Fitch Ratings: Uzbekistan’s Rating Resilient to Pandemic; Challenges Ahead

Tashkent, Uzbekistan (UzDaily.com) -- The Republic of Uzbekistan has demonstrated resilience to the coronavirus pandemic, supported by its robust external and fiscal buffers, access to external financing and diversified economy. 

It was among the few sovereigns to avoid an economic contraction in 2020, as timely support from official creditors underpinned anti-crisis measures. High gold prices benefitted exports, public finances and international reserves. Fitch Ratings maintained Uzbekistan’s Long-Term Foreign-Currency Issuer Default Rating at ‘BB-’ with a Stable Outlook throughout 2020, most recently affirming in October.

As the global health conditions improve, the Uzbek authorities face the challenge of maintaining policy consistency to improve macroeconomic stability, moderate the rapid growth of government and external debt, and maintain reform momentum to address structural weaknesses. Fiscal policy will remain supportive of the economic recovery, and the reduced scale of policy lending will mitigate near-term risks to macroeconomic stability. Nevertheless, the current account deficit and inflation will remain high.

Government debt (estimated at 36% of GDP in 2020) is low relative to peers, but the pace of borrowing has been rapid in recent years and it is almost entirely foreign currency-denominated. Mitigating factors include the maturity and cost structure of government debt and the government’s high cash buffers (27% of GDP).

In spite of the unprecedented policy challenges raised by the pandemic, continuation of the banking sector and state-owned enterprise reform strategies demonstrate that the government remains committed to the reform programme initiated in 2017 that aims to improve macroeconomic stability and growth prospects, decrease the state’s role in the economy and address institutional and governance weaknesses.