Regions and Countries

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p. 13 of 47 BACK | NEXT Developing Asia and the Pacific The global economy Newly industrialized economies Central Asian republics, Azerbaijan and Mongolia Kazakhstan Kyrgyz Republic Tajikistan Turkmenistan Uzbekistan Azerbaijan Mongolia People’s Republic of China Southeast Asia South Asia The Pacific

Uzbekistan

Economic performance

Economic growth: GDP growth was 4.0 percent in 2000, compared with an official target of 4.2 percent, and growth of 4.4 percent in 1999, representing a fifth year of consecutive GDP growth. The agriculture sector output contracted because of a poor cotton harvest resulting from the drought. While growth in the industry sector remained strong, it was lower than expected because of a sharp drop in FDI.

Employment: With new employment opportunities expected to grow slowly, the emergence of surplus labor will pose a major challenge. Although officially registered unemployment was just 0.6 percent of the workforce at the end of 1999, considerable hidden unemployment and underemployment exist in the state-owned enterprises and collective farms.

Inflation: Although official statistics reported average annual inflation at 24.9 percent for 2000, compared with 29.1 percent for 1999, estimates by the International Monetary Fund and the European Bank for Reconstruction and Development put the inflation rate much higher, at over 50 percent. The inflation target of 20.0 percent, set by the authorities at the beginning of 2000, was exceeded because of a 51.0 percent increase in wages and an increase in fuel prices effective 1 August. Interest rates are negative in real terms.

Fiscal balance: With improved tax collection and expenditure control measures, the state budget recorded a deficit of 1.0 percent of GDP for 2000, lower than the 2.8 percent deficit targeted at the beginning of the year. Total government revenues reached 28.5 percent of GDP in 2000, with total expenditures equal to 29.6 percent of GDP.

External sector: The current account position improved, with a surplus equivalent to 0.8 percent of GDP being attained in 2000, compared with a deficit of 0.1 percent in 1999. Export earnings increased slightly in 2000 despite lower gold prices and falling cotton export volumes. Imports declined because of increased import compression and intensified import substitution policies, resulting from devaluation of the domestic currency and import controls. The external debt increased from 26.4 percent to 29.0 percent of GDP over the same period.

Domestic policies: Monetary policy remained relatively loose, with interest rates negative and growth in money supply estimated at 27.1 percent in 2000. Bank credit increased significantly in real terms. Overall, the country’s financial sector, including its equity and bond markets, is at an early stage of development.

Some major steps in banking reforms have been undertaken in recent years. A government resolution, enacted in January 1999, regulated the use of bank accounts for tax purposes. In addition, the Government has created a Bank Privatization Agency and nominated five banks for the first round of privatization.

In 2000, the Government took several steps to reduce the number of exchange rates and the spread between them. Current account convertibility remains one of the main policy concerns to be addressed by the Government in 2001.

ADB operations

Operational strategy: ADB’s new operational strategy for Uzbekistan, approved in March 2000, supports reducing poverty in a sustainable manner. The strategy, which recognizes the Government’s reform program as being essential for reducing poverty, has two objectives: (i) manage the transition by developing market-based institutions, which will involve supporting basic reforms, developing the financial sector, and minimizing the social costs of transition especially in social and urban services; and (ii) harness the potential for growth by encouraging regional cooperation and trade, developing agriculture and rural development, and providing direct support to the private sector to complement public sector projects.

Policy dialogue: Policy dialogue with the Government continued on reforms in the education and railways subsectors, and small and medium enterprise (SME) development. In the railways subsector, dialogue was on, among others, adopting a regulatory framework, restructuring the Uzbekistan railways, and assessing the social impact of the restructuring program. In SME development, dialogue was on encouraging growth and protecting the legitimate interests of SMEs engaged in lawful entrepreneurial activities; guaranteeing legal and intellectual property rights of entrepreneurs; and introducing transparency, equity, and fairness in the inspection process. In processing the SME Development Project, significant achievements were also made on foreign exchange and surrender systems.

Loans and technical assistance: In 2000, ADB approved three loans totaling $177 million to support reforms in the senior secondary education, modernize railways, and develop SMEs. ADB also approved five technical assistance grants totaling $3.3 million: two for project preparation and three for advisory and operational purposes.

Project implementation: Since joining ADB in 1995, Uzbekistan has received eight loans, all of which were active at the end of 2000. Contract awards totaled $49.7 million, bringing the cumulative figure to $102.2 million. The contract award ratio was 10.5 percent, lower than the ADB-wide average of 21 percent. Disbursements during the year totaled $60.9 million, bringing cumulative disbursements to $78.8 million. The disbursement ratio was 31.7 percent, higher than the ADB-wide average of 20.5 percent.

In June 2000, ADB conducted its second country portfolio review. To address project implementation constraints, ADB and the Government developed an action plan that recommends increased high-level government monitoring of ADB-financed projects and more frequent meetings with resident mission staff. Also, ADB will continue to strengthen the supervisory capabilities of executing agency staff on all aspects of project implementation. In response to ADB’s Resident Mission Policy, additional staff were assigned to the Uzbekistan Resident Mission to handle portfolio management.

   

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