Tashkent, Uzbekistan (UzDaily.com) -- A briefing, organized by the National Association of Electronic Media of Uzbekistan (NAESMI), entitled "Public external debt: the direction of spending borrowed funds and the effectiveness of projects" was held in Tashkent.

The event was attended by over 100 representatives of a number of ministries and departments, structural divisions of the ministries of economy and finance, investment and foreign trade, energy, agriculture, transport, deputies of the country's lower house of parliament, NGOs, non-state TV and radio channels - members of NAESMI.

The main issue on the agenda was the process of forming the external public debt of the Republic of Uzbekistan, its dynamics and structure, selection and financing of projects, ensuring the effectiveness of projects carried out with borrowed funds.

The Minister of Finance of Uzbekistan Temur Ishmetov stressed that the state debt is an integral and important part of the state economic policy of any state. “According to preliminary estimates, as of 1 January 2021, the size of the external public debt amounted to US$21.1 billion, or 36.5% of GDP. Despite the growth in recent years, according to international standards, the external public debt of our country remains at a moderate level. The borrowed funds received by the state are mainly directed to the development of the backbone sectors of the economy - energy, transport, engineering and telecommunications, chemical, education, agriculture and healthcare. In particular, at the end of 2020, 14.6%, or US$3.1 billion, was directed to the electric power industry, 12.4%, or US$2.6 billion - energy (oil and gas), 11.5%, or US$2.4 billion - transport and transport infrastructure, 9.4%, or 2 billion dollars - housing and communal services,” said Ishmetov.

During the event, the main creditors were also named. International organizations that provide borrowed funds include the Asian Development Bank (US$5 billion), the World Bank (US$3.7 billion), the Japan International Cooperation Agency, the Eximbank of the PRC and the China State Development Bank, etc. (US$2 billion each) each, International Investors (US$1.7 billion), Fund for Economic Development and Cooperation and others (US$1 billion), Islamic Development Bank (US$0.9 billion), Japan Bank for International Cooperation and others (US$.04 billion), as well as other international financial institutions (US$2.4 billion).

The international rating agency "Fitch Ratings" in its report (October, 2020) noted that Uzbekistan has a low level of public external debt. Also, the agency noted that the public debt of Uzbekistan in the medium term will remain below the average level of countries with a rating of "BB".

At the briefing, the chairman of the committee on budget and economic reforms of the lower house of parliament, Sharof Nazarov, will focus on the selection of projects financed from the state external debt, their financing, and ensuring effective implementation. “All projects with such funding are subject to mandatory audit by the Accounts Chamber, discussed with the participation of deputies of the Legislative Chamber of the Oliy Majlis and representatives of civil society. The automated software complex DMFAS-6 ("Debt Management and Financial Analysis System") was put into operation. Reviews of the state and dynamics of the state debt of the Republic of Uzbekistan are regularly published on the official web pages of the Ministry of Finance and in other sources,” said Sh. Nazarov.

The briefing also named large infrastructure projects financed by public debt.

The electricity and oil and gas industries became in demand in terms of the level of loans received. It was noted at the event that as of January 2021, US$3.1 and US$2.6 billion were allocated for the development of these two sectors, respectively. For example, the construction of a third combined cycle plant with a capacity of 650 MW at the Navoi TPP (2020 - US$650 million), which will increase electricity production by about 6-7%. “Borrowed funds from IFIs in the amount of US$1,320 million were attracted to expand the Talimarjan TPP with combined cycle power plants with a total capacity of 900 MW, which, when fully commissioned, fully supplies the Kashkadarya region with electricity (123%) with additional distribution of the remaining 23% to neighboring regions. The allocated US$680 million loan funds of the Japan International Cooperation Agency for the construction of the Turakurgan TPP with a total capacity of 900 MW allowed to provide electricity for about 40% of the Fergana, Andijan and Namangan regions, - said Deputy Energy Minister Sherzod Khojaev.

The water supply sector was supported by six international financial institutions at once. Water supply, especially in remote regions of the country, remains an urgent issue in the country. “In Kashkadarya region, US$51 million was allocated for the construction of 176.6 km and the reconstruction of 110.2 km of water supply networks, the reconstruction of 4 water distribution facilities. As a result, the number of the population provided with centralized drinking water supply will increase by 114 thousand people, ”said Sohib Saifnazarov, Chairman of the Board of Uzsuvtaminot.

US$2.4 billion was allocated for the development of transport and transport infrastructure. One of the major projects implemented by the Ministry of Transport was the construction of the Termez-Sairob road with a length of 100 km. “The total cost of borrowed funds amounted to US$134.02 million. ADB funds were attracted to implement the project. With the money saved, we managed to carry out the reconstruction and construction of additional roads adjacent to this highway, - said Deputy Minister of Transport Jasur Choriev.

The head of Uzkimyosanoat JSC J. Mirzamakhmudov shared information on the work done on the effective use of funds allocated for the development of the chemical industry at the expense of the state external debt, and specific examples of achievements in this area. “The industry received US$711.2 million. We managed to use these funds to implement 3 large projects for the production of ammonia, urea and nitric acid, which made it possible to establish an import substitution system and provide the agricultural sector with the necessary raw materials”.

It was decided to finance projects aimed at achieving the UN Sustainable Development Goals with proceeds from the placement of sovereign international bonds in national currency in the amount of 2 trillion soums.

“This year, it is planned to build 25 new schools and reconstruct 21 operating schools worth 429.7 billion soums. 197.7 billion soums will be spent on the healthcare sector. It is planned to use these funds to build 3 new and carry out the reconstruction of 14 existing medical institutions. The allocated 126 billion soums were used to build more than 200 km of water supply networks and facilities. The development of road infrastructure, construction, reconstruction and repair of more than 300 km of roads required 1,096.7 billion soums of injections. For the provision of material assistance to women and families in difficult social situations, women with disabilities, support for the institution of family, motherhood and childhood, preferential loans to women for the development of entrepreneurship, payment of unemployment benefits - only 149.8 billion soums,” said the director of the department State internal and external debt Jasur Karshiboev.

As noted by Cindy Malvicini, Director of the ADB Resident Mission in Uzbekistan, “Uzbekistan joined the ADB programs in 1995 and since then and until now we have developed a very good portfolio. We are pleased that the funds allocated by the Asian Development Bank are being directed in Uzbekistan in the right direction - to support social issues and improve infrastructure projects. "

It was noted at the event that Uzbekistan adheres to a conservative approach and principles of risk management when attracting external borrowed funds. In particular, the volume of debt funds attracted from IFIs and IPFOs amounted to US$19.3 billion, provided for a long term (up to 30 years) and at preferential interest rates. Ishmetov stressed that the size of the signed loan agreements is decreasing every year: if in 2019 about US$9 billion were attracted, then in 2020 this figure was 5.3. The established limit for the current year is US$5 billion.

In turn, the speakers noted that the borrowed funds are already beginning to give a significant return in the form of economic growth in economic sectors, as well as an increase in tax revenues to the state budget. “The borrowed funds for projects in our industry amounted to US$1.5 billion, - said J. Mirzamakhmudov. The planned volume of production will amount to US$7 billion, of which US$2.3 billion are exported. At the same time, 555 million will be transferred to the state budget in the form of tax payments”.

The participants of the event - representatives of non-state television and radio studios of the country, noted the positive results of the meeting, and stressed the need for such specialized briefings on a regular basis.