Background Paper For Debt Management in Uzbekistan

External Debt Management by the Government of Uzbekistan:
Policies, Strategies, Techniques, Legal System and Institutional Set Up

And Evaluation of their Processes and Methods.
Background Note and Questionnaire
Tarun Das1 Ph.D.

Professor (Public Policy), IILM, New Delhi.
Consultant, World Bank
October 2008
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.The Author would like to express his gratitude to the World Bank HQ and the Uzbekistan Country Office,
particularly to Dr. Saumya Mitra, Lead Economist, The World Bank Country Office in Uzbekistan at
Tashkent for providing an opportunity to prepare this paper. The background note and the Questionnaire
express the personal views of the author, which do not necessarily imply the views of the World Bank or
the organizations he is associated with.
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Background Note and Questionnaire
Tarun Das , Consultant, World Bank
CONTENTS
ACKNOWLEDGEMENTS
1. Introduction- Scope and Objectives of the Study

1.1 Debt Management Policy
1.2 Debt Sustainability Analysis (DSA) by IMF Staff
1.3 Legal Framework for External Debt Management in Uzbekistan
1.4 Terms of Reference (TOR) for the Study
2. Basic concepts of external debt and sustainability indicators

2.1 Definition of external debt
2.2 Debt Sustainability and Fiscal Deficit
2.3 Debt Sustainability and Current Account Deficit
2.4 Liquidity versus Solvency
2.5 Debt Sustainability Measures
2.6 World Bank Classification of External debt
2.7 Stress Tests, Debt Distress and Indicative Debt Service Thresholds
2.8 Policy framework and Institutional Set up for External Debt Management
2.9 Capacity Building for Management of Public Debt and Contingent Liability
2.10 International best practices for policy framework and institutional set up
3. Current State of the Uzbekistan Economy

3.1 Economic Performance and Poverty
3.2 Uzbekistan Economic Freedom Indices: The Heritage Foundation
3.3 Strengths, Weakness, Opportunities and Threats (SWOT)
3.4 Economic Growth and Inflation in 2007
3.5 External Sector Performance in 2007
3.6 Money Supply and Banking Operations
3.7 Fiscal Situation and Reforms
3.8 Medium Term Economic Forecasts
3.9 Development Challenges
4. Questionnaire for All Stakeholders of External Debt in Uzbekistan

A. Debt Recording, Analysis and Debt Statistics: Coverage, Scope and Quality
B. Debt monitoring and reporting: Transparency
C. Guarantees and other Contingent Liabilities
D. Legal System and Institutional Set Up: Accountability
E. External Debt Management Policies, Strategies, Practices, Methods and Systems
F. Risk Management: Capacities and Systems
Annex-1: World Bank CPIA Criteria for Debt Management

Selected References
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And Evaluation of their Processes and Methods
ACKNOWLEDGEMENTS
This Report is based on mainly a review of recent studies on Uzbekistan

economy made by the development stakeholders and the lessons and
international best practices drawn from the author’s studies on management
of external debt in selected developing countries in Africa, Asia and Pacific
such as India, Cambodia, Gambia, Indonesia, Lao PDR, Mongolia, Nepal,
Samoa, and Thailand . Most of these references are cited in the paper and
included in the selected bibliography.
The Author would like to express his gratitude to the World Bank HQ and
the Uzbekistan Country Office, particularly to Dr. Saumya Mitra, Lead
Economist, the World Bank Country Office in Uzbekistan at Tashkent for
providing an opportunity to prepare this paper.
The author is presently working as Professor (Public Policy) at the Institute

for Integrated Learning in Management, New Delhi, India. Earlier he
worked as Economic Adviser in the Planning Commission and the Ministry
of Finance, Government of India at New Delhi; Strategic Planning Expert in
the ADB Capacity Building Project on Governance Reforms, Ministry of
Finance, Government of Mongolia at Ulaanbaatar; Commonwealth
Secretariat Consultant for Debt Sustainability Analysis for the Government
of Gambia at Banjul; and UN-ESCAP Consultant for the Management of
External Debt for the Governments of Samoa, Cambodia, Lao PDR and
Nepal. The background note and the Questionnaire express the personal
views of the author, which do not necessarily imply the views of the World
Bank or the organizations he is associated with.
Tarun Das, Ph.D.

Professor (Public Policy), IILM, New Delhi, and
Consultant, World Bank.
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And Evaluation of their Processes and Methods.
1. Introduction- Scope and Objectives of the Study
This is a part of a wider study and an Economic Report being prepared under the World
Bank’s Country Policy and Institutional Assessments (CPIA) for discussion between
the Uzbek authorities and the Bank. The main objectives of the Economic Report include
the following: (i) to develop a common understanding of the meaning of the criteria used
in the CPIA exercise and how they are applied; (ii) to obtain information and data relating
to the criteria that would enable Bank staff to make updated assessments; and (iii) to
discuss with the authorities future policy steps and reform intentions that would affect
CPIA assessments. This approach would be successful only if, during its course, the
authorities presented data and information on the variables used in the CPIA exercise at a
suitably disaggregated level. It is proposed that the Economic Report be based initially on
three set of questions, (i) debt policy; (ii) trade; and (iii) revenue mobilization. The
present Questionnaire deals with the Debt Management Policies, Strategies, Legal and
Institutional Systems, Techniques and Evaluation of their Processes and Methods.
1.1 Debt Management Policy
This chapter of the Economic Report will make an assessment of the impact of debt
management strategy on minimizing budgetary risks and ensuring long-term debt
sustainability. Uzbekistan’s debt burden is manageable with favorable trends of major
debt sustainability indicators (Tables-1.1 and 1.2). The ratio of total debt stock to GDP
declined to 17.6 percent in 2007 and further to 15.4 percent in 2008 from 42 percent in
2003. The debt service ratio (i.e. the ratio of total debt services to exports of goods and
services) declined to around 8.6 percent in 2007 after reaching the maximum at 26.7
percent in 2001. The ratio of total debt stock to exports of goods and services also
declined to 43.5 percent in 2005 after attaining the maximum at 158 percent in 2002. The
ratio of sort term debt to total debt has declined continuously from 10.4 percent in 2001
to 0.9 percent in 2005. Moreover, foreign exchange reserves are being built up rapidly
and stood at $10.2 billion equivalent to 10 months of imports of goods and services at the
end of 2007. But, the shares of concessional and multilateral loans are low as compared
to those for other low income and developing countries. However, the situation does not
pose problems in the near and medium term. The degree and effectiveness of
coordination between debt management and macroeconomic policies will also be
discussed. Adequate and timely information on debt stocks and flows is an important
component of debt management strategy. A dedicated debt management unit should be
able to plan strategy and monitor new borrowing and manage risks. Annex-1 presents
details related to these CPIA criteria. Present paper has four sections. Following section-
1dealing with scope, objectives and terms of reference the study, Section-2 presents a
brief note on basic concepts on external debt and debt sustainability indicators and
Section-3 presents a brief note on the current state of the Uzbekistan economy. Section-4
presents a detailed questionnaire for all stakeholders of external debt in Uzbekistan.
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Table-1.1 Uzbekistan: Trends of Selected Economic Indicators in 2002-2007
Economic Indicators 2003 2004 2005 2006 2007 2008*
Growth rate of Real GDP (percent) 4.2 7.7 7.0 7.3 9.5 8.0
Growth rate of Nominal GDP (percent) 32.0 24.6 29.9 30.4 35.8 23.1
CPI inflation rate (%) official estimate 3.7 3.8 7.8 6.8 6.9 6-8
CPI inflation rate (percent) IMF estimate 7.8 9.1 12.3 11.4 11.9 11.0
Growth rate of reserve money (%) 26.7 38.7 87.5 36.5 44.9 28.4
Growth rate of broad money supply (%) 27.1 47.8 54.3 36.8 46.1 32.4
Growth rate of net foreign assets (%) 45.6 48.8 44.0 76.3 67.4 35.8
Growth rate of net domestic assets (%) -87.8 -50.5 -28.4 -148 -88.7 -38.4
Growth rate of net claims on govt (%) -1509 -114 -87.0 -145 -78.9 -56.8
Growth rate of credits to the economy (%) 6.9 10.8 15.8 4.3 16.7 30.8
Growth rate of exports of G&S (%) 28.4 28.1 12.0 18.0 40.7 22.1
Growth rate of imports of G&S (%) 8.9 26.8 4.4 13.8 44.3 28.9
As percentage of GDP at current mp
Revenue and grants (as % of GDP) 33.4 32.2 30.8 31.4 31.7 30.6
Expenditure and net lending (% of GDP) 33.9 32.1 31.1 30.9 30.2 31.1
Overall budget balance as % of GDP 0.1 0.6 1.2 2.2 2.1 -0.4
Augmented budget balance as % of GDP 0.1 0.6 1.2 5.2 5.1 5.0
Total Public debt as % of GDP 41.6 35.1 28.2 21.3 15.8 13.5
Public External Debt as % of GDP 38.7 32.0 25.2 19.8 14.7 12.5
Exports of goods & services as % of GDP 37.3 40.5 38.1 37.6 40.4 41.3
Imports of goods & services as % of GDP 30.6 32.9 28.9 27.5 30.3 32.7
Current account balance as % of GDP 8.7 10.2 13.7 17.3 19.2 16.6
FDI as % of GDP 0.7 1.6 0.6 1.1 3.3 3.5
External debt (as % of GDP) 42.0 36.2 29.1 22.7 17.6 15.4
Ext. debt service (as % of exports of G&S) 20.5 17.1 14.1 12.7 8.6 7.6
Ext. debt service (as % of FE reserves) 49.7 35.6 28.0 17.3 11.3 8.1
Memo Items:
GDP in sum trillion 9.8 12.3 15.9 20.8 28.2 34.7
GDP in US$ billion 10.1 11.9 14.2 17.0 22.2 26.6
Nominal GDP per capita (US$) 396 462 543 641 827 977
Nominal GDP per capita (US$ PPP) 1654 1808 1970 2154 2388
Income velocity of money supply (level) 10.5 9.5 8.4 7.6 7.3 6.5
Foreign exchange reserves (US$ Bln) 1.66 2.15 2.90 4.45 7.41 10.1
Forgn. Exch. Reserves (Months of imports) 5.1 6.3 7.4 7.9 10.2 11.8
End-period Exchange rate (UZ Sums/US$) 979 1058 1180 1240 1290
External debt outstanding (US$ million) 4249 4322 4133 3853 3913 4095
Year-End foreign exch. reserves (US$ bln) 1.66 2.15 2.90 4.46 7.41 10.14
Foreign exch. reserves (months of imports) 5.1 6.3 7.4 7.9 10.2 11.6
Exports of goods & services (US$ billion) 3.78 4.84 5.42 5.39 9.00 10.78
Imports of goods & Services (US$ billion) 3.10 3.93 4.10 4.67 6.74 8.67
External CAB (US$ Million) 861 1215 1949 2933 4267 4472
External capital balance (US$ Million) -414 -702 -1191 -1389 -2113 -1741
Population (million) 25.6 25.9 26.2 26.5 26.9 27.2
* Estimated. Source: International Monetary Fund (2008b) Republic of Uzbekistan: 2008 Article IV
Consultation- Staff Report; IMF, Washington, D.C., July 2008.
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Table-1.2: Trends of External Debt in Uzbekistan in 1995-2005 (US$ Million, unless otherwise specified)
Items 1995 2000 2001 2002 2003 2004 2005
Total Debt stock (EDT) 1799 4618 4855 4776 5012 5007 4225.5
Long term debt 1430 4209 4274 4383 4748 4810 4189
Public & guaranteed 1415 3764 3904 4003 4257 4302 3638.5
Private non-guaranteed 15 445 370 380 491 508 550.5
Use of IMF credit 157 127 78 62 43 19 0
Short-term debt 212 282 503 331 221 178 36.5
Principal repayments 149 646 635 581 659 700 782.2
Long term debt 149 581 590 559 636 675 782.2
IMF purchases 0 65 45 22 23 25 0
Interest payments (INT) 96 236 227 180 152 148 172
Long term debt 80 204 206 164 145 141 172
IMF charges 3 9 5 2 1 1 0
Short term debt 13 23 16 14 6 6 0
Total debt service paid (TDS) 245 882 862 761 811 848 954.2
Long term debt 229 785 796 723 781 816 954.2
IMF repurchases and charges 3 74 50 24 24 26 0
Short term debt (interest only) 13 23 16 14 6 6 0
Gross national income (GNI) 13316 13541 11196 9543 10012 11912 13946
Exp.of goods and services (XGS) 3800 3400 3223 3020 3810 3890 5680
Workers remittances 0 0 0 0 0 … …
Imp.of goods & services (MGS) 3840 3198 3379 3023 3247 … …
International reserves (RES) 1867 1273 1215 1400 1659 2146 2895
Current account balance -21 216 -113 117 882 1215 1949
Debt Sustainability Indicators (in per cent)
Items 1995 2000 2001 2002 2003 2004 2005
Total Debt stock (EDT)/ XGS 47.3 135.8 150.6 158.1 131.5 128.7 74.4
Long term debt/ XGS 37.6 123.8 132.6 145.1 124.6 123.7 73.8
Public & guaranteed/ XGS 37.2 110.7 121.1 132.5 111.7 110.6 64.1
Private non-guaranteed/ XGS 0.4 13.1 11.5 12.6 12.9 13.1 9.7
Use of IMF credit/ XGS 4.1 3.7 2.4 2.1 1.1 0.5 0.0
Short-term debt/ XGS 5.6 8.3 15.6 11.0 5.8 4.6 0.6
Total Debt stock (EDT)/ GNI 13.5 34.1 43.4 50.0 50.1 42.0 30.3
Long term debt/ GNI 10.7 31.1 38.2 45.9 47.4 40.4 30.0
Public & guaranteed/ GNI 10.6 27.8 34.9 41.9 42.5 36.1 26.1
Private non-guaranteed/ GNI 0.1 3.3 3.3 4.0 4.9 4.3 3.9
Use of IMF credit/ GNI 1.2 0.9 0.7 0.6 0.4 0.2 0.0
Short-term debt/ GNI 1.6 2.1 4.5 3.5 2.2 1.5 0.3
TDS/ XGS 6.4 25.9 26.7 25.2 21.3 21.8 16.8
INT/ XGS 2.5 6.9 7.0 6.0 4.0 3.8 3.0
INT/ GNI 0.7 1.7 2.0 1.9 1.5 1.2 1.2
Short-term/ Total debt 11.8 6.1 10.4 6.9 4.4 3.6 0.9
Concessional/ EDT 10.4 30.4 30.1 32.7 35.6 37.6 ….
Multilateral/ Total debt 13.7 9.8 10.7 11.9 12.5 14.8 …
Source: (1) World Bank, Global Development Finance 2006 for the years 1995-2004 and ADB for the year 2005.
Table 1.3A External Debt: Public and Publicly Guaranteed:

Average Terms of Commitment
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Items 1995 2000 2002 2003 2004 2005
Interest (% per annum) 5.7 6.4 3.0 2.9 2.1 2.6
Maturity (years) 15.5 14.9 22.7 13.9 26.3 23.4
Grace period (years) 4.3 3.5 6.7 2.5 6.4 6.4
Grant element (%) 24 19.5 47.4 32.5 57.5 52.2
Table 1.3B External Debt: All Creditors: Average Terms of Commitment
Items 1995 2000 2001 2002 2003 2004

Maturity (years) 15.5 14.9 13.0 22.7 13.7 26.2
Grant element (%) 24 19.3 25.0 47.4 31.6 57.2
Table 1.3C External Debt: Official Creditors: Average Terms of Commitment
Items 1995 2000 2001 2002 2003 2004

Maturity (years) 18.1 17.9 22.3 26.5 21.2 28.6
Grant element (%) 28.9 24.0 39.0 53.2 36.0 61.4
Table 1.3D External Debt: Private Creditors: Average Terms of Commitments
Items 1995 2000 2001 2002 2003 2004

Maturity (years) 9.0 6.4 6.6 7.5 9.5 7.7
Grant element (%) 11.2 7.5 15.3 23.6 29.2 24.5
Table 1.3E Currency Mix of External Debt (in percentage)
Currency 1995 2000 2001 2002 2003 2004

Euro … … 16.0 18.2 20.7 19.6
Japanese Yen 3.1 21.2 20.7 20.7 21.1 21.4
Pound Sterling 0.0 0.0 0.0 0.0 0.0 0.0
Swiss Franc 0.1 0.0 0.0 0.0 0.0 0.1
U.S. Dollars 66.5 56.7 57.6 54.4 49.6 48.9
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1.2 Debt Sustainability Analysis (DSA) by IMF Staff
As a part of the Republic of Uzbekistan: 2008 Article IV Consultation,

IMF Staff makes a Debt Sustainability Analysis (DSA) for Uzbekistan.
The IMF concluded that the medium-term (2009-2013) outlook of the
Uzbekistan external debt situation is favorable under both the baseline
projections and the standard stress tests. The authorities have
ambitious targets at 8–9 percent export-led GDP growth over the
medium term, and believe that these growth rates are achievable
through consolidating macroeconomic stability, modernizing various
sectors, improving physical and social infrastructure, enhancing the
role of the private sector, and attracting FDI. They expect the external
current account to continue registering relatively large surpluses.
The IMF team assessed that the recorded current account surplus
should decline as external statistics improve through proper recording
of the debit items. The IMF staff’s more conservative baseline scenario
based on current policies assumes that GDP growth would slow down
gradually to about 6 percent as export growth slows and the economy
faces capacity constraints, and the current account surplus would
decline gradually to 8 percent of GDP. Then the IMF staff makes the
following standard “two Baseline Scenarios” and “six Bound Tests”:
Baseline:
A. Alternative Scenarios
A1 = Key variables at their historical averages in 2008–132
A2 = New public sector loans on less favorable terms in 2008–133
B Bound Tests
B1 = Real GDP growth at historical average minus one standard deviation in 2009–10
B2 = Export value growth at historical average minus one standard deviation in 2009-104
B3 = U.S. dollar GDP deflator at historical average minus one SD in 2009-10
B4 = Net non-debt creating flows at historical average minus one SD in 2009-105
B5 = Combination of B1-B4 using one-half standard deviation shocks
B6 = One-time 30 percent nominal depreciation relative to the baseline in 20096
IMF staff concluded that under all scenarios and stress tests
the external debt situation of Uzbekistan has low and declining
external and public debt levels, and the debt outlook is
2
Variables include real GDP growth, growth of GDP deflator (in U.S. dollar terms), noninterest current account in percent of GDP,
and nondebt creating flows.
3
Assumes that the interest rate on new borrowing is by 2 percentage points higher than in the baseline, while grace and maturity
periods are the same as in the baseline.
4
Exports values are assumed to remain permanently at the lower level, but the current account as a share of GDP is assumed to return
to its baseline level after the shock (implicitly assuming an offsetting adjustment in import levels).
5
Includes official and private transfers and FDI.
6
Depreciation is defined as percentage decline in dollar/local currency rate, such that it never exceeds 100 percent.
8
resilient to adverse shocks. Tables 7–10 from the IMF Report
are reproduced here.
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10
11
12
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Limitations of the IMF Assessment
However, IMF Study has the following limitations:

(1) It makes stress tests for only public external debt and public debt, but it does not
make sensitivity analysis for the private debt which has important impact on the
economy’s financial and foreign exchange situation. The Asian financial crisis in
the 1990s and the present global financial turmoil have originated not from the
public debt rather from the private debt.
(2) It does not make Strength, Weakness, Opportunities and Threats (SWOT)
Analysis for the Uzbekistan economy, which has both direct and indirect impact
on debt. A tentative SWOT analysis is made by the present author in Annex-3.
(3) It does not deal with external sector related contingent liabilities, and domestic
sector related off balance sheet and off budget risks of the government.
(4) It does not make in-depth analysis of the Policies, Strategies, Systems,
Techniques, Legal and Institutional Set Up for the management of external debt
and public debt in Uzbekistan and a critical Evaluation of their Processes and
Methods.
The present report will make an attempt to fill these gaps on the basis of desk study
as well as field surveys through interviews and designed questionnaires for all the
stakeholders of public debt and external debt.
1.3 Legal framework for External Debt Management in Uzbekistan
As per government’s business rules and procedures, Ministry of Finance is in charge of

evaluation of projects being financed by external aid. It is also in charge of government
borrowing from external sources and making payment of interest charges and repayment
of principal.
Normative - legal framework of activity
Regulations of the Ministry of Finance of the Republic of Uzbekistan have been

approved by the Resolutions of the Cabinet of Ministers "On Approval of the Regulations
of the Ministry of Finance of the Republic of Uzbekistan" №533 dated Nov 23, 1992.
The organizational structure of the Ministry has been approved by the Resolutions of the
Cabinet of Ministers "On organizational structure of the Ministry of Finance of the
Republic of Uzbekistan" № 59 dated February 11, 1992
According to the assigned tasks the Ministry of Finance within its competence given by
legislation performs the following main functions relating to management of external
debt: “In the framework of state debt management together with the Central Bank carries
out monitoring, counting and servicing of internal debt of the Republic of Uzbekistan,
submits suggestions to the Cabinet of Ministers of the Republic of Uzbekistan about
improvement of the structure of government debt, acts as a government securities issuer,
develops and approves legislative acts for securities issuance, manages external debt,
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develops top parameters of government external loans, prepares and submits guarantees
of the Government of the Republic of Uzbekistan, organizes fulfillment of loan and other
contract obligations to external creditors, carries out records and control over use and
servicing of foreign credits attracted or guaranteed by the Republic of Uzbekistan.”
1.4 Terms of Reference (TOR) for the Study
In the light of above discussions, the present study will have the following objectives:
1. To study the external debt recording and analysis system; and quality and coverage of
external debt statistics;
2. To study the trends of stock and composition of external debt, key external debt
sustainability indicators, currency-maturity-interest mix of external debt, creditor-wise
and borrower-wise classification of external debt;
3. To review Debt Management Policies, Strategies, Processes, Legal Framework, and

Institutional Arrangements,
4. To make a Debt Sustainability Analysis (DSA) of external debt as per joint guidelines
by the World Bank and IMF;
5. To study the risk management framework, policies, strategic benchmarks and

institutional set up;
6. To study the sovereign external debt management and the contingent liabilities relating
to external debt;
7. To recommend and suggest best practices for the following:

a) Debt recording, analysis and debt statistics;
b) Management of external debt and public debt;
c) Institutional and operational framework;
d) Legal and regulatory framework;
e) Monitoring and evaluation of external debt, public debt and contingent liabilities;
f) Risk management modeling and stress test;
g) Monitoring debt indicators for debt sustainability analysis;
h) Possibilities of debt restructuring or debt relief;
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2. Basic Concepts of External Debt
2. Conceptual Issues Relating to External Debt
Debt sustainability basically implies the ability of a country to service all debts – internal
and external on both public and private accounts- on a continuous basis without affecting
adversely its prospects for growth and overall economic development. It is linked to the
credit rating and the creditworthiness of a country. However, there is no simple answer to
the question- what should be the sustainable or optimal level of debt for a country?
Before discussing various measures for sustainable debt management, it is useful to
clarify certain basic concepts regarding measurement of external debt.
2.1 Definition of external debt
The Guide on external debt statistics jointly produced by the Bank for International
Settlements (BIS), Commonwealth Secretariat (CS), Eurostat, International Monetary
Fund (IMF), Organization for Economic Co-operation and Development (OECD), Paris
Club Secretariat, United Nations Conference on Trade and Development (UNCTAD) and
the World Bank and published by the IMF (2003) defines “Gross external debt, at any
time, as the amount of disbursed and outstanding contractual liabilities of residents of a
country to non-residents to repay the principal with or without interest, or to pay interest
with or without principal”.
This definition is crucial for collection of data and analysis of external debt:
1. First, it talks of gross external debt, which is directly related to the problem of
debt service, and not net debt.
2. Second, for a liability to be included in external debt it must exist and must be
outstanding. It takes into account the part of the loan, which has been disbursed
and remains outstanding, and does not consider the sanctioned debt, which is yet
to be disbursed, or the part of the debt, which has already been repaid.
3. Third, it links debt with contractual agreements and thereby excludes equity
participation by the non-residents, which does not contain any liability to make
specified payments.
4. Fourth, the concept of “residence” rather than “nationality” is used to define a
debt transaction hereby excluding debt transaction between foreign-owned and
domestic entity within the geographical boundary of an economy. Besides, while
borrowing of overseas branches of domestic entities including banks would be
excluded from external debt, borrowing from such overseas branches by domestic
entities would b included as part of external debt.
5. Fifth, it talks of contractual agreements, and excludes contingent liabilities. For a
liability to be included in external debt, it must exist at present and must have
contractual agreement.
6. Finally, the words “principal with or without interest” include interest free loans
as these involve contractual repayment liabilities, and the words “interest with or
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without principal” include loans with infinite maturity such as recently popular
perpetual bonds as these have contractual interest payments liabilities.
Three other concepts- one relating to interest payments, another relating to currency and
another relating to short-term debt need some clarification. While calculating interest, in
general an accrual method rather than the actual cash-flow method is used. As regards
currency, debt is made in different currencies and it is a common practice to convert all
debt in a single foreign currency, say US dollar, and also in domestic currency. In some
cases, debt from non-residents could be denominated in terms of domestic currency. As
per definition of external debt, such debt should form a part of external debt, even though
it may not be fully convertible.
In general, short-term debt is defined as debt having original maturity of less than one
year. However, Southeast Asian crisis highlighted the necessity to monitor debt by
residual maturity. Short-term debt by residual maturity comprises all outstanding debt
having residual maturity of less than one year, irrespective of the length of the original
maturity. Residual maturity concept is distinctly superior to original maturity concept.
2.2 Debt Sustainability and Fiscal Deficit
External public debt is sustainable when debt services (repayment of principal plus
interest payments) can be paid without resort to exceptional financing (such as debt
relief) or debt restructuring or a major correction in the balance of income and
expenditures. Debt-servicing problems in low-income countries arise when the costs of
servicing public debt become very high, and official creditors (such as international
financial institutions or governments, and donors) do not to provide sufficient new
financing in terms of loans or grants for financing a country’s primary deficit. Although
external official debt is the dominant source of financing, domestic debt is equally
important for a developing country. In general, interest rates on domestic debt are very
high in low-income countries and maturities tend to be short, exposing a country to
significant roll-over and liquidity risks. Unlike external debt, which is mostly
concessional, domestic debt is usually issued at market rates. This implies that costs of
servicing domestic debt depend on overall macroeconomic environment and fiscal
situation of a country.
Debt sustainability is closely related to the fiscal deficit, particularly to the primary
deficit (i.e. fiscal deficit less interest payments). Sustainability requires that there should
be a surplus on primary account. It also requires that the real economic growth should be
higher than the real interest rate. Countries with high primary deficit, low growth and
high real interest rates are likely to fall into debt trap.
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2.3 Debt Sustainability and Current Account Deficit
A current account deficit occurs if imports of goods and services (excluding interest
payments) exceed exports of goods and service plus net transfers. It is often the most
important factor that leads to a rise in external debt. A persistent negative current account
balance is likely to indicate that a country may face an increase in its probability of debt
distress. The standard textbook two-gap theory on the Balance of Payments also states
that high fiscal deficit spills over current account deficit of the balance of payments. Thus
persistent and high levels of current account deficit is an indication of the balance of
payments crisis and needs to be tackled by encouraging exports and non-debt creating
financial inflows.
2.4 Liquidity versus Solvency
One important conceptual issue relates to the distinction between debt service problems
due to liquidity crunch and those due to insolvency. These concepts are borrowed from
the financial analysis of corporate bodies, but there are distinctions between firms and
countries (Raj Kumar 1999). If a firm has positive net worth but faces difficulty to meet
the obligations of debt service, it is considered to be solvent but to have liquidity
problem. When it has negative net worth, it is insolvent.
There is difficulty to apply these concepts to a country, as it is difficult to value all the
assets of a country such as natural resources, wild life, antics in museum, heritage
buildings and monuments. Besides, firms can disappear due to insolvency problems, but
a country cannot become bankrupt nor disappear nor are overtaken or merged purely on
account of financial problems. So we need to consider medium and long term prospects
of a country in terms of growth and balance of payments.
2.5 Debt Sustainability Measurements
There are broadly two approaches to determine debt sustainability of a country. One is to
develop a comprehensive macroeconomic model for the medium term particularly
emphasizing fiscal and balance of payments problems, and another is to assess various
risks associated with debt and to monitor various debt sustainability indicators over time.
These indicators express outstanding external debt and debt services as a percentage of
gross domestic product or other variables indicating the strength of the economy. Some
commonly used debt sustainability indicators are given in Table-2.1
2.6 World Bank Classification of External debt
On the basis of ratio of PV to GNI and PV to XGS (exports of goods and services), the
World Bank in their report on Global Development Finance 2005 has classified countries
into three categories viz. low indebted, moderately indebted, and severely indebted
countries as indicated in Table-2.2. While PV takes into account all debt servicing
obligations over the life span of debt, GNI indicates country’s total potentials and XGS
indicates foreign exchange earnings reflecting debt-servicing ability. Countries are also
classified into low and middle income depending on the level of per capita income.
18
Table-2.1: Debt Sustainability Indicators
Purpose Indicators
1. Solvency ratios (a) Interest service ratio – the ratio of interest payments to
exports of goods and services (XGS).
(b) External debt to GDP or XGS or Revenue ratio
(c) Present value of debt services to GDP or XGS ratio
2. Liquidity (d) Basic debt service ratio- Ratio of total debt services
monitoring ratios (interest payments plus repayments of principal) to XGS
(e) Cash-flow ratio for total debt or the total debt service
ratio (i.e. the ratio of total debt services to XGS)
(f) Interest payments to reserves ratio.
(g) Ratio of short-term debt to total debt or XGS or foreign
exchange reserves
(h) Import cover ratio- Ratio of total imports to total foreign
exchange reserves.
3. Debt burden ratio (i) Total external debt to GDP or GNP or XGS ratio
(j) Debt services to GDP (or GNP) ratio
(k) Total public debt to budget revenue ratio
(l) Ratio of concessional debt to total debt
4. Debt structure (m) Rollover ratio- ratio of amortization (i.e. repayments of
indicators principal) to total disbursements
(n) Ratio of interest payments to total debt services
(o) Ratio of short-term debt to total debt
5. Public sector (p) Ratio of public sector debt to total external debt or GDP
indicators (q) Public sector debt services to XGS ratio
(r) Public sector debt to government revenue ratio
(s) Average maturity of non-concessional debt
(t) Foreign currency debt over total debt
6. Financial sector (u) Open foreign exchange position- Foreign currency assets
indicators minus liabilities plus long term position in foreign
currency stemming from off-balance sheet transactions
(v) Foreign currency maturity mismatch
(w) Ratio of foreign currency loans for real estate to total
credits given by the commercial banks
(x) External sector related contingent liabilities
(y) Trends of share market prices
(z) GDRs and Foreign Currency Convertible Bonds issued
(aa) Inflows of FDI and portfolio investment
7. Corporate sector (bb) Leverage (debt/ equity ratio)- Ratio of debt to equity
indicators (cc) Interest to cash flow ratio
(dd) Short-term debt to total debt
(ee) Return on assets
(ff) Exports to total output ratio
(gg) Net foreign currency cash flow
(hh) Net foreign currency debt over equity
19
8. Dynamic ratios (ii) Average interest rate/ growth rate of exports
(jj) Average interest rate/ growth rate of GDP
(kk) Average interest rate/ growth rate of revenue
(ll) Change of PV of debt service/ change of exports
(mm) Change of PV of debt service/ change of GDP
(nn) Change of PV of debt service/ change of revenue
Source: Tarun Das (2006a) and IMF (2003)
Table-2.2 Cross classification of countries by income level and indebtedness
Indebtedness → Severely Indebted Moderately Indebted Either Less Indebted

Either PV/XGS > 220% Or 132%<PV/XGS<220% Both PV/XGS<132%
PV/GNP > 80% or 48%<PV/GNP<80% and PV/GNP<48%
Income Level ↓
Low income: GNI per Severely Indebted Moderately Indebted Less Indebted
capita less than US$765 Low income (SILI) Low income (MILI) Low income (LILI)
Middle income: GNI per Severely Indebted Moderately Indebted Less Indebted
capita between US$766 Middle income (SIMI) Middle income (MIMI) Middle income (LIMI)
and US$9,385
2.7 Stress Tests, Debt Distress and Indicative Debt Service Thresholds
Stress tests are closely related to the debt sustainability indicators and are useful in
identifying major liquidity risks, as well as strategies to mitigate them. Stress tests can be
used to test a variety of scenarios such as the following:
(a) Types of capital inflows (FDI, trade credit, other credits)

(b) Periods of access to capital markets
(c) Exchange rate changes/ derivative positions
(d) Risks due to price and interest rate changes
(e) Macroeconomic uncertainties (such as outlook for exports and imports)
(f) Policy uncertainties (fiscal and monetary policies)
(a) Standard Stress Tests
(a) Revenue growth = Baseline GR – 1 SD

(b) Export value growth = Baseline GR – 1 SD
(c) Assets value growth = Baseline GR – 1 SD
(d) Inflation rate = Baseline Rate + 1 SD
(e) Net non-debt creating flows = Baseline Inflows – 1 SD
(f) One-time major nominal or real exchange rate depreciation = Baseline + ½ SD
where GR stands for growth rate and SD for standard deviation.
20
(b) Indications of debt distress episodes
Debt distress is indicated by recourse to any of the following forms of exceptional

finance:
(a) Arrears: Number of years in which principal and interest arrears to all creditors
is in excess of 5% of total debt outstanding
(b) Debt rescheduling: Year of initial debt restructuring plus two subsequent years
(c) Bailout by financial institutes / lenders
(d) Normal times are non-overlapping periods of five years in which no signs of
above mentioned debt distress are observed.
(c) Determinants of debt distress

• Traditional Debt Sustainability Indicators include the following:
– Present value of debt/exports ratio
– Present value of debt/revenues ratio
– Present value of debt/assets ratio
– Debt service/exports ratio
– Debt service/revenues ratio
– Debt service/assets ratio
• Shocks can arise as significant fall or volatility of the following:
– Real revenue growth
– Real depreciations
– Assets value growth
(d) Quality of institutions and policies
1. There could be substantial value-added in looking at the role of organizational

quality, good governance, policies and shocks in addition to traditional debt
burden indicators when assessing probability of debt distress.
2. Using a common debt-burden threshold to assess sustainability for all companies

is unlikely to be appropriate.
3. There is a strong tradeoffs between quality of institutions, policies, systems of

auditing and sustainable level of debt.
(e) Indicative Debt and Debt-Service Thresholds (%)
To assess debt sustainability, debt burden indicators are compared to indicative debt-
burden thresholds. If a debt-burden indicator exceeds its indicative threshold, then a
country is at a higher probability of debt distress. The basic assumption is that a country
with a high debt service burden relative to its repayment capacity is more likely to run
into debt-servicing difficulties. As per joint Fund-Bank empirical studies (IMF 2006)
low-income countries with weaker policies and institutions tend to face debt-servicing
problems at lower levels of debt than countries with sound fundamentals and strong
institutions, because governments with weak institutions and inadequate macroeconomic
policies tend to misuse and mismanage public funds. These countries are also more
21
vulnerable to exogenous shocks, such as declines in the international prices of the major
exports or a natural disaster at home, since they lack adequate preemptive measures for
disaster management and mitigation.
Thus, the indicative debt-burden thresholds8 depend on a country’s quality of policies and
institutions, measured by the Country Policy and Institutional Assessment (CPIA) index
of the World Bank (see Table 2.3). The CPIA grades countries according to their
economic management, structural and social policies as well as public sector
management and institutions. The index is updated annually.
Table 2.3 Indicative Thresholds for Debt Sustainability Indicators
(in percent)
Indicators Quality of Debt Management Policies and Institutions
Poor Medium Strong
NPV debt/GDP ratio (%) 30 44 50

NPV debt/XGS ratio (%) 100 150 200
NPV debt/Revenue ratio (%) 200 250 300
Debt service/XGS ratio (%) 15 20 25
Debt service/Revenue ratio (%) 25 30 35
Source: IMF (2006)
For example, if the policy regime and institutions of a country is assessed as “Poor” by the World
Bank CPIA, then the debt service to exports ratio for this country should be kept below 15
percent. If debt service ratio exceeds 15 percent, the country would face problems for servicing
debt. If the policy regime of a country is considered to be “Medium”, the country can have debt
service ratio up to 20 percent. If the policy regime for a country is assessed as “Strong”, the
country’s debt/service ratio can go up to 25 per cent. Other indicators have similar interpretations.
However, IMF concludes that the indicative debt burden thresholds are indicative
benchmarks for making a debt sustainability assessment based on a forward-looking
analysis of debt and debt-service trends, and not intended to be rigid ceilings. In a similar
vein, it is neither expected nor suggested, that countries with low debt ratios borrow up to
their thresholds.
(f) Debt Distress Classifications
A country faces an episode of debt distress if it cannot service its debt without resort to
exceptional financing (such as debt relief) or a major future correction in the balance of
income and expenditures. The joint WB/IMF DSA framework classifies countries
according to their probability of debt distress into four broad categories:
(1) Low risk
22
All debt indicators are well below the relevant indicative debt burden thresholds.
Alternative scenarios and stress tests do not result in indicators breaching thresholds in
any significant way.
(2) Moderate risk
The baseline scenario does not indicate a breach of thresholds. Alternative scenarios and
stress tests show a substantial rise in the debt-service ratio over the projection period. As
a consequence, the debt-service ratio may reach its indicative threshold, while debt-stock
ratios may breach them.
(3) High risk
The baseline scenario indicates a breach of debt stock and/or service ratios over the
projection period. This is exacerbated by the alternative scenarios/stress tests.
(4) In debt distress
Current debt stock and service ratios are in significant and/or sustained breach of
thresholds.
2.8 Policy framework and Institutional Set up for External Debt Management
International experiences and practices of management of external debt, public debt and
associated contingent liabilities by leading public debt offices bear many valuable lessons
for developing countries in the process of strengthening their debt management capacity.
Many countries - mainly advanced and some emerging market economies - have set up
integrated public debt offices and are successfully managing their sovereign debts. In
most countries where debt offices have been set up, there is clear evidence of moving
towards fiscal consolidation. There has also been a significant change since late 1980s in
the institutional structure, the role and style of functions of public debt management
towards risk management. This has been enabled by institutionalization of the debt office
with an in-house risk management culture, as a specialized institution, staffed with
professionals and market specialists. The role of such debt offices, in many instances,
gradually transformed into treasury operations on the lines of those performed by
investment banks, corporate houses and foreign exchange management by central banks.
Within the debt office, middle office emerges as the risk manager, which formulates and
advises on the debt management strategy and also develops benchmarks for assessing the
risk-cost trade off of the portfolio.
The primary requirement for a debt office is to bring the size of public debt at sustainable
levels. Without sustainability of debt, risk management would not have much impact
towards insulating the debt portfolio from systemic risks. The main risks that need to be
managed for the sovereign debt portfolio are foreign currency risk, interest rate risk,
credit risk, liquidity risk, refinancing risk, operational risk and payments and settlement
23
risk. Many debt offices have addressed management of market risks like currency and
interest rate risk by establishing a risk management framework for the sovereign debt in
an asset-liability management framework.
A prudential risk management framework is essential for reducing uncertainty among

sovereign debt managers as to the government’s tolerance for risk, its willingness to trade
off cost and risk objectives. Once the risks are identified, risks and costs for alternative
debt strategies are measured in a scenario-based model under a base case scenario and
different market rate scenarios; or in a simulation-based model under value-at-risk, cost-
at-risk or budget-at-risk approach. The government then chooses the strategy that best
represents the government’s preferences for managing the risk/cost trade-off, and
generally tends to choose a policy framework along an efficient frontier, which entails
minimum risk. The debt managers may also use various derivatives such as buyback
operations, currency and interest swaps and other hedging activities.
The institutional structure for public debt management, world wide, could be broadly
characterized into two categories – setting up of a centralized public debt office and
scattered debt management responsibilities. The former category of a centralized debt
office, which has been the showcase for countries currently strengthening their debt
management capacity, is mainly found in advanced countries and a few emerging market
economies. For these countries, there has been a preference to locate the debt office as a
separate entity under the Ministry of Finance or within the mainstream Ministry. There
are also some instances of locating the debt office outside the Ministry as an autonomous
agency, but with a Memorandum of Understanding (MOU) signed between the Ministry
of Finance and the Public Debt Office. This institutional mechanism is usually,
safeguarded, by public debt legislation or legal statutes.
The second category of institutional structure reflects dispersed debt management

responsibility, either within the Ministry of Finance (for most emerging market
economies) or scattered between the Ministry of Finance (responsible for external public
debt management) and the central bank (responsible for the internal public debt
management). A World Bank survey of about 50 developing economies showed that in
about 11 per cent of these countries, central bank manages domestic debt. Some of the
emerging market economies, with dispersed debt management responsibilities between
the Ministry of Finance and the central bank (Hungary, Colombia, and South Africa) have
already separated debt management responsibility from their central banks. Moreover,
some emerging market economies with debt management responsibility within the
Ministry of Finance (China, India, Thailand, South Korea, Brazil, and Mexico) have set
up a middle office under the Ministry of Finance as a first step towards strengthening
their debt management capacity.
Although, independent set-up for the Public Debt Office and the Ministry of Finance are
regarded as somewhat separate watertight compartments for locating the debt office, in
reality, however, there is a very thin dividing line between the two. The Ministry of
Finance always exercises some measure of control over the operations of the debt office,
irrespective of its location. This is unavoidable because it is the liability of the
24
Government that is to be managed by the debt office. Therefore, even among the most
independent set-ups like National Treasury Management Agency of Ireland and the
Swedish National Debt Office which are entrusted with day-to-day management
responsibilities, the Ministry of Finance determines the policy, sets the operational
guidelines and the benchmarks under which the debt office is required to operate.
Governance issues promoting sound and professional approach towards debt

management, required debt offices to clearly define and disclose its objectives for debt
management, establishing an organizational structure that ensures clear accountability
and transparency of responsibilities with appropriate internal controls, and establishment
of a legal framework wherever possible. For enabling sound risk management practices,
most debt offices established prudent risk management strategy and policy, strengthened
middle office analytical capability, and defined a framework for risk management
ensuring consistency with other macroeconomic policies and objectives. Debt offices also
accorded priority to recruitment of trained staff, and selection and implementation of
effective management information systems.
2.9 Capability Building for Management of Public Debt and Contingent Liability
Continual upgrading of the information and communications technology (ICT) and the
professionals engaged in the management of public debt and contingent liabilities is
essential for maintaining debt sustainability over time. Once the public debt management
responsibility is centralized and a computerized debt recording system functions
efficiently, the main challenge is to develop a risk management office (or middle office).
Building a sound risk management capability within a sovereign debt management
operation can take several years given the experiences of even the developed countries
like Belgium, Colombia, Ireland, New Zealand and Sweden. However, there is no
uniform model which holds good for all countries and at all times. The system needs to
be country-specific and owned by the respective government and cannot be imported
directly from other countries.
Given that risk management skills are a scarce resource and training staff in this area is
very expensive, a strategy needs to be developed to hire new staff with these skills and to
have an intensive training program for existing staff. Appropriate wage-income policies
and succession plan also need to be formulated to retain these staff given their obvious
marketability or to replace a staff in the case of need. The manager or the head of the
middle office should also have strong technical and public policy skills.
A decision on whether to introduce specialist risk management software should be

deferred until risk management skills and a sound technical knowledge have been
built up within the debt offices. Rushing into these decisions may lead to the
establishment of a risk management framework without full understanding of the
alternative strategies or an understanding of how the designated software actually
works. There is also the question of compatibility of this software with the
management information systems.
25
2.10 International Best Practices for Policy Framework and Institutional Set Up
for External Debt Management
As regards policy framework, international best practices for the management of external
debt leads to the following broad conclusions:
(a) Management of external debt is closely related to the management of domestic

debt, which in turn depends on the management of overall fiscal deficit.
(b) Debt management strategy is an integral part of the wider macro economic
policies that act as the first line of defense against any external financial shocks.
So debt management policies need to be well coordinated with fiscal policies,
monetary policies, financial and capital market policies and overall macro-
economic policies.
(c) As regards institutional set up, nearly all of the autonomous debt management
offices have adopted an organizational structure similar to that in leading
corporate treasury and investment banks. They divide functional responsibilities
for managing transactions into different offices within the debt management
organization and established procedures to ensure internal control, accountability,
checks and balances. Usual practice is to establish separate front offices, middle
office, back office and head office, as explained earlier.
(d) International best practices also indicate that debt management offices generally
form a part of the Ministry of Finance, although the management of external
assistance from the IMF is the joint responsibility of the Ministry of Finance and
the Central Bank. A few developed countries have set up independent debt offices
outside the Ministry of Finance for management of both domestic and external
debt. However, a developing country will need a number of years before
migrating to such an independent system.
(e) Almost all the developing countries donot allow sub-national governments (states,
provinces, corporations, municipalities etc.) to borrow directly from external
sources, although public sector enterprises are allowed to borrow directly from
external sources, preferably without government guarantees.
(g)
(f) There is need to have a cautious approach on external short-term credit. In many
developing countries, like India, government does not resort to any short term
borrowing from external sources, although the public sector enterprises and the
private sector companies are allowed to borrow short-term credit externally
subject to certain conditions and prudential limits.
26
(g) For an emerging economy like Uzbekistan, it is better to put a limit on private
commercial borrowing with short and medium maturity.
(h)
(h) Big bullet loans are bad for small economies like Uzbekistan as these can create
refinancing risk and roll over problems in future.
(i) It is not enough to manage the government balance sheet well, it is also necessary
to monitor and make an integrated assessment of national balance sheet and to put
more attention on surveillance of overall debt- both internal and external, private
and public. During the last financial and foreign exchange crisis towards the end
of the last decade, in each of the major Asian crisis economies, viz. Indonesia,
Korea and Thailand, weakness in the government balance sheet was not the
source of vulnerability, rather vulnerability stemmed from the un-hedged sort-
term foreign currency debt of the private sector comprising commercial banks,
finance companies and corporate sector.
(j) It is not sufficient to manage the balance sheet exposures, it is equally important
to manage off-balance sheet exposures and contingent liabilities.
(k)
(l) It is necessary to adopt suitable policies for enhancing exports and other current
account receipts (tourism earnings and remittances) that provide natural hedge
and the means for financing imports and debt services.
(l)
(m)Detailed data recording and dissemination are pre-requisites for an effective
management and monitoring of external debt and formulation of appropriate debt
management policies.
(m)It is vital that external contingent liabilities and short-term debt are kept within
prudential limits.
(n) It is important to strengthen public and corporate governance and enhance

transparency and accountability by strengthening internal and external audit.
(o) It is also necessary to strengthen the legal, regulatory and institutional set up for
management of both internal and external debt.
(p) A sound financial system with well developed debt, money and capital markets is
an integral part of a country’s debt management strategy.
27
28
3. Uzbekistan- Current Economic Performance and Outlook7
3.1 Economic Performance and Poverty
Uzbekistan economy is currently in a resilient and rebound mood. Economy performed

very well since 2004 benefiting from favorable external environment and improved
policy framework. Uzbekistan suffered less economic shock from the dissolution of the
Soviet Union than did most other former Soviet republics because it avoided hasty
liberalization of the economy, and relied on an import-substitution trade regime that
prevented the collapse of domestic agriculture and manufacturing, which was a widespread
occurrence in other former Soviet Republics. It produces large amounts of cotton and gold,
and commodities of value on world markets. There was also an exchange rate regime which
complemented the regulation of trade regime and minimized capital flight.
The country achieved an average growth rate of nearly 8 per cent during 4 years 2004-
2007 with peak at 9.5 per cent recorded in 2007 (Table 3.2), compared to an average
growth rate of only 4.2 percent during 1999-2003. The increased productions and exports
boom of cotton, automobiles, gas, and metals served as the main drivers of growth
supported by favorable weather conditions and high world prices of cotton and metals.
Uzbekistan economy usually does well when the weather conditions are favorable and
international commodity markets are buoyant.
Higher growth coupled with a sharp decline in the population growth rate from 2% in the
1996-99 to 1.2% in 2000-07, led to an increase of annual per capita GDP growth, from
2% in the late 1990s to 6% in 2004-06 and 8% in 2007. Despite high economic growth,
employment generation and private consumption lagged behind and the incidence of
poverty remained wide-spread, as poverty ratio had been relatively growth-inelastic. This
implies that the so-called trickle down effects of high growth have been uneven, slow and
delayed in the case of Uzbekistan. A study made by Mckinley and Weeks (2007)
concluded that, although the growth performance of Uzbekistan in the post-independent
era was better than for similar former Soviet Union Republics (Table 3.1), there are
untapped potentials for achieving faster trend growth rates, and if more broadly based,
such growth could bring dramatic gains in employment and poverty reduction.
Table 3.1: Comparative Economic Performance of Uzbekistan, Annual GDP Growth (%)
Countries 1991-1994 1995-1999 2000-2006 1991-2006
Central Europe -3.3 3.2 4.5 2.1
Baltic states -11.7 4.8 8.0 2.1
Other Soviet Republics -15.4 0.2 9.2 0.3
Uzbekistan -6.8 1.1 5.1 0.9
Source: Mckinley and Weeks (2007)
7
This section is primarily based on (a) the Uzbekistan Country Brief 2008 prepared by the World Bank
(July 2008); (b) the ADB Country Report on Uzbekistan prepared by Iskandar Gulamov and Kiyoshi
Taniguchi of the Uzbekistan Resident Mission, ADB, Tashkent, for the real sectors; and (c) International
Monetary Fund (2008b) Republic of Uzbekistan: 2008 Article IV Consultation- Staff Report; IMF,
Washington, D.C., July 2008, for the financial and external sectors.
29
Table 3.2 Uzbekistan: Trends of Selected Economic Indicators in 2002-2007
Economic Indicators 2003 2004 2005 2006 2007 2008*

Growth rate of Real GDP (percent) 4.2 7.7 7.0 7.3 9.5 8.0
Growth rate of Nominal GDP (percent) 32.0 24.6 29.9 30.4 35.8 23.1
CPI inflation rate (%) official estimate 3.7 3.8 7.8 6.8 6.9 6-8
CPI inflation rate (percent) IMF estimate 7.8 9.1 12.3 11.4 11.9 11.0
Growth rate of reserve money (%) 26.7 38.7 87.5 36.5 44.9 28.4
Growth rate of broad money supply (%) 27.1 47.8 54.3 36.8 46.1 32.4
Growth rate of net foreign assets (%) 45.6 48.8 44.0 76.3 67.4 35.8
Growth rate of net domestic assets (%) -87.8 -50.5 -28.4 -148 -88.7 -38.4
Growth rate of net claims on govt (%) -1509 -114 -87.0 -145 -78.9 -56.8
Growth rate of credits to the economy (%) 6.9 10.8 15.8 4.3 16.7 30.8
Growth rate of exports of G&S (%) 28.4 28.1 12.0 18.0 40.7 22.1
Growth rate of imports of G&S (%) 8.9 26.8 4.4 13.8 44.3 28.9
As percentage of GDP at current mp
Revenue and grants (as % of GDP) 33.4 32.2 30.8 31.4 31.7 30.6
Expenditure and net lending (% of GDP) 33.9 32.1 31.1 30.9 30.2 31.1
Overall budget balance as % of GDP 0.1 0.6 1.2 2.2 2.1 -0.4
Augmented budget balance as % of GDP 0.1 0.6 1.2 5.2 5.1 5.0
Total Public debt as % of GDP 41.6 35.1 28.2 21.3 15.8 13.5
Public External Debt as % of GDP 38.7 32.0 25.2 19.8 14.7 12.5
Exports of goods & services as % of GDP 37.3 40.5 38.1 37.6 40.4 41.3
Imports of goods & services as % of GDP 30.6 32.9 28.9 27.5 30.3 32.7
Current account balance as % of GDP 8.7 10.2 13.7 17.3 19.2 16.6
FDI as % of GDP 0.7 1.6 0.6 1.1 3.3 3.5
External debt (as % of GDP) 42.0 36.2 29.1 22.7 17.6 15.4
Ext. debt service (as % of exports of G&S) 20.5 17.1 14.1 12.7 8.6 7.6
Ext. debt service (as % of FE reserves) 49.7 35.6 28.0 17.3 11.3 8.1
Memo Items:
GDP in sum trillion 9.8 12.3 15.9 20.8 28.2 34.7
GDP in US$ billion 10.1 11.9 14.2 17.0 22.2 26.6
Nominal GDP per capita (US$) 396 462 543 641 827 977
Nominal GDP per capita (US$ PPP) 1654 1808 1970 2154 2388
Income velocity of money supply (level) 10.5 9.5 8.4 7.6 7.3 6.5
Foreign exchange reserves (US$ Bln) 1.66 2.15 2.90 4.45 7.41 10.1
Forgn. Exch. Reserves (Months of imports) 5.1 6.3 7.4 7.9 10.2 11.8
End-period Exchange rate (UZ Sums/US$) 979 1058 1180 1240 1290
External debt outstanding (US$ million) 4249 4322 4133 3853 3913 4095
Year-End foreign exch. reserves (US$ bln) 1.66 2.15 2.90 4.46 7.41 10.14
Foreign exch. reserves (months of imports) 5.1 6.3 7.4 7.9 10.2 11.6
Exports of goods & services (US$ billion) 3.78 4.84 5.42 5.39 9.00 10.78
Imports of goods & Services (US$ billion) 3.10 3.93 4.10 4.67 6.74 8.67
External CAB (US$ Million) 861 1215 1949 2933 4267 4472
External capital balance (US$ Million) -414 -702 -1191 -1389 -2113 -1741
Population (million) 25.6 25.9 26.2 26.5 26.9 27.2
* Estimated. Source: International Monetary Fund (2008b) Republic of Uzbekistan: 2008 Article IV
Consultation- Staff Report; IMF, Washington, D.C., July 2008.
30
National poverty ratio (defined as percentage of persons consuming less than 2,100 kilo-
calories per day) declined by only 1.7 percentage points from 27.5% in 2001 to 25.8% in
2005 (Table 3.3). Poverty reduction was uneven in rural and urban areas. While urban
poverty ratio declined from 22.5% in 2001 to 18.3% in 2005, rural poverty ratio remains
more or less invariant around 30 percent over the same period. Consequently, the
difference between the poverty ratio in urban and rural areas grew from 8% in 2001 to
almost 12% in 2005. The rural population makes up 64.4% of the total population but the
proportion of the disadvantaged population living in rural areas is 74.7%.
This geographic distribution of the disadvantaged population highlights the large

differentiation in poverty rates between the regions as well as the fundamental difference
between Tashkent city and other regions of the country. The highest poverty rate in 2005
was in Karakalpakstan (44%) and the lowest one was in Tashkent city (6.7%), with the
second lowest being Ferghana oblast (15.8%) (Table 3.4).
Table 3.3 Poverty rate (2001– 2005), in %

Sectors 2001 2002 2003 2004 2005
Total 27.5 26.5 27.2 26.1 25.8
Urban 22.5 21.8 22.0 18.8 18.3
Rural 30.5 29.4 28.7 30.3 30.0
Source: Family Budget Survey (2001) as reported in IMF PRSP for Uzbekistan (2008)
Table 3.4 Geographic Distribution of Poverty in 2005 (in percent)

Territory/ oblast Poverty ratio Total population Disadvantaged
population (%)
Total 25.8 100 100
Urban 18.3 35.6 25.3
Rural 30.0 64.4 74.7
Karakalpaktan 44.0 5.1 8.7
Andijan 23.1 9.5 8.5
Bukhara 20.8 6.4 5.1
Jizzakh 29.6 3.7 4.3
Kashkadarya 41.0 8.5 13.5
Navoi 26.3 2.9 3.0
Namangan 33.4 7.9 10.2
Samakand 23.9 11.2 10.4
Surkhandarya 34.6 7.3 9.8
Syrdarya 32.6 2.4 3.0
Tashkent oblast 20.4 10.1 8.0
Ferghana 15.8 11.6 7.1
Khorezm 31.0 5.1 6.1
Tashkent city 6.7 8.2 2.1
Source: State Statistics Committee, as reported in IMF PRSP (2008)
31
As judged by the World Bank’s poverty line of 2 USD per day, around 45% of the Uzbek
population lived on less than 2 USD per day. Income inequality as judged by Gini
coefficient also remained high at 36.8 percent in 2003. The share of the lowest 10 percent
of the households in income or consumption was only 2.8%, while that of the highest
10% of the households was 29.6%.
As in many developing states, the most vulnerable groups in terms of poverty are rural
inhabitants, families with many children, the disabled, the unemployed, people with
lower level of education and households with women breadwinners. A common
characteristic of poor families is that the head of household is unemployed and they have
many children. Even employment does not always guarantee protection from poverty, as
50% of the poor families have an employed household head. However, being
unemployed sharply increases the potential for poverty.
A recent survey further revealed that “income-poor” in Uzbekistan can be “asset rich”.
For example, over 98 per cent of the population owns a house or flat, 86 per cent have
plots of land, 87 per cent have a TV set, 38 per cent have a refrigerator and 12 per cent
have a car.
Despite sustained high growth since 2004, Uzbekistan’s economy is underperforming

compared with other CIS economies. It is still the poorest country in the region, with
GDP per capita (at PPP) at only 40% of the CIS average. Its economic potential remains
significantly underutilized. Although geographic limitations (a large distance to major
markets) could provide a part of the explanation, major constrains for faster poverty
reduction and employment generation include lack of appropriate policies for the private
sector development.
3.2 Uzbekistan Economic Freedom Indices: The Heritage Foundation
Uzbekistan's economy is 52.3 percent free, according to Heritage Foundation 2008

assessment, which makes it the world's 130th freest economy. Uzbekistan is ranked 24th
out of 30 countries in the Asia–Pacific region, and its overall score is lower than the
regional average.
Uzbekistan has relatively high levels of fiscal freedom (88%), business freedom (67.8%),
and labor freedom (72.1%). The top personal income tax rate is moderate, the top
corporate tax rate is low, and overall tax revenue equals little more than 20 percent of
GDP. The labor market is flexible. Licensing and bankruptcy procedures are costly, but
opening a business is easy, and the average tariff rate is moderate.
Uzbekistan is weaker in monetary freedom (57.5%), investment freedom (30%), financial

freedom (20%), property rights (30%), and freedom from corruption (21%). Inflation is
disastrous, and the government controls the prices of a variety of goods through state
monopolies. Foreign investment is officially welcome, but opaque bureaucracy and
political interference create disincentives. The courts are subject to political interference,
and corruption is pervasive throughout the civil service.
32
3.3 Strengths, Weakness, Opportunities and Threats (SWOT)
A SWOT analysis of the Uzbekistan economy is presented in Table-3.4. It is evidenced

by the table that Uzbekistan has many strengths and opportunities to achieve higher
growth provided it continues with strict monetary discipline and fiscal prudence, it brings
the structural reforms for private sector development to their logical ends, and is able to
tackle the risks due to variations of international prices of its major exports such as
cotton, gold, copper and gas and major imports such as petroleum oil and food products.
3.4 Economic Growth and Inflation in 2007
Uzbekistan achieved a real GDP growth rate of 9.5% in 2007, supported by a growth of
6.1% in agriculture value added, 12.1% in industry, and 26.6% in services. Despite
deteriorating soil quality, rising grain harvests, higher world prices for cotton, and
increasing productivity from privatization of agricultural cooperatives helped agriculture
to grow by 6.1% in 2007.
Industrial growth was aided by increased production and exports of metals, gas, and
automobiles. Metals, country’s largest single export, received significant govt. investment
in recent years. Gas export volumes increased by 18%, and secured a 40% gain in export
prices. Overall, fuel and energy sub-sector grew by 10.1%. Automotive industry output
increased by 27%, driven by substantial government support through various tax
exemptions and subsidies.
Growth in services stemmed from increased revenues from gas transit, substantial
Russian-led investments in the communications, and significant construction activities in
housing and infrastructure.
High inflation remained as a major problem for both the government and the Central
bank. Although the official estimate of the Consumer Price Index (CPI) based inflation in
2007 was 7%, the IMF estimated CPI inflation at 12.3%8, caused by a marked expansion
in the money supply, increases in administered prices, public sector wage rises, and
unproductive expenditure related to the general election. The authorities responded by
further tightening the monetary and fiscal discipline, reducing the pace of sum
depreciation, and limiting the pass-through of higher international food prices through
administered prices.
8
The divergence between official estimate of inflation (6.8%) and the International Monetary Fund (IMF)
estimate (11.4%) was almost the same in 2006. In general, IMF estimate of CPI inflation is about five
percentage point higher than the official estimate of CPI inflation. IMF states that its estimates are
consistent with other available information, including producer prices, GDP deflators, wage increases,
growth in monetary aggregates, and utility price increases.
33
Table-3.4 SWOT Analysis of the Uzbekistan Macro-economy
1. Sustained high GDP growth averaging around 8% since 2004.
2. Cotton, metals, gas, construction are the leading sectors.
Strengths 3. Favorable fiscal situation, with overall fiscal surplus in recent years.
4. Strict monetary discipline
5. Declining ratios of public debt to GDP (estimated 13.5% in 2008)
6. Enabling environment for FDI and public-private partnership.
7. Favorable fiscal reforms with simplified rules and tax cuts.
8. Improvement in budgeting system and planning with introduction of
medium-term budgeting, adoption of GFSM-2001 budget classification
and switch to standard accounting and auditing rules.
Internal environment
9. High levels of fiscal freedom (88%), business freedom (67.8%), labor

freedom (72.1%) and flexible labor markets.
10. Moderate personal income tax rate and low corporate tax rate.
1. Land locked economy with long distances to major growth centers in the
neighboring economies
Weaknesses 2. Growth is not broad-based with high dependence on exports of cotton,
metals and gas.
3. High cost economy due to rising utility prices and substantial increase in
wages and salaries
4. Underdeveloped money markets, and despite high growth rates of money
supply, the degree of monetization is low.
5. Notwithstanding recent progresses, the financial system remains under-
developed with low intermediation.
6. Difficult business environment, with costly licensing and bankruptcy
procedures. Ranked the 138th in 2008 in the world as per the latest World
Bank Doing Business Report.
7. Low levels of domestic savings (around 23% of GDP)
8. High poverty ratio (28%) and inequality index (Gini ratio 36.8%)
34
Opportunities 1. Average tariff rate is moderate.
2. Comfortable foreign exchange reserves (equivalent to 10.2 months of
imports at the end of 2007 and estimated 11.6 months of imports in 2008)
3. Declining ratios of external debt to GDP
4. Declining and low external debt service ratios (8.6% in 2007 and 7.6% in
2008) indicating sustainability of external debt over time (and possibility
of no debt trap).
5. Despite downside risks, international commodity prices are expected to
External environment
remain buoyant in the near term, and the growth prospects of the
neighboring economies, having pulls on the Uzbek economy, are bright...
6. The Uzbek economy remains insulated from the global financial crisis
because of its limited integration with the world financial markets.
Threats 1. Economy is heavily dependent on external trade of a few items, whose
prices are volatile and subject to global business cycles.
2. Overall GDP growth and government revenue remain vulnerable to terms
of trade shocks trigged by possible sharp declines in international prices of
cotton, metals and gas in future.
3. Business environment is not so favorable and doing business in Uzbekistan
is not easy due to restricted trade and business practices.
4. Balance of payments remains vulnerable to future risk of further hardening
of global prices of food grains and petroleum products
5. Foreign investment is officially welcome, but opaque bureaucracy and
political interferences create disincentives for FDI inflows.
3.5 External Sector Performance in 2007
Balance of payments situation remained very comfortable for recent years. Uzbekistan
always maintained an external current account surplus, which amounted to $4.3 billion in
2007, amounting to 19.2% of GDP, aided by commodity exports boom and significant
rise in remittances. Exports of gold, cotton, and energy (mainly gas), accounted for 56%
of total exports of goods in 2006 and also performed well in 2007 due to strong external
demand and soaring international prices in 2007. As one of the world’s largest producers
and exporters of gold, Uzbekistan benefited from the metal’s record prices in 2007.
Remittances represent another significant foreign currency source, and come primarily
from Uzbeks working in Kazakhstan and the Russian Federation.
Foreign Exchange Reserves increased to a record level at $7.4 billion, equivalent to 10.2
months of imports of goods and services at the end of 2007. Because of a conservative
external borrowing policy followed by the govt, external debt to GDP ratio declined to
17.6% of GDP by end-2007.
Substantial current account surplus and foreign direct investment inflows put upward
pressure on the exchange rate of Uzbek sum. The central bank intervened in the foreign
exchange market to prevent a nominal appreciation of the sum, against the US dollar,
continuing a policy aimed at boosting exports. During 2007 the “sum” depreciated by
about 4% against the dollar.
3.6 Money Supply and Banking Operations
35
Rise of foreign exchange reserves by $3 billion in 2007 created pressures on growth in
bank liquidity and monetary expansion. The central bank expanded its open-market
operations, by selling central bank certificates. The impact of these operations, however,
was partly offset by a reduction in reserve requirements for local deposits from 15% to
13%. Money supply grew rapidly by 46% on top of 36.8% growth in 2006. Although
general confidence in the banking system has been rising, the ratio of broad money (M2)
to GDP is low (about 16% in 2007), which suggests that banking still plays a relatively
minor role in the economy.
The policy of checking taxpayers’ bank accounts by the tax authorities undermines
confidence in banking. As a part of anti-inflationary efforts, the central bank puts limit on
the volume of cash that depositors may withdraw, which induces greater holdings and
transactions in cash.
3.7 Fiscal Situation and Reforms
Fiscal policy was prudent in 2007 and the outcome was better than budgeted. The
consolidated general government budget recorded a surplus of 2.1% of GDP in 2007,
marginally lower than 2.2 percent in 2006, due to deceleration in revenue growth and rise
of expenditure caused by an increase of wages and pensions twice in 2007, by 25% in
August 2008 and by 20% in November 2008, although these were counterbalanced by
some moderation in planned capital spending. The augmented fiscal surplus, combining
the consolidated government and the Fund for Reconstruction and Development (FRD),
remained unchanged around 5 percent of GDP compared with a budgeted deficit of 1
percent of GDP.
The strong budget performance in the past 2 years was driven by tax reforms, growing
customs receipts, and increases in utility prices. However, still more revenue
strengthening is required as the Govt is committed to raise all public sector wages,
pensions, and social benefits by 150% by 2010, relative to 2006.
Fiscal Reforms
Fiscal and financial reforms progressed further in 2007-2008. There was a concerted
effort to increase bank capitalization. Treasury modernization continued under the
ongoing technical assistance project, as did tax reforms. Further the restructuring of
“shirkats” into private farms was completed. According to the World Bank’s Doing
Business 2009 Report, Uzbekistan improved its ranking and jumped from the 145th place
in 2007 to 138th place in 2008 thanks to establishing a private credit bureau and a public
credit registry to share credit information among financial institutions. These measures
have significantly improved access of population to credit resources. The report also
notes that adoption of new Tax Code and decrease of tax burden resulted in decrease of
income tax and single tax payment in 2007.
In Jan 2008, Parliament approved a revised tax code. As a part of policies to reduce the
tax burden, the rate of unified tax for micro- and small enterprises was reduced from 10%
36
to 8%, and the rate of corporate income tax for banks was lowered from 17% to 15%. The
new code also introduced an excess profits tax for “subsurface users” extracting or
producing cathode copper, cement, polyethylene granules, and gas. The tax rates are 60%
for cathode copper and 75% for all other commodities. The taxable base for the excess is
defined as the difference between the price set by legislation and the selling price.
The Government established a treasury, which, under a public finance reform

management project, is setting up a treasury single account and is streamlining the budget
execution mechanism. In 2007, it implemented treasury operations at the regional level,
closed thousands of accounts of spending units, and introduced territorial single treasury
accounts. The major medium-term challenge is to consolidate all government fiscal
accounts into a single account, including those of the Government’s extra-budgetary
funds.
A Reconstruction and Development Fund (RDF) was established in 2006 with capital
targeted to reach $1.0 billion by 2010.It had already reached $1.2 billion at end-2007
because of a strong budgetary position. Eight high-priority investment projects have
been approved for financing from RDF funds in 2008, mainly in the chemical and
hydrocarbon sectors. RDF’s role in these projects will focus on procuring capital goods.
37
3.8 Medium Term Economic Forecasts
Assuming that world prices of gold, cotton, and gas would stay buoyant over the next
couple of years, there would be no destabilizing factors either at home or abroad, and
there would be no monsoon failures, economic prospects of Uzbekistan in the near and
medium terms are considered to be bright. According to the assessments made by the
IMF, risks to the 2008 economic outlook of Uzbekistan appear to be limited with strong
growth prospects of its major trading partners. Despite downside risks, international
commodity prices are expected to remain buoyant. The Uzbek economy remains
insulated from the global financial crisis because of its limited integration with the world
financial markets. The IMF Staff analysis suggests that a 10 percent decline in
international commodity prices would lead to a reduction of the Uzbekistan current
account surplus and government revenues by only 1 percentage point of GDP each.
According to forecasts made by IMF, healthy external demand and surging commodity
prices, coupled with greater remittances and import controls, are expected to keep the
current account surplus at 16.8% in 2008 and 12.9% in 2009.
The medium term outlook is also favorable. The authorities target 8-9 percent export-led
growth over the medium term, which appears to be feasible. These ambitious targets will
be achieved through consolidating macroeconomic stability, modernizing various sectors,
improving physical and social infrastructure, attracting more FDI, enhancing the role of
private sector and public-private partnership.
The conservative fiscal stance is expected to be continued by the government, leading to

fiscal surplus and so assisting monetary policy efforts to control high inflation. However,
the central bank’s commitment to currency depreciation to support exports are likely to
lead to persistent rapid expansion in money supply. Excessive money supply along-with
planned increases in utility tariffs are expected to create inflationary pressures.
3.9 Development Challenges
Since 2004 the Uzbekistan economy had been buoyant with high economic growth and
surplus on both domestic and external current accounts. But, it has also led to various
development challenges such as how to contain the inflationary pressures, how to sustain
high growth with strict monetary discipline and fiscal prudence, how to promote
equitable growth and to raise the levels of living of all citizens, how to eradicate poverty
and unemployment at a faster speed, and how to create enabling environment for public-
private partnership and international cooperation in the development process.
The authorities have made significant progress in macroeconomic adjustment, but have
further scope for improving the macroeconomic policy mix, particularly in regard to anti-
inflationary measures and movement towards full convertibility of Uzbek Sum on current
account transactions. The reforms backlog suggests that the economy is underperforming,
although it is now moving along a higher growth profile. If the structural reforms needed
for private sector-led growth are carried out to their logical ends, Uzbekistan can become
38
one of the most dynamic economies in central Asia and can achieve still higher growth
along-with faster reduction of poverty and unemployment.
Favorable economic conditions with large foreign exchange reserves, a low level of
external debt, and positive fiscal balance put the government in a comfortable position to
push through long-awaited reforms aimed at deepening industrial diversification, banking
and trade liberalization, and private sector development. The authorities are in a position
to exploit the present growth momentum and substantially expand reform initiatives in
order to secure sustainable high growth for the longer term.
39
4. QUESTINNAIRE for All Stakeholders of External Debt in Uzbekistan
In the light of the above discussions and the scope, purpose and objectives of the study,
please provide brief replies to the following Questionnaire. It is assured that the
information will be used for only the World Bank study and would not be disclosed to
any other authorities or public without prior approval of the concerned authorities.
QUESTINNAIRE
A. Debt Recording, Analysis and Debt Statistics: Coverage, Scope and Quality
A.1 Which of the following debt recording systems is being used by the Uzbek Govt? Are
you fully satisfied with the system? What are its particular advantages and limitations?
Given choice, would you like to have another system? If yes, why? Give reasons.
(a) Commonwealth Secretariat Debt Recording and Management System
(b) UNCTAD Debt Management Financial and Analysis System
(c) Other system developed by the government
A.2 What are the major components of external debt considered by the government?
A.3 Verify Tables-1.1, 1.2 and 1.3 in section-1 and update for the years 2006-2008.
A.4 Fill in the table below the outstanding external debt under different heads at the most
recent date:
Table-4.1: Outstanding External Debt as on ___________________________
External Debt of Uzbekistan Amount in Uzbek Amount in US$
Soum (billion) (million)
1. Public and publicly guaranteed
(a) Official creditors
(i) Multilateral
--- Concessional
(ii) Bilateral
--- Concessional
(b) Private creditors
(i) Bonds
(ii) Commercial banks
2. Private non-guaranteed
(i) Bonds
(ii) Commercial banks
3. Short term debt
4. Non-residents’ deposits
5. Others, if any, please specify
A.5 Indicate the sectoral use of external debt for the latest five years.
A.6 Provide the interest rate mix of outstanding external debt for the latest five years.
A.7 Provide the maturity mix of outstanding external debt for the latest five years.
A.8 Provide the currency mix of outstanding external debt for the latest five years.
40
B. Debt Monitoring and Reporting: Transparency
B.1 For each of the components of external debt indicated in the table, which institutions
are responsible for recording and reporting the information?
B.2 Which institutions can instantaneously retrieve from their databases up-to-date
information for the items listed below? Which documents report such figures? What is
the time lag in reporting?
(a) Outstanding external debt by creditor and debtor classifications
(b) External debt by sectors
(c) Guaranteed external debt by sectors
(d) Total debt services- classified by amortization and interest payments
B.3 Which types of external debt, in your view, not reported to the following and why?
Give reasons for not reporting. Reasons could be “not available, in public interest,
official secrecy, national security” etc.
(a) Ministry of finance
(b) Cabinet
(c) Central bank
(d) Parliament
(e) Foreign investors
(f) Public
C. Guarantees and other Contingent Liabilities
C.1 Contingent liabilities include government guarantees, and financial losses of

institutions that are covered by some type of government guarantee, state insurance and
social security programs, and all government commitments to spend or intervene or bail
out financial or other strategic institutions financially in the future. Contingent liabilities
can be broadly groups under two heads: explicit (defined by a law or contract) or implicit
(broadly predetermined by public expectations and pressures by interest groups).
(a) Which Ministry/ Department is responsible for deciding on government

guarantees and other contingent liabilities?
(b) Are there written documents on the scope and various aspects relating to
government guarantees and other contingent liabilities? If yes, give details and
provide copies of such documents.
C.2 Is the government legally required to explain the amounts of government contingent
liabilities? If yes, specify the Act and Legislation. Also specify to whom these are
reported- to the Parliament, to the public, and others (please specify).
41
C.3 Tick (√) the types of contingent liabilities borne by the government.
1. Government guarantees given to loans taken by:

(a) Sub-national governments (i.e. provinces and local governments)
(b) Government operated or controlled corporations,
(c) Public sector banks and financial institutions
(d) Entities under public-private partnership
(e) Private sector entities
1. Umbrella government guarantees for various types of loans in priority sectors

(mortgage loans, student loans, and loans to agriculture, housing, micro
enterprises, and other priority sectors)
2. Exchange rate guarantees issued by the government for external loans or foreign
currency denominated non-residents’ or residents’ deposits with banks
3. Government guarantees on various types of risks (including market, currency,
regulatory, political etc) in BOT contracts in infrastructure
4. State insurance and social security schemes such as deposits insurance, health
insurance, private pension funds, crop insurance, natural calamity insurance, war-
risk insurance etc., Funds for old age, children, women, unemployment
allowances etc.
5. Guarantees on benefits (unfunded liabilities) of the social security system (public
pension and provident funds)
6. Others, if any, please specify
C.4 Describe the following in details:

(a) Government guarantees: the requirements for their design (the type of risks that
can be covered, the extent of required risk sharing), issuance authority (is only
the ministry of finance authorized?), government control mechanism (required
reports from the creditor and beneficiary, and audit, accounting and valuation
requirements), guarantee fees, and realization mechanism if they fall due.
(b) Sub-national governments, public sector agencies and enterprises, and state-
guaranteed institutions: the financial management and reporting requirements
and government control mechanism
(c) Demands and pressures on the government to extend ad hoc, previously
unforeseen financial support: the legal requirements and practice for deliberation
in government decision making.
C.5 Classify guarantees by sectors such as industry, transport, telecommunications,

power, banking and insurance, social sectors, urban development, real estate, housing and
construction etc.
C.6 Specify top 5 major guarantees given by the state with their face value, the issuer
(MOF or other government agency), beneficiaries, creditors, currency of denomination,
types of risk covered, risk sharing etc.
42
C.7 List major 5 state-guaranteed institutions and provide statement of their contingent
liabilities at the latest date. What type of other government support (financial or non-
financial) do these institutions receive (for example, privatization revenues, supply of
land and public utilities at concessional rates, deferment or exemption of government
taxes and duties, tax holidays, cheap financing via the banks and financial institutes, state
guarantee for borrowings)?
C.8 List 5 large state-owned enterprises and large state-owned banks that receive
government guarantees and provide statements of their contingent liabilities at the latest
date. What type of other government support do these institutions receive (for example,
additional capital support, cheap financing from the Central Bank, sovereign guarantee
for borrowings)?
D. Legal System and Institutional Set Up: Accountability
D.1 Does the government of Uzbekistan have an Act or Cabinet approved Guidelines or
any other written document on the scope, objectives, purpose, policies, strategies,
processes, legal framework, and institutional arrangements etc. relating to external debt
or public debt and related contingent liabilities? If yes, provide details and give a copy of
the same.
D.2 As per the government document, one of the main functions of the Ministry of
Finance (MOF), Government of Uzbekistan, includes the following: “in the framework
of state debt management together with the Central Bank, MOF carries out monitoring,
counting and servicing of internal debt of the Republic of Uzbekistan, submits
suggestions to the Cabinet of Ministers of the Republic of Uzbekistan about
improvement of the structure of government debt, acts as a government securities issuer,
develops and approves legislative acts for securities issuance, manages external debt,
develops top parameters of government external loans, prepares and submits guarantees
of the Government of the Republic of Uzbekistan, organizes fulfillment of loan and other
contract obligations to external creditors, carries out records and control over use and
servicing of foreign credits attracted or guaranteed by the Republic of Uzbekistan”.
(a) Please indicate the exact institutional arrangements for these functions. International
experience suggests that centralized debt offices in most of the countries are located
under the Ministry of Finance. What is the arrangement in the government of
Uzbekistan? Give details and indicate constrains (in terms of staff, skill, information gaps
and communications technology etc.) if any.
D.3 Are there any legal requirements that the government estimate, account, and report
the external debt, guarantees and other contingent liabilities to the Cabinet, to the
Parliament and to the Public? If yes, specify the Act and Legislation.
D.4 Is their any government Website on various aspects of public debt, external debt and
related contingent liabilities, which can be easily accessed by anybody without paying
any fee? If yes, indicate the website. If no, is their any plan in the government to do so?
43
D.5. Which of the components of external debt and contingent liabilities are not regulated
by any law and depend fully on ad hoc government decisions?
D.6 International best practices suggest that debt management functions should be
organized as separate and independent units given their different objectives,
responsibilities and staffing needs. Usual practice is to establish a separate front
office, middle office, back office and head office9 as in the case of investment banks
and other financial institutions. Does the government of Uzbekistan have such distinct
offices? If yes, indicate their locations, staffing pattern and functions. If not, who
performs all these functions of external and public debt management? Provide details.
D.7 For each component of external debt, specify the departments/ institutions which act
as the Head Office, Front Office, Middle Office and Back Office for the management of
external debt.
E. External Debt Management Policies, Strategies, Practices, Methods and Systems
E.1 Is there any law on the Fiscal Responsibility and Budget Management10 which
indicates upper limits on annual borrowing, guarantees and fiscal deficit, and outstanding
public debt and guarantees? If yes, give details. If not, would the MOF prefer to have
such limits in the annual budget? Would it be possible to enact such an Act in the
Parliament?
E.2 In which areas and under what circumstances does the Ministry of Finance resort to
external borrowing beyond the budgeted amount? What kind of approvals is required
from the Cabinet and Parliament for this kind of external borrowing?
E.3 What is the audit and accounting system for public debt and external debt? Are their
both internal and external auditors? Is there Audit by independent auditors? Would the
9
The front office is responsible for the efficient execution of all portfolio transactions and negotiations
with lenders consistent with the portfolio management policy of the agency. The middle office (or risk
management office) is responsible for identification, measurement and monitoring of debt and risk,
establishment of benchmarks, dissemination of data and policy formulation for both short and medium
term and public and private debt. Back Office is responsible for accounting, auditing, data consolidation
and the dealing office functions for debt servicing. Head Office is the final authority to approve all public
debt- both domestic and external.
10
Most of the international best practices dealing with sovereign debt (such as the IMF Guidelines for
Public Debt Management- the “IMF Guidelines”, prepared by the Staffs of the International Monetary
Fund and the World Bank, 21 March 2001) is concerned with the management of public or government
debt in total, not just external debt. Likewise, most of the legal systems and laws deal with the total public
debt. This is quite evident from the titles of such laws such as Public Finance Law, Fiscal Responsibility
Law, Fiscal Responsibility and Budget Management Act, Financial Management and Accountability Act,
Budget Law, Fiscal Prudence and Transparency Law etc . The World Bank maintains a list of such laws on
their website http://www1.worldbank.org/publicsector/pe/countrybudgetlaws.cfm
.
44
government departments and public enterprises and the private sector prefer adoption of
the Generally Accepted Accounting Principles (GAAP) being followed in the USA?
E.4 Does the Annual Budget provide details of annual and outstanding external debt (in
both book value and current exchange rates)? Does it also provide a Statement on Fiscal
Risk (Off-Budget liabilities)? If not, would the MOF prefer to place such statements?
E.5 While considering alternative sources of government finance, do the Ministry of

Finance, Cabinet, Central Bank or Parliament
• Quantify the future fiscal cost of alternative options in any medium-term fiscal
framework?
• Describe the risks of alternative options?
E.6 List examples when the government withstood political pressure and did not provide
financial support beyond the budgeted figures (for example, when the government
refused bail out a loss-making enterprise or bank).
E.7 Are public enterprises and banks, state-guaranteed institutions, and creditors and
beneficiaries under state guarantees “rewarded” and “punished” for the quality of their
risk management? Provide examples.
E.8 It is understood that the pension, insurance and provident funds not fully funded and
“pay as you go” approach as in the case of the most developing countries is adopted.
Would the MOF like to have a fully funded system in the medium term?
E.8 It is understood that a full-fledged Public Debt Management Office does not exist in
the Philippine government. Would the MOF like to establish such an office as per
international best practices?
E.9 For effective governance and risk management of external debt, most of the
developing countries like India donot allow Sub-national or provincial governments to
borrow directly from the external sources. Only the Central government borrows from
multilateral and bilateral sources and then on lends money to the provinces and local
governments. What is the system in Uzbekistan?
E.10 In many developing countries like India, government does not borrow from
external private commercial sources (syndicated banks, foreign institutional investors
etc) and also does not resort to short-term external borrowing. The government borrows
from only multilateral and bilateral sources on long terms. Many Governments do not
issue bonds and shares directly in the international stock markets although they may
allow purchase of limited domestic government securities (G-Secs) by non-residents and
Foreign Institutional Investors (FIIs) and allow public sector and private enterprises and
financial entities to raise capital from foreign stock markets or from foreign commercial
banks and investment companies. What is the system and what are the procedures as
regards external commercial borrowing and short-term borrowing in the government of
Uzbekistan?
45
E.11 Tick (√) the options (most appropriate for Uzbekistan) in the following
Table11:
Items Per
Items Tick (√) the most
appropriate options- You
may tick multiple options
1. Public Debt management objectives and priorities
(a) To minimize financial costs and risks to the economy
(b) To minimize financial costs and risks to the government
(c) To raise funds for financing government budget
(d) Development of financial and capital markets
(e) Others if any, please specify
2. External Debt management objectives and priorities
(a) To minimize financial costs and risks to the economy
(b) To minimize financial costs and risks to the government
(c) To raise funds for financing government budget
(d) Management of overall public debt
(e) Allow public and private sector companies to raise
capital from external markets
(f) Management of balance of payments
(g) Management of foreign exchange reserves
(h) Others if any, please specify
3. Establishment of benchmarks for risk management
(a) Has established guidelines for risk management
(b) Has established benchmarks for foreign currency debt
(c) Has established benchmarks for portfolio performance
(d) Has established benchmarks for domestic debt
(e) Has established benchmarks for interests mix
(f) Has established benchmarks for maturity mix
4. Objectives of Risk Management Guidelines
(a) To establish limits on currency risk
(b) To smooth maturity profile
(c) To avoid excessive short-term debt
(d) To incur debt in least volatile currency
(e) To fix limits on debt with floating interest rate
(f) To maintain debt matching foreign exchange reserves
(g) Others if any, please specify
5. Analytical techniques for undertaking risk analysis
(a) Has establish Middle Office to conduct risk analysis
(b) Not using any analytical techniques
(c) Uses Value-at-Risk (VAR)/ Cost-at-Risk (CAR)
(d) Uses Debt Sustainability Indicators
(e) Conducts debt stress tests
(f) Others if any, please specify
11
The Table is based on the World Bank Survey on Second Sovereign Debt Management Forum (1999).
46
6. Constraints for establishing benchmarks Tick (√) the most
(a) Lack of debt management policy and strategy
(b) Lack of debt management expertise
(c) No access to financial and bond markets
(d) Lack of debt monitoring
(e) Lack of appropriate Information Technology (IT)
(f) Difficult economic environment
(g) Difficult political environment
(h) Others if any, please specify
7. Use of derivatives to hedge currency/ interest rate risks
(a) Uses currency swaps
(b) Uses interest rate swaps
(c) Use of exchange commodity futures and options
(d) Others if any, please specify
8. Constraints for using derivatives
(a) Lack of technical knowledge
(b) Undeveloped financial and capital markets
(c) Legal constraints
(d) Political constraints
(e) Others if any, please specify
9. Institutions managing the foreign currency debt
(a) Ministry of Finance
(b) Central Bank
(c) Jointly by the Ministry of Finance and the Central Bank
(d) Independent Debt Office
10. Coordination of both public and private debt
(a) By the Ministry of Finance
(b) By the Central Bank
(c) Jointly by the Ministry of Finance (MOF) and the
Central Bank (CB)
(d) Debt Management Committee
11. Highest authority for approval of public debt Component of Component
Domestic Debt of External
(Specify) Debt
(Specify)
(a) President
(b) Parliament
(c) Cabinet
(d) Inter-ministerial board
(e) Prime Minister
(f) Finance minister
(g) Governor of the Central Bank
(h) DG of independent authority
47
12. Average time taken for approval of external debt Tick (√) the most
(a) Less than a week
(b) Less than a month
(c) More than a month, but less than three months
(d) More than three months
13. Management of Contingent liabilities
(a) Sub-national entities are allowed to raise their own
funding from abroad
(b) Sub-national entities are not allowed to raise their own
funding from abroad
(c) Central govt provides explicit guarantees for IBRD
loans taken by public sector enterprises
(d) Central govt provides explicit guarantees for other
multilateral and bilateral loans by PSEs
(e) Central govt bears fully the exchange rate risk for IBRD
external loans taken by public sector enterprises
(f) Central govt bears fully the exchange rate risk for other
(g) Central govt shares partially the exchange rate risk for
(h) Central govt shares partially the exchange rate risk for
external loans taken by any enterprises
(i) Central govt does not bear any foreign exchange risk
14. Efficiency of Middle Office
(a) There is no Middle Office Unit
(b) There exists a Distinct Middle Office Unit
(c) Middle Office is placed under the direction of the Front
Office or Back Office
(d) Middle Office exits but lacks appropriate technical skill
and appropriate software and hardware
(e) Uses Market Information system (MIS)
(f) Has Access to internet
(g) Maintains Government Website for Public to provide
information on external debt and public debt
15. Main constraints for external debt management
(a) Lack of proper organizational structure
(b) Macroeconomic risk
(c) Political risk
(d) Lack of technical staff in the front office
(e) Lack of technical staff in the middle office
(f) Lack of technical staff in the back office
(g) Front, back and middle offices are not independent
(h) Lack of legal framework
(i) Limited local debt and bond markets
(j) Limited domestic capital markets
(k) Limited domestic money and financial markets
48
centage in
F. Risk Management: Capacities and Systems
F.1 Describe the capacities of the ministry of finance, other government agencies, public
sector institutions and enterprises, and state-guaranteed institutions to evaluate domestic
and external debt and control the associated contingent liabilities.
F.2 Is there any Contingency Liability Fund or Government Reserve Fund for assuming
the contingent liabilities in the case of defaults?
F.3 Is there any system for provisioning for contingent liabilities under prudential norms
either by the guarantee agencies or by the government?
F.4 What steps do the Ministry of Finance and other agencies undertake to prevent fiscal
risks arising from the public and private sectors (for example, are any actions taken if
enterprise debt or central bank obligations appear to be too high)?
F.5 It is understood that the budget is formulated on the basis of cash accounting. Does
the MOF desire to move towards accrual accounting in the medium or long term as per
requirements under the IMF Revised Government Finance Statistics 2000?
F.6 Do you consider any of the previous loans to be very expensive as compared to
current rates of interest either in domestic capital markets or in international markets?
F7. Have any considered any debt to be restructured? If yes, give details.
F8. Do you consider the existing systems and procedures at the MOF and the Central
Bank to be adequate for efficient management of external debt? If not, what
improvements do you like to have? Give details.
F9. It is understood that both World Bank and UNDP are providing technical assistance
and development funds to the MOF and the Central Bank for structural reforms and
improving macro stabilization policies. Do you like to have additional technical
assistance from the World Bank, ADB, IMF, UNDP and other development partners for
governance reforms and capacity building for the management of external debt?
49
ANNEX-1:
Country Policy and Institutional Assessments (CPIA) for External Debt
50
Selected References
Asian Development Bank (2008a) Asian Development Outlook 2008, Country Report on
Uzbekistan, ADB, Manila.
Asian Development Bank (2008b) Uzbekistan, pp.400-404, Key Indicators of Developing

Asian and Pacific Countries, ADB, Manila
Advameg Inc. (2008) Uzbekistan- An Overview of economy.
Das, Tarun (1999a) East Asian Economic Crisis and Lessons for External Debt Management,
pp.77-95, in External Debt Management, ed. by A. Vasudevan, April 1999, RBI, Mumbai, India.
Das, Tarun (1999b) Fiscal Policies for Management of External Capital Flows, pp. 194-207, in
Corporate External Debt Management, edited by Jawahar Mulraj, December 1999, CRISIL,
Bombay.
Das, Tarun (2000) Sovereign Debt Management in India, pp.561-579, in Sovereign Debt
Management Forum: Compilation of Presentations, November 2000, World Bank,
Washington D.C.
Das, Tarun (2003a) Off budget risks and their management, Chapter-3, Philippines
Improving Government Performance: Discipline, Efficiency and Equity in Managing
Public Resources- A Public Expenditure, Procurement and Financial Management
Review (PEPFMR), Report No. 24256-PH, A Joint Document of The Government of
the Philippines, the World Bank and the Asian Development Bank, World Bank
Philippines Country Office, April 30, 2003.
Das, Tarun with Raj Kumar, Anil Bisen and M.R. Nair (2003b) Contingent Liability
Management- A Study on India, pp.1-84, Commonwealth Secretariat, London.
Das, Tarun with Usha Thorat and Charan Singh (2003c) Management of Public Debt
in India, pp.85-110, in Guidelines for Public Debt Management: Accompanying
Document and Selected Case Studies, 2003, IMF & World Bank, Washington D.C.
Das, Tarun with Anil Bisen (2003d) Management of External Debt in India, in External
Debt Statistics- Guide for Compilers and Users, 2003, IMF, Washington D.C.
Das, Tarun (2005a) International Cooperation Behind National Borders- A Case Study
for India, pp.1-50, Office of Development Studies, UNDP, UN Plaza, New York, 2005.
Das, Tarun (2005b) Management of Public Debt, External Debt and Medium Term Expenditure
Framework for the Government of Samoa, pp.1-35, presented at the National Workshop on
External Debt Management, organized jointly by UN-ESCAP and the Ministry of Finance,
Government of Samoa, at Apia, 20-22 August 2005.
51
Das, Tarun (2005c) Management of External Debt in India and Lessons for Other Developing
Countries, pp.1-35, UN Economic and Social Commission for Asia and Pacific, Bangkok.
Das, Tarun (2005d) Management of External Debt and Medium Term Fiscal Framework for the
Government of Indonesia, presented at the Multi-stakeholders Consultation on the External Debt
and Fiscal Responsibility Law, organized jointly by the United Nations Institute for Training and
Research (UNITAR), the Australian Agency for International Development (AusAID) and the
Ministry of Finance, Government of Indonesia, at Jakarta, 28 November- 2 December 2005.
Das, Tarun (2006a) Management of External Debt: International Experiences and

Best Practices, pp.1-46, Best Practices series No.9, United Nations Institute for
Training and Research (UNITAR), Geneva, January 2006.
Das, Tarun (2006b) Governance of Public Debt- International Experiences and Best
Practices, pp.1-23, Best Practices series No.10, United Nations Institute for Training
and Research (UNITAR), Geneva, January 2006.
Das, Tarun (2006c) Management of External Debt and Medium Term Fiscal Policy Framework
for the Government of Cambodia, presented at the National Workshop on External Debt
Management, organized jointly by UN-ESCAP and the Ministry of Finance, Government of
Cambodia, at Phnom Penh, 21-22 February 2006.
Das, Tarun (2006d) Management of External Debt and Medium Term Fiscal Policy Framework
for the Government of Lao PDR, presented at the National Workshop on External Debt
Management, organized jointly by UN-ESCAP and the Ministry of Finance, Government of Lao
PDR, at Vientiane, 23-25 February 2006.
Das, Tarun (2006e) Management of External Debt and Medium Term Fiscal Policy Framework
for the Government of Nepal, presented at the National Workshop on External Debt Management,
organized jointly by UN-ESCAP and the Ministry of Finance, Government of Nepal, at
Katmandu, 24-28 May 2006.
Das, Tarun (2006f) Management of External Debt and Medium Term Fiscal Policy Framework
for the Government of Malaysia, presented at the International Conference on Global Economic
Prospects,, organized by organized by the Malaysian Institute of Economic Research (MIER), at
Kuala Lumpur, 5-7 December 2006.
Das, Tarun (2008a) Financial Planning - Part-1: Methodology, pp.1-34, and Financial Planning
Methodology and Policies- Part-2: Policies, pp.1-32, ADB Capacity Building Project on
Governance Reforms, Ministry of Finance, Government of Mongolia, Ulaanbaatar, Jan 2008.
Das, Tarun (2008b) Medium Term Macroeconomic Framework and the Debt Sustainability
Analysis for the Government of Gambia, presented at the National Workshop on Debt
Sustainability Analysis, organized jointly by the Commonwealth Secretariat, and the Ministry of
Finance, Government of Gambia, at Banjul, 18-21 August 2008.
Gulamov, Iskandar and Kiyoshi Taniguchi (2008) ADB Country Report on Uzbekistan,
Office of the Uzbekistan Resident Mission, ADB, Tashkent.
52
The Heritage Foundation (2008) Uzbekistan Economic Freedom Indices, Washington
D.C., USA.
India, Government of (2008) India’s External Debt- A Status Report 2007-2008, pp.1-
55, Ministry of Finance, New Delhi, August 2008.
International Monetary Fund (2003) External Debt Statistics- Guide for Compilers
and Users, 2003, IMF, Washington D.C.
International Monetary Fund (2006) How to do a Debt Sustainability Analysis for

Low-Income Countries, A Guide to LIC Debt Sustainability Analysis, pp.1-46, October
2006, IMF, Washington D.C.
International Monetary Fund (2008a) Republic of Uzbekistan: Poverty

Reduction Strategy Paper, pp.1-143, IMF Country Report No. 08/34, IMF,
Washington D.C., January 2008
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Consultation- Staff Report; Public Information Notice on the Executive Board
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Three-Gap Framework, World Bank Policy Research Working Paper No. 3145, World
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Department, Country Risk Research, Uzbekistan, Tashkent, August 2008.
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53
USA, Federal Government of (2007) Background Note: Uzbekistan, pp.1-14, Under
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54

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External Debt Management by the Government of Uzbekistan:

Policies, Strategies, Techniques, Legal System and Institutional Set Up

Background Note and Questionnaire

Tarun Das1 Ph.D.

1. Introduction- Scope and Objectives of the Study

2. Basic concepts of external debt and sustainability indicators

3. Current State of the Uzbekistan Economy

4. Questionnaire for All Stakeholders of External Debt in Uzbekistan

Annex-1: World Bank CPIA Criteria for Debt Management

This Report is based on mainly a review of recent studies on Uzbekistan

The author is presently working as Professor (Public Policy) at the Institute

Tarun Das, Ph.D.

1. Introduction- Scope and Objectives of the Study

1.1 Debt Management Policy

Table 1.3A External Debt: Public and Publicly Guaranteed:

Table 1.3B External Debt: All Creditors: Average Terms of Commitment

Items 1995 2000 2001 2002 2003 2004

Table 1.3C External Debt: Official Creditors: Average Terms of Commitment

Items 1995 2000 2001 2002 2003 2004

Table 1.3D External Debt: Private Creditors: Average Terms of Commitments

Items 1995 2000 2001 2002 2003 2004

Table 1.3E Currency Mix of External Debt (in percentage)

Currency 1995 2000 2001 2002 2003 2004

As a part of the Republic of Uzbekistan: 2008 Article IV Consultation,

However, IMF Study has the following limitations:

1.3 Legal framework for External Debt Management in Uzbekistan

As per government’s business rules and procedures, Ministry of Finance is in charge of

Normative - legal framework of activity

Regulations of the Ministry of Finance of the Republic of Uzbekistan have been

1.4 Terms of Reference (TOR) for the Study

3. To review Debt Management Policies, Strategies, Processes, Legal Framework, and

5. To study the risk management framework, policies, strategic benchmarks and

7. To recommend and suggest best practices for the following:

2. Conceptual Issues Relating to External Debt

2.1 Definition of external debt

2.2 Debt Sustainability and Fiscal Deficit

2.5 Debt Sustainability Measurements

2.6 World Bank Classification of External debt

Table-2.2 Cross classification of countries by income level and indebtedness

Indebtedness → Severely Indebted Moderately Indebted Either Less Indebted

(a) Types of capital inflows (FDI, trade credit, other credits)

(a) Standard Stress Tests

(a) Revenue growth = Baseline GR – 1 SD

where GR stands for growth rate and SD for standard deviation.

Debt distress is indicated by recourse to any of the following forms of exceptional

(c) Determinants of debt distress

(d) Quality of institutions and policies

1. There could be substantial value-added in looking at the role of organizational

2. Using a common debt-burden threshold to assess sustainability for all companies

3. There is a strong tradeoffs between quality of institutions, policies, systems of

(e) Indicative Debt and Debt-Service Thresholds (%)

Indicators Quality of Debt Management Policies and Institutions

Poor Medium Strong

NPV debt/GDP ratio (%) 30 44 50

(f) Debt Distress Classifications

(1) Low risk

(2) Moderate risk

(3) High risk

(4) In debt distress

A prudential risk management framework is essential for reducing uncertainty among

The second category of institutional structure reflects dispersed debt management

Governance issues promoting sound and professional approach towards debt