BAKU, Azerbaijan, April 5. Fitch Ratings expect the international reserves of Uzbekistan to decline to $33 billion in 2022 and to $30 billion in 2023, Trend reports via the agency’s statement.
At the end of February 2022, this figure reached $35.4 billion.
According to Fitch, reserve coverage at 12 months of current external payments and external liquidity, measured by the ratio of the country's liquid external assets to its short-term external liabilities, at 284 percent in 2023 will remain substantially higher than peers.
The share of gold in international reserves remains high at 59 percent; hence higher prices could also cushion the impact of higher external financing needs. Increased external financing costs and reduced risk appetite will likely slow the pace of external debt accumulation for banks and the private sector.
Uzbek government debt declined to 35 percent of GDP in 2021, from 37 percent in 2020, reflecting high growth, a broadly stable exchange rate, and a reduced pace of borrowing.
Fitch projected debt to increase to 42 percent of GDP in 2022, still below the 59 percent 'BB' median forecast, reflecting increased external borrowing to finance fiscal support to the economy and a weaker soum. Government debt is almost entirely foreign currency-denominated (96 percent), closely linking macroeconomic stability and debt sustainability.
The state debt law could be approved in the second reading in the near term. The legislation will introduce a 60 percent of GDP debt ceiling (for public and public-guaranteed obligations), annual borrowing limits, and the requirement to undertake corrective measures if debt rises above 50 percent of GDP.
Fitch considers that the credibility of this policy anchor will depend on its capacity to slow down the pace of debt growth, manage the risk of contingent liabilities such as PPPs and preserve the relative strength of government fiscal buffers, a key supportive factor for the rating.