Tashkent, Uzbekistan (UzDaily.com) -- Uzbekistan’s current reform agenda intends to build modern and effective economy to ensure sustainable economic growth and prosperity to our people.

Success of these reforms is directly linked to attracting foreign investments across key sectors of the economy, adopting leading international experience and ensuring transparency and rule of law.

Having obtained first ever international sovereign credit ratings for the Republic of Uzbekistan in December 2018 (BB- from S&P and Fitch with Stable outlooks), the government successfully issued its inaugural sovereign Eurobonds totaling US$1bn in global financial markets in February 2019.

It is important to mention that the government commands sufficient fiscal reserves as well as macroeconomic stability. Therefore, the purpose from Eurobond issuance is not to finance the budget deficit or attract additional funds, but it is to fulfil the following strategic goals:

1. Placement of sovereign Eurobonds in global financial markets has demonstrated economic potential of the country to international investors in detail while creating a proper benchmark for foreign investors (including FDI investors) to properly evaluate the sovereign risk.

It should be noted that Uzbekistan priced sovereign Eurobonds with 5 and 10-year tenor at 4.75% and 5.375%, respectively, which also indicates assessed moderate risk level by investors. Prior to the issuance of Eurobonds, many foreign investors had considered 10-year sovereign risk of Uzbekistan over 6-8% per annum.

2. Successful placement of sovereign Eurobonds has created useful benchmark for large state-owned and private enterprises and banks in Uzbekistan to issue their own Eurobonds and start independently financing their investment projects.
3. After the issuance, foreign investors continuously observe the key developments and reforms in Uzbekistan, which leads to further transparency and prudent approach to on-going reforms by the government.

In other words, the secondary market price quotation of Uzbek sovereign Eurobonds serves as a barometer for sustained economic reforms.

4. By February 2019, Uzbekistan had mainly attracted funding from international financial institutions, in other words from official sector. Size, use of proceeds and terms of such loans are often limited, and, in most cases, the government is subject to further restrictive terms and conditions. Sovereign Eurobonds, on the other hand, are bought without such restrictive terms by hundreds of private sector investors which also help the country to diversify its funding sources.

After issuance, the government paid special attention to the use of proceeds based on the need and market mechanisms.

In particular, strong investments in construction, expansion and modernisation of production capacities, development of new types of products and services as well as increased focus on exports have led to sharp growth in demand by the real sector of the economy for commercial bank loans.

Therefore, taking into account the need for long-term financial resources by commercial banks, in accordance with the Presidential Decree #PD-4258 dated on 2 April 2019, US$889.2 million has been allocated to commercial banks as deposits through market auction.

Moreover, US$20 million subordinated loan was provided to the Agrobank and US$89.9 million loan was given to Navoi Mining and Metallurgical Combinat to finance strategically important projects.

It should be noted that main proportion of funds received from sovereign Eurobonds will be placed in deposits of commercial banks and will not increase the state budget expenses.