Uzbekistan is expecting its budget deficit to be 4% of the national GDP this year. The country is going to decrease the rate to 3% next year. However, lowering the deficit may prove challenging given rising structural spending pressures and the desire to reduce taxes, according to the International Monetary Fund (IMF) mission that visited the country.
Inflation remains the most immediate threat to current and future prosperity by squeezing real incomes and undermining macroeconomic stability. Fiscal policy should continue to protect the most vulnerable through targeted support.
“However, other spending may well need to be curtailed further given risks to revenues from the reduction in the VAT rate and lower gold prices. Efforts to broaden the tax base by eliminating exemptions and improving compliance should continue. There remains scope to further strengthen public investment management, as well as fiscal risk management, including by setting firm rules and limits for public-private partnerships,” the IMF mission said in a report.
Over the first six months of 2022, the consolidated budget deficit in Uzbekistan was at 3.7% of the GDP. The government had tried to cover that deficit at the expense of public bonds, loans from foreign financial institutions and money from the Uzbekistan Fund for Reconstruction and Development.