Tashkent, Uzbekistan (UzDaily.com) -- The Central Bank of Uzbekistan has prepared and posted on the Single portal of interactive public services for public discussion a draft Decree of the President of the Republic of Uzbekistan “On improving state monetary policy and increasing the effectiveness of measures by the Government and the Central Bank to ensure price stability in economy”.

The draft decree envisages the gradual transfer of monetary policy conditions to the inflation targeting regime with the establishment of a permanent inflation target of 5% from 2023.

The main motive for accelerating the transition to inflation targeting is the urgency of taking further decisive measures to curb inflation, amid increasing risks of the presence of the current two-digit inflation rate under the influence of ongoing structural reforms, including liberalization of regulated prices and tax reforms.

In particular, the evolving dynamics of the current level and forecast inflation indicators, taking into account the tasks assigned to the Central Bank to ensure price stability, are forcing to take concrete and more effective measures in this direction.

The establishment of the conditions and goals of inflation targeting will contribute to the high-quality implementation of coordinated joint actions of the Government and the Central Bank in the process of implementation and implementation of monetary policy in the new conditions.

The analysis and calculations show that the fulfillment of a number of conditions noted in the draft decree, including pursuing a tight monetary policy, ensuring the balance of the consolidated budget, as well as the effective implementation of structural reforms in other sectors of the economy, will help achieve the inflation target in 2023.

At the same time, in order to reduce and maintain inflation at a level acceptable to the economy and anchor inflationary expectations, the draft Decree provides for the improvement and implementation of new monetary policy instruments, increasing the efficiency and flexibility of the Central Bank's interest rate policy.

In terms of other measures in the field of macroeconomic policy and structural reforms, the draft Decree stipulates:

revision of methods and principles of directed lending within the framework of state target programs with the establishment of from 1 January 2020, interest rates at a level not lower than the Central Bank refinancing rate, and from 1 January 2021, free market rates using, if necessary, compensation mechanisms for part of interest expenses;

measures in the field of fiscal policy aimed at developing "budget rules" and introducing, since 2020, the practice of approving the maximum annual parameter for changes in internal and external public debt;

ensuring strict implementation of the State budget within the framework of the established parameters, as well as coherence of the fiscal and monetary policies;

the establishment of a procedure in accordance with which decisions made on further reforming the economy will be based on principles and tasks that will ultimately meet the goals of high-quality and sustainable economic growth and ensure price stability.

This, in turn, includes the creation of a modern production, transport and social infrastructure, the completion of regulated price liberalization, the development of a competitive environment, the improvement of the reform of state-owned enterprises through the widespread introduction of market mechanisms in their activities, and increased labor productivity and energy efficiency.