Baku, Azerbaijan, March 11
By Fakhri Vakilov-Trend:
The international rating agency RAEX-Europe raised the credit rating of Uzbek sovereign government (SGC), Trend reports with reference to the rating agency.
The rating was upgraded from “B +” (moderately low level of government solvency) to “BВ-” (sufficient level of government solvency) in national and foreign currency. The rating outlook is stable, which means a high probability of maintaining the rating in the medium term.
"The increase in Uzbekistan’s credit ratings reflects a steady decline in financial dollarization, as well as the country's successful access to the international capital market through the issuance of the first eurobonds issue in February 2019. The government’s sustainable fiscal position, including low public debt and moderate budget deficits, high economic growth, good indicators of profitability and capitalization of the banking system remain the strengths of credit position," the agency noted.
At the same time, RAEX-Europe stated that, the level of ratings continues to be constrained by increased and volatile inflation, a low level of economic and institutional development, a high share of government debt in foreign currency, and a low level of development of local capital markets.
Moreover, a high level of segmentation of the credit market with a wide distribution of directed lending at concessional rates, as well as a high concentration of the banking system dominated by state banks are key credit risks for the country.
“Monetary policy remains tight but not fully effective. The growth of consumer price index slowed down during 2018 and reached 14.3 percent by the end of the year, after fixing its maximum value of 20.1 percent in January 2018. However, Uzbek Central Bank raised the refinancing rate from 14 percent to 16 percent in September 2018, adhering to a hard floor tics due to increased volatility of the exchange rate in the second half of 2018, the rapid growth of domestic demand and unfavorable inflation expectations," the agency stressed.
After the liberalization of foreign trade, imports in 2018 increased by 39.6 percent, helped by credit growth, mainly due to the investment programs of state enterprises. At the same time, exports increased by only 13.6 percent, which led to the expected trade deficit and current account deficit of 12 percent and 8 percent, respectively.
RAEX-Europe expects both indicators to remain negative in the coming years due to the planned modernization of the national economy. At the same time, these external risks are leveled by significant international reserves and moderately low external debt.
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