assets 19.41% 17.50%

Capital at the end of period 56 105 64 230

Risk-weighted assets 289 117 367 097

NPL to total gross loans 2.48% 5.51%

Non-performing loans 6 509 18 474

Total gross loans 262 293 311 326

Source: Central Bank of the Republic of Uzbekistan

Banking system stability indicators

Note 1: Average official exchange rate for January-August 2021, USD/UZS = 10 552.3

105.4 106.0104.4

102.8

107.6

103.1 103.0

105.4

107.6

116.1 116.1

118.2120.0

Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21

Broad Money (M2)

As of September 1, 2021, broadmoney constituted UZS 120.0 tn

(~U.S.$ 11.3 bn)(1), while the growth rate

equaled 13.9% compared to the same periodof last year.

The volume of money supply innational currency constituted

UZS 81.8 tn (~U.S.$ 7.7 bn)(1), of which

currency in circulation and transferabledeposits in national currency amounting to

respective UZS 27.2 tn (~U.S.$ 2.6 bn)(1) and

UZS 27.6 tn (~U.S.$ 2.6 bn)(1) and other

deposits in national currency UZS 27.1 tn

(~U.S.$ 2.6 bn)(1) and foreign currencydeposits in national currency equivalent

reached to UZS 38.2 tn (~U.S.$ 3.6 bn)(1).

20.7 18.8 18.6 19.0 18.5 20.2 20.3 19.7 19.3 20.7 21.5 20.2 21.5

13.7 15.4 14.5 13.914.1 14.3

13.7 13.113.0

13.113.7

13.5 13.2

Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21

Monetary gold SDRs Foreign currency reserves

34.633.5 33.4 33.0

34.9 34.333.3 32.7

34.235.5

34.135.1 35.1

7

Creditors of State external debt𝟏

(as of July 1, 2021)Use of proceeds of State external debt𝟏

(as of July 1, 2021)

Asian Development Bank - U.S.$ 5.0 bn

Japan International Cooperation Agency -

U.S.$ 2.2 bn

Islamic Development Bank –

U.S.$ 0.9 bn

Japanese Bank for International

Cooperation - U.S.$ 0.6 bn

Other IFIs and foreign government

financial organisations - U.S.$ 2.4 bn

Total State external debt - U.S. $ 21.8 bn

Budget support – U.S.$ 4.7 bn

Electric power - U.S.$ 3.1 bn

Energy (oil and gas) - U.S.$ 2.7 bn

Transport & Transport Infrastructure –U.S.$ 2.5 bn

Agriculture - U.S.$ 2.3 bn

Housing & communal services - U.S.$ 2.0 bn

Commercial banks - U.S.$ 1.3 bn

Chemical industry - U.S.$ 1.2 bn

Education & healthcare - U.S.$ 0.7 bn

Telecommunications - U.S.$ 0.2 bn

Others - U.S.$ 1.1 bn

Total State external debt - U.S. $ 21.8 bn

Source: Ministry of Finance of the Republic of Uzbekistan

International investors - U.S.$ 1.7 bn

Note 1: State debt statistics are constantly being improved with the help of IFIs and lending institutionsNote 2: Debt borrowed on behalf of the Republic of Uzbekistan and under its guaranteeNote 3: Debt-to-GDP ratios have been revised reflecting GDP revision for 2010-2020 years

7. Borrowing Statistics

Total State debt (as of July 1, 2021, U.S.$ bn)3

Total State debt

As of July 1, 2021, the State debt2 of Uzbekistanamounted to U.S.$ 24.2 bn equivalent or 38.5% ofGDP. Apparently, state debt-to-GDP ratio declined forthe three quarters in a row, being 38.9% for 4Q2020,1Q2021 - 38.6% and 2Q2021 for 38.5%. Maintenance ofthe ratio at sustainable levels is reached due to theeffective debt management measures.

Specifically, debt ceiling is set on external debtattraction, debt sustainability analysis has beenconducted, the MTDS is being updated annually, stateguarantees provision on domestic obligations has beensuspended, SOEs and SOBs started independentlyfinance their investment projects.

World Bank - U.S.$ 3.8 bn

Export-Import Bank of China –U.S.$ 2.0 bn

China Development Bank –U.S.$ 2.2 bn

Economic development and cooperationfund and others - U.S.$ 1.0 bn

7.59.9

15.7

21.1 21.0 21.84.0

4.8

2.1

2.2 2.22.4

18.6%

27.9%29.7%

38.9% 38.6% 38.5%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

45,0%

0,0

5,0

10,0

15,0

20,0

25,0

30,0

2017 2018 2019 2020 2021 2021

I quarter I half

State external debt State domestic debt State debt to GDP

State debt ceiling – 60% of GDP

Auction results of Domestic Treasury Securities

Type of Government Securities

Date of auction Maturity dateAnnounced

volume, (UZS bn)3

Fixed couponrate

Aggregate amount of bids submitted,

(UZS bn)3

Volume of securities issued, (UZS bn)3

Weightedaverage YTM

Outstanding amount, (UZS bn)3

6-months 13 Jul 2021 11 Jan 2022 30.0 zero-coupon 60.0 30.0 13.94% 30.0

12-months 19 Jul 2021 18 Jul 2022 300.0 zero-coupon 186.7 186.7 13.96% 186.7

5-years 27 Jul 2021 30 Jul 2026 200.0 14% 45.1 45.1 14.00% 45.1

6-months 27 Jul 2021 25 Jan 2022 100.0 zero-coupon 88.4 88.4 13.99% 88.4

6-months 3 August 2021 1 February 2022 100.0 zero-coupon 130.0 100.0 13.63% 100.0


12-months 17 August 2021 16 August 2022 300.0 zero-coupon 62.8 62.8 14.00% 62.8



6-months 31 August 2021 1 March 2022 100.0 zero-coupon 16.0 16.0 13.99% 16.0

2-years 31 August 2021 31 August 2023 200.0 14% 81.0 81.0 14.00% 81.0

6-months 7 September 2021 8 March 2022 100.0 zero-coupon 178.1 100.0 13.96% 100.0

12-months 14 September 2021 13 September 2022 200.0 zero-coupon 30.0 30.0 14.00% 30.0



3-years 28 September 2021 29 September 2023 200.0 14% 89.0 89.0 14.00% 89.0


Source: Ministry of Finance of the Republic of Uzbekistan

Note 1: Official exchange rate for 1 October 2021, USD/UZS = 10 691.9Note 2: Average official exchange rate for January – September 2021, USD/UZS = 10 565.5 Note 3: Nominal value of each bill and bond is equal to UZS 1.0 m. All calculations are derived based on the nominal value of the securities issued

As of October 1, 2021 the Ministry of Finance had outstanding treasury bills and bonds amounting to UZS 4.0 tn (~U.S.$ 0.37 bn)1. In January – September 2021, the

total number of 48 auctions conducted reached and the total volume of issuance of T-bills and bonds reached UZS 3.4 tn (~U.S.$ 0.33 bn)2. In the long term, Ministry of

Finance aims at remaining committed to the development of the domestic government debt market, continuous diversification of debt instruments in terms of both tenor and

tranche amount and gradually widening the investor base by working in collaboration with the Central Bank of Uzbekistan.

8 8. Domestic Treasury Securities

Auction results for 3Q2021

597.1

1 550.0

5 024.0

3 437.3

1 562.7

3

15

22

71

0

10

20

30

40

50

60

70

80

0

1000

2000

3000

4000

5000

6000

2018 2019 2020 2021

as of 01.10.2021

Vo

lum

e o

f g

ove

rnm

en

t se

cu

ritie

s (

bn

, U

ZS

)

Fact Plan The number of auctions

9

Source: Ministry of Finance of the Republic of UzbekistanNote 1: Nominal value of each bill and bond is equal to UZS 1.0 mAll calculations are derived based on the nominal value of the securities issued

8. Domestic Treasury Securities

UZS

3 964 bnOutstanding

value

Domestic issuance volume dynamics

(UZS, bn)

Treasury bills and bonds by maturity

(% of total issuance)

Information on conducted auctions and placed government securities

in 2018-2021

(as of 1 October, 2021)

26.1

2.2

018

28.1

2.2

018

27.0

2.2

019

12.0

3.2

019

08.0

5.2

019

22.0

5.2

019

12.0

6.2

019

05.0

7.2

019

17.0

7.2

019

17.0

1.2

020

06.0

4.2

020

10.0

4.2

020

06.0

5.2

020

11.0

5.2

020

28.0

5.2

020

08.0

9.2

020

21.0

9.2

020

08.1

0.2

020

20.1

0.2

020

01.1

2.2

020

09.0

2.2

021

23.0

2.2

021

09.0

3.2

021

23.0

3.2

021

06.0

4.2

021

20.0

4.2

021

04.0

5.2

021

18.0

5.2

021

01.0

6.2

021

15.0

6.2

021

29.0

6.2

021

19.0

7.2

021

03.0

8.2

021

17.0

8.2

021

31.0

8.2

021

14.0

9.2

021

28.0

9.2

021

7%

8%

9%

10%

11%

12%

13%

14%

15%

16%

17%

Yield of government securities issued in 2018-2021

Policy rate of Central Bank Consumer price index 1.5-5 year government securities

6-month government securities 9-12 month government securities

2018 20202019 𝟏𝐬𝐭 Oct 2021

33.0%

33.5%

33.5%33,2%

57,1%

9,7%

6-months 9-12 months 1.5-5-years

33.2%

57.1%

9.7%

32.3%

29.0%

38.7%

59

7

0

10

0

15

0

0 30

0

30

0

70

0

0 0 0 0 0 70

0

0 0 13

90

12

70

10

0

0 0 73

5

63

2 10

0

97

0 60

0

49

3

48

0

52

0 14

8

35

0

47

0

37

6

Dec-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Ap

r-19

Ma

y-1

9

Jun

-19

Jul-

19

Au

g-1

9

Se

p-1

9

Oct-

19

Nov-1

9

Dec-1

9

Jan

-20

Fe

b-2

0

Ma

r-2

0

Ap

r-20

Ma

y-2

0

Jun

-20

Jul-

20

Au

g-2

0

Se

p-2

0

Oct-

20

Nov-2

0

Dec-2

0

Jan

-21

Fe

b-2

1

Ma

r-2

1

Ap

r-21

Ma

y-2

1

Jun

-21

Jul-

21

Au

g-2

1

Se

p-2

1

41,4%

36,2%

22,4%

9. Sovereign Eurobonds

SettlementDate

Issuer S&P Fitch Coupon(%) Volume Maturity

20 Feb 2019 Uzbekistan BB- BB- 4.75 U.S.$ 500 m 20 Feb 2024

20 Feb 2019 Uzbekistan BB- BB- 5.375 U.S.$ 500 m 20 Feb 2029

25 Nov 2020 Uzbekistan BB- BB- 3.7 U.S.$ 555 m 25 Nov 2030

25 Nov 2020 Uzbekistan BB- BB- 14.5UZS 2.0 tn

(~U.S.$ 192.5 m)125 Nov 2023

19 July 2021 Uzbekistan BB- BB- 3.9 U.S.$ 635 m 19 Oct 2031

19 July 2021 Uzbekistan BB- BB- 14.0UZS 2.5 tn

(~U.S.$ 235.4 m)219 July 2024

Yield- to-maturity (%)

10

Spread-over-the-benchmark (bps)Price (%, relative to the nominal value)

Source: Bloomberg Terminal(As of October 1, 2021)

bps%

Note 1: Official exchange rate for 19 November 2020, USD/UZS = 10 391Note 2: Official exchange rate for 12 July 2021, USD/UZS = 10 621

%

104.72%

108.96%

96.95%97.35%

4.10%3.96%2.69%

231190

235

0

2

4

6

8

10

12

14

16

UZBEK 4 ¾ 02 20 24 UZBEK 5 ⅜ 02 20 29 UZBEK 3.7 25 11 30

UZBEK 3.9 19 10 31 UZBEK 14.5 25 11 2023 UZBEK 14.0 19 07 24

0

100

200

300

400

500

600

700

UZBEK 4 ¾ 02 20 24 UZBEK 5 ⅜ 02 20 29

UZBEK 3.7 25 11 30 UZBEK 3.9 19 10 31

80

85

90

95

100

105

110

115

120

UZBEK 4 ¾ 02 20 24 UZBEK 5 ⅜ 02 20 29 UZBEK 3.7 25 11 30

UZBEK 3.9 19 10 31 UZBEK 14.5 25 11 23 UZBEK 14.0 19 07 24

101.30%101.04%

13.52%13.75%

4.22%

246

10. Uzbek corporate Eurobonds

Yield- to-maturity (%)

11

Z-Spread (bps)

%

Source: Bloomberg Terminal(As of October 1, 2021)

bps

Price (%, relative to the nominal value)

Spread-over-the-benchmark (bps)

%

bps

103.89%104.09%

103.10%

420

348303

356377

318

4.031%

4.41%4.40%

5.12%

98.91%

393

420

2

3

4

5

6

7

8

9

10

11

12

SQBN 5 ¾ 12 02 24 Corp NBUZB 4.85 10 21 25 Corp

IPTBZU 5.5 11 19 2025 Corp UZMTS 4.85 05 04 26

0

200

400

600

800

1000

1200



0

200

400

600

800

1000

1200



75

80

85

90

95

100

105

110



11. Capital Market Development 12

State share 98.6% State share 85%

State share 49%

State share 67.7%

State share 100%

State share 94.3%

State share 100% State share 84.8%

State share 100%

State share 25%

State share 88.3% State share 76%

State share 75.5%

State share 96.5%

State share 94%

IPOs & SPOs of 15 companies are in pre-IPO and transformation process

Pre-IPOs & SPOs: Roadmaps of all 15 companies was approved and preparationwork was stated.

Transformation to IFRS is in process for non-bank companies.

Banks are improving corporate governance and IT system:

Non-executive directors (NEDs) on Supervisory Boards;

Processing IT transformation;

Adopted Short-Medium term strategies;

Optimisation of working process and stuff training on the pipeline.

Working on Investor Relation;

Non-bank companies are working on obtaining:

International Credit Ratings;

Certificates from other internationally recognized bodies.

There are also local bond issuers.

Will be local IPOs & SPOs and depending on the market condition international IPOsbe considered.

2022 – 2023 will be the year of IPOs & SPOs

Apart from the 15 blue-chips, there will be other IPOs & SPOs from private andother JSCs;

Other JSCs are in the process of transformation and improvement of corporategovernance, active on information disclosure through public portal and ownwebsites;

Seeking for qualified board members;

Improving efficiency;

Optimising working process;

Seeking for internationally experienced managers to the Management Board.

11. Capital Market Development 13

Specific sets of action are being taken to comply with the Decree of the President of the Republic of Uzbekistan “On measures to further develop the capital market”PD-6207. As of October 1, 2021 the market capitalisation of the Republican stock exchange amounted to UZS 64.6 tn. There were 603 Joint-Stock companies, securitiesissuance of which constituted UZS 146.5 tn.

9 19

21

43 52

65

2016 2017 2018 2019 2020 01.10.2021

Market capitalization U.S.$ 6.4 billion

146 568

12 527

Total issuances

Total Bonds

Significant number of transactionswere noted in August, 2021 withordinary shares of Uzmetkombinattransactions consituting 700. Itmade up 13.1% of total numberof transactions.

The number of transactionspertaining to the ordinary sharesof KVTS Kvarts amounted to 556.QZSM Qizilqumsement and SQBNUzsanoatqurilishbank witnessed469 and 440 transactions,respectively.

As of October 1, 2021 the totalamount of the issued bondsequaled UZS 494.1 bn. Thenumber of issued bonds reached55 825.

The volume of securitiestransactions by banks constitutedUZS 5.3 bn, while that ofconstruction field equaledUZS 3.1 bn.

As of October 1, 2021 the totalamount of issued stock exceededUZS 146.6 bn (in nominal value).In quantitative terms the totalnumber of issued stock amountedto 12.1 bn shares.

The volume of issued sharesdecreased by UZS 2.9 bn, whereasthe number of shares increased by2.1 bn shares.

Capitalisation of JSCs increasedsteadily over the years, fromUZS 8.9 tn in 2016 to UZS 64.6tn as of 3Q2021.

5 state organisations wereconverted into the Joint-Stockcompanies.

Market capitalisation of 138 listed companies, UZS tn

Total bond issuances, UZS bn

Total stock issuances, as of 3Q2021,UZS bn

Market capitalisation

UZSE transactions Stock Market

3 0

14

4 3

54

4 2

07

5 6

96 8 6

52

6 8

67

4 5

35

5 3

28

January

February

March

April

May

June

July

August

Number of Transactions UZSE, as of 31.08.2021

Bond Market

494

56

Volume of BondsIssued ( in bln)

Number of Bondsissued (in thousand)

12. World Economic OutlooksSeptember 2021

Source:https://www.adb.org/news/adb-raises-uzbekistan-growth-projections-2021-and-2022

14

Uzbekistan’s economy is expected to grow by 5.0%this year and by 5.5% next year assuming a smoothcoronavirus disease (COVID-19) vaccine rollout and therapid recovery for industry, services, investment, andprivate consumption continues.

The Asian Development Outlook (ADO) 2021 Update,ADB’s flagship annual economic publication, noted thecountry’s 6.2% growth in the first half of 2021 asindustry rebounded strongly from a decline last yearthanks to increases in manufacturing, mining, andquarrying. Growth in services accelerated to 8% thanksto gains in trade, transport, and storage.

“A smooth implementation of the government’sCOVID-19 vaccination program will be vital to protect thepeople of Uzbekistan, restore confidence, and underpinthe promising growth we saw in the first half of thisyear,” said ADB Country Director for Uzbekistan CindyMalvicini. “ADB remains fully committed to helpingUzbekistan overcome the pandemic and maintainingsustainable economic growth.”

Inflation slowed in the first half of 2021 to 10.9%from 13.9% last year. Improved food production helpedto slow the rise in food prices while tariffs for electricityand gas remained unchanged. With continuing tightmonetary policy and energy tariffs unlikely to change,ADB maintained its 10% and 9% inflation forecasts for2021 and 2022, respectively.

ADB raises Uzbekistan growth projections for 2021 and 2022

Source:https://www.worldbank.org/en/country/uzbekistan/overview#economy

October 2021

In 2021, growth is projected to accelerate to 6.2percent. However, this forecast remains subject touncertainties about the continued impact of furtherwaves of COVID-19 on global and domestic economicconditions.

A recovery in investment, trade, and remittanceswill support economic growth and reduce unemploymentand poverty in 2021. Growth is projected to remainstrong at 5.6 percent in 2022 as the pace of vaccinationsaccelerates and global disruptions ease further.

The current account deficit is projected to be 5.9percent of GDP in 2021 as capital imports for investmentprojects recover and gold exports fall from record levelsin 2020. Foreign direct investment is expected to remainsubdued in 2021 and partially recover in 2022.

The expansion of social assistance and publicinvestments to improve ruralinfrastructure, along with cost of vaccinations, isexpected to further elevate public spending in 2021. Thiswill be partially offset by higher tax, mining, andprivatization revenues, leading to a projected overallfiscal deficit of 5.5 percent of GDP in 2021. This will befinanced by increased public debt that will reach 40.6percent of GDP by end-2021.

Uncertainties about the global recovery and anannounced value added tax reduction in 2023 willcontribute to a high medium-term fiscal deficit. Theeconomic recovery, gradual withdrawal of anti-crisismeasures. and widening of the tax base will helpstabilize public debt at 42 percent of GDP by end-2023.

World Bank forecasts Uzbekistan’s economic growth at 6.2 percent in 2021

Global recovery continues, but the momentum has weakened and uncertainty has increased

The global economic recovery is continuing, even as

the pandemic resurges. The fault lines opened up by

COVID-19 are looking more persistent—near-term

divergences are expected to leave lasting imprints on

medium-term performance. Vaccine access and early

policy support are the principal drivers of the gaps.

The global economy is projected to grow 5.9 percent in

2021 and 4.9 percent in 2022, 0.1 percentage point lower

for 2021 than in the July forecast. The downward revision

for 2021 reflects a downgrade for advanced economies—in

part due to supply disruptions—and for low-income

developing countries, largely due to worsening pandemic

dynamics. This is partially offset by stronger near-term

prospects among some commodity-exporting emerging

market and developing economies. Rapid spread of Delta

and the threat of new variants have increased uncertainty

about how quickly the pandemic can be overcome. Policy

choices have become more difficult, with limited room to

maneuver.

International Monetary Fund has significantly revised

Uzbekistan's Real GDP growth projections from 5% (June

est.) to 6.1% (Oct est.) in 2021 and from 5.3% (June

est.) to 5.4% (Oct est.) in 2022. The country remains one

of the most attractive and stable markets among all global

emerging economies.

Source:https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021

October 2021

8 October, 2021

Source: https://www.fitchratings.com

Fitch Ratings has affirmed Uzbekistan's Long-Term Foreign-Currency Issuer Default Rating at 'BB-' with a Stable Outlook

On October 8, 2021, Fitch Ratings has affirmed sovereign credit rating of theGovernment of Uzbekistan’s at “BB-” with a Stable Outlook.

According to the report, Uzbekistan's ratings balance robust external and fiscalbuffers, low government debt and a record of high growth relative to 'BB' rated peersagainst high commodity dependence, high inflation and structural weaknesses interms of low GDP per capita and weak institutional and governance levels relative topeers. Fitch Ratings affirms that Uzbekistan will maintain a strong emphasis onpoverty reduction and improvement in social conditions in parallel to the economicreform push.

The economy will expand by 6.2% in 2021 and growth will maintain strongmomentum, averaging 5.7% in 2022-2023 (vs. forecast 3.7% for the 'BB' median)supported by a gradual pace of fiscal consolidation, strong investment, continuedaccess to external financing and reforms positively impacting agriculture, constructionand industrial production. The evolution of the pandemic and delays in the rollout ofvaccination campaigns present downside risks to our growth forecast.

The Agency states that mitigating factors to the rapid government debt growthinclude the structure in terms of maturity and costs, with official debt accounting for92% of the external stock. In addition, the government aims to increase the share oflocal currency-denominated funding through more domestic debt issuance, and soldsom-denominated external bonds (payable in US dollars) in 2020 and 2021.

Uzbekistan will maintain robust external buffers (forecast reserves at USD35.2billion in 2021) with reserve coverage (12.6 months of current external payments),almost doubling that of the forecast 'BB' median (6.9 months) in 2022-2023.

Fitch Ratings Agency expects that the CBU to maintain positive real rates, as partof its transition to inflation targeting. The bank is developing policy instruments toimprove policy transmission, but this remains constrained by high inflationexpectations, financial dollarisation, shallow capital markets and a still high share ofpublic-sector-funded credit on preferential terms. We forecast inflation to decline to9.8% by end-2021, but expect that strong domestic demand, salary increases, andelectricity and gas tariff adjustment will keep it above rating peers ('BB' median of5.4%) in 2022-2023.

Report for 2020 of the World Governance Indicators published by the World Bank has been released

No. Name of indicatorScore Rank

2019 2020 change 2019 2020 change

1.

Political Stability and

Absence of

Violence/Terrorism

–0.27 –0.44 -0.17 135 149 –14

2. Government Effectiveness –0.51 –0.51 0 138 138 0

3. Voice and Accountability –1.65 –1.54 +0.11 190 194 –4

4. Regulatory Quality –0.99 –0.94 +0.05 182 177 +5

5. Rule of Law –1.05 –1.06 –0.01 179 181 –2

6. Control of Corruption –1.05 –1.05 0 179 176 +3

World Bank published the World Governance Indicators report for 2020 covering 210countries with 30 number of sources.

According to the report 2020, Uzbekistan achieved an increase on 2 indicators,decrease on 2 indicators, and 2 indicators remained unchanged.

Due to an increase by 1 percent in the number of indicators of the RegulatoryQuality, the country ranked 177th with an increase of 5 positions compared to the lastyear report. Uzbekistan rose by 1.4 percent on the indicator of the Voice andAccountability and ranked 194 rather than 2019 year’s report.

29 September, 2021

Source: https://www.ung.uz

For the first time, Fitch Ratings agency has assigned sovereign credit rating of the JSC “Uzbekneftegaz”

at “BB-” with Stable Outlook

Agency affirms that the UNG's rating is equalised with Uzbekistan's due to strong tiesbased on our Government-Related Entities Rating Criteria.

They view the status, ownership and control factor as 'Strong' as the state is UNG'ssole shareholder but may sell around a quarter of the company. Support record is 'VeryStrong' because 80% of its consolidated debt was guaranteed by the state at end-2020, though they believe the share of state-guaranteed debt may significantly reduceas debt is gradually refinanced. Other forms of support are the conversion of UNG'sUSD1.7 billion of debt to the sovereign wealth fund of Uzbekistan and dividendspayable into equity in 2020, lowered taxes, and liberalised oil product prices charged byUNG.

13. International Ratings and Indices15

September 2021

Source: https://www.info.worldbank.org

International Conference on New Uzbekistan’s National SDGs: Milestones and Perspectives

On 24 September, 2021 Tashkent hosted international conference on NewUzbekistan’s National SDGs: Milestones and Perspectives. The conference is a jointinitiative between The Senate of the Oliy Majlis of the Republic of Uzbekistan, the YouthAffairs Agency of the Republic of Uzbekistan, UNDP in Uzbekistan, the World Bank inUzbekistan, Westminster International University in Tashkent (WIUT) and theUniversity of World Economy and Diplomacy (UWED).

The conference aims to discuss ongoing socio-economic reforms in Uzbekistan, theirimportance in achieving national SDGs, to exchange knowledge, share ongoingresearch and policy efforts, and identify gaps for improvement and future strategies.World-renowned scholars, representatives of the government and private sector,representatives of international agencies and think tanks took part in the event. Amongthem, Prof. Jeffrey Sachs, President of the UN Sustainable Development SolutionsNetwork (SDSN).

The conference outputs include:

Identification of international best practices inthe process of achieving the SDGs andassociations of socio-economic reforms withthe achievement of the SDGs;

International experts` observations andassessment of achieving the NationalSustainable Development Goals (SDGs) inUzbekistan;

Results from studying and reviewing theresearch carried out by international researchcommunity, including research with implications to Central Asia / Uzbekistan;

Announcement of the start of work by the academic community on writing a newbook in English, which will be devoted to the ongoing socio-economic reforms inUzbekistan and their empirical analysis;

Proposal on the youth initiative "SDG Youth Ambassadors", which is planned to beimplemented at the national level;

The conference participants have defined further roadmaps of collaboration toachieve the National SDGs.

Uzbekistan increased by 7 positions in the Global Innovation Index 2021

The 2021 edition of the Global Innovation Index (GII) presents the latestglobal innovation ranking of 132 economies, relying on 81 different indicators.

Uzbekistan ranked 86th out of 132 countries in the Global InnovationIndex. Previously, our country was ranked 93rd in 2020 and 122nd in 2015.

According to the GII, Uzbekistan has the following strong indicators in theworld: “Graduates in science and engineering” - 7th place, “Ease of starting abusiness” – 8th place, “Labor productivity growth” – 8th place, “Gross capitalformation” – 7th place, “Expenditure on education” – 28th place.

An international conference was held to analyse and improve the position of Uzbekistan in Global Innovation Index

24 October 2021

On October 4, 2021, the Ministry of Innovative Development hosted anInternational Conference on the Analysis of the role of the Global Innovation Index(GII) for the development of the Republic of Uzbekistan. In the conference, therewere discussed the improvement of GII by 7 positions in the 2020 report by therepresentatives of international organizations, relevant ministries and departments,as well as economists.

Sumitra Dutta - a Professor of Management at Johnson College of Business atCornell University and founder of the index, noted the innovation reforms in India andVietnam, and said that studying and implementing the experience of these countriescould have a positive impact on Uzbekistan's ranking.

At the end of the conference, "Uzbekistan was developed to identify priorities forinnovative development in Uzbekistan, the introduction of innovations andtechnologies in the economy and the daily life of the population, ensuring the globalcompetitiveness of the national economy and Uzbekistan's inclusion in the Top 50 inthe Global Innovation Index by 2030" It was agreed to review and improve theproject "Strategy for Innovative Development of the Republic until 2030" incollaboration with WIPO and Cornell University.


20 September 2021 24 September 2021

Source: https://www.wipo.int/global_innovation_index

Source: https://www.uz.undp.org

Over 50 international agreements signed at the Uzbekistan EconomicForum 2021, cementing 5 years of irreversible reforms in Central Asia’s mostpopulous country

Uzbekistan’s first-ever international economic forum concludes in Tashkent, settingthe scene for the next phase of reforms and a privatization programme that aims to putmore than 50% of the economy into private hands to support the country’s sustainableand inclusive growth.

The Forum concluded with a flurry ofbold commitments, agreements, andnew partnerships – aimed ataccelerating the country’s sweepingreforms and privatization programmeinitiated by President ShavkatMirziyoyev. More than 1,200 leadersfrom international financial institutionsand the private sector from around theworld descended on the capital to

On 29-30 September, 2021 “Uzbekistan Economic Forum 2021: Achievement of Economic Reforms and Outlook” was completed successfully

“Uzbekistan has done in 5 years what many countries take decades to do.” AnnaBjerde, the World Bank’s Vice President for Europe and Central Asia, said after theevent, calling on the government to double down on their commitment to raising livingstandards and create jobs.

Underscoring the country’s commitment to selloff nearly three quarters of the state’s assets overthe next five years, the government announcedprivatization deals worth $600m, including justover $250m for a 57% stake in Coca-Cola BottlersUzbekistan (CCBU) from Turkey-based Coca-ColaIcecek (CCI) and a 75% stake in mortgage lenderIpoteka Bank, the country’s 5th largest bank, toHungary’s OTP Bank for an undisclosed amount.

Emphasizing that the reforms areirreversible, Uzbekistan’s deputy primeminister Jamshid Kuchkarov alsoannounced the country may sell a 10-15% in Navoi Mining and MetallurgicalCombine, one of the world largesturanium and gold producers, throughan initial public offering in 2024. Intotal, 55 agreements were signed insectors ranging from infrastructureand renewable energy to financialservices, including U.S.$ 2.6 bn inpublic private partnerships.

exchange views on the path forward, discuss upcoming opportunities and voice theirsupport for the government’s reforms.

The final day of the Forum also saw the unveiling of a wide range ofcommitments from every sector, including:

Social empowerment and value-creation through equal employment and skillsdevelopment;

Financial services: improving accessto finance and providing betterfinancial opportunity to SMEs andsociety;

Infrastructure, energy and utilities:providing international investorswith the opportunity to supportinternal growth yielding strongfinancial returns.

Government officials said they expect that these commitments will set the scenefor even deeper cooperation and make Uzbekistan’s economy and the country’sforming private sector attractive to international investors.


29-30 September 2021

Source: https://www.mf.uz

Ministry of Finance of the Republic of UzbekistanDebt Management Office

Contact us

29, Istiqlol, Yunusobod distr., Tashkent city, 100017, the Republic of Uzbekistan

Phone: (+99871) 239-48-12, E-mail: [email protected]

Web-site: www.mf.uz

mailto:[email protected]

september, 2021 newsletter 25 - mf.uz

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