WASHINGTON (IMF press centre) — After discussions between the Uzbek authorities and an IMF staff team in Tashkent during July 17-26, 2018, a statement has been published which summarizes the findings and conclusions of IMF team.

According to IMF, the Uzbek authorities have made further progress on their far-reaching reforms to tackle the country’s most pressing economic and social challenges. The discussions focused on the economic outlook, tax reform, state-owned enterprise (SOE) restructuring, and the fiscal strategy for 2019-21. External trade has picked up significantly; but cyclical tailwinds from rising commodity export prices and external demand are projected to abate. Consumer price index (CPI) inflation has been declining, but sustained macroeconomic policy discipline is needed to ensure that underlying inflation will trend downward. Growth and job creation are likely to react with delay to transition reforms.

Tax reform is the government’s economic flagship project; it is needed foremost to create more and better jobs. Tax reform is also needed to forestall a potential sharp decline in future revenues. At the same time, it was agreed that tax reform will have to be a multi-year project.

Following open and intensive public debates, a comprehensive tax package has been adopted. The adopted reform is an important and courageous step toward a more rational tax system. Looking ahead, drafting a new tax code will be a major challenge. In the short term, reform of tax administration will focus on the implementation of tax policy and high-priority organizational changes. Over the medium term, the tax administration faces an even more challenging reform agenda.

SOEs remain the nerve centre of the economy, but they increasingly struggle with multiple challenges that could threaten their very survival. The government needs to bring tariffs and energy prices closer to cost-recovery levels, thus beginning to address the first challenge. The second challenge calls for increasing SOEs’ financial transparency in several respects. The third challenge calls for restructuring state-owned banks and putting them on a more commercial footing.

Addressing the fourth challenge, improving governance through restructuring of non-financial SOEs, will have to be the centerpiece of reform.

Fiscal policy in 2018 is posed to remain prudent, notwithstanding pressures to expand public spending. With the upcoming 2019 budget, the government will for the first time submit to parliament a three-year fiscal framework covering 2019-21. Staff’s preliminary fiscal projections for 2019 suggest that securing strict overall spending discipline will be essential to reach the envisaged fiscal targets.

There was agreement that the transparency of fiscal policy during the coming years should be enhanced by several measures:

• Improving fiscal reporting;
• Improving fiscal forecasting and budgeting;
• Improving fiscal risk management.