IMF Needs to Rethink Uzbekistan
IMF Needs to Rethink Uzbekistan
At the end of May, the International Monetary Fund, IMF, issued a statement advising the Uzbek government to start fighting inflation and publish more realistic economic data than it does now.
A major task, the IMF said, should be to reduce the inflation rate to below ten per cent before the end of 2013 by cutting budget spending and relaxing its monetary policy.
The IMF calculates that the year-on-year inflation rate was around 13 per cent in 2011 and is likely to be the same in 2012. Official government forecasts, meanwhile, claim that inflation will not rise above seven to nine per cent to nine per cent.
In reality, the annual inflation rate has been running at 30 per cent or more for the last 15 year, and there has been no economic growth.
In response to the IMF’s advice, the Uzbek government issued a directive on May 28 restricting access to statistical data. That suggests the authorities have no plans either to release more accurate economic figures or to heed the IMF’s recommendations. But they cannot be unaware that obscuring the facts will only worsen the economic recession.
Uzbekistan’s economy has remained isolated, and it has been resistant to external financial shocks thanks to exports of raw materials and the cash sent home by labour migrants working in Russia. But progress is held back by the lack of objective state statistics, the rigid system of administration, the widespread black market, the lack of convertibility of the Uzbek national currency, and inflation rates that outstrip economic growth.
Local economists say that Uzbekistan experienced hyperinflation as food prices rose sharply last year. In its 2012 Index of Economic Freedom, the Heritage Foundation, a Washington-based think tank, ranked Uzbekistan 164th out of 179 countries and classed its economic system as “repressed”.
In January, President Islam Karimov announced that the growth forecast for 2012 had been lowered because the global economic crisis would reduce demand for exports and thus revenue.
In reality, the fall in foreign-currency earnings is due to investors’ reluctance to put their money into the Uzbek economy. Hostile takeovers of foreign investors like Oxus Gold, Spentex Toshkent Toytepa and Wimm Bill Dann, and the Turkish shopping centres Demir and Turkuaz; the seizure of the Bekabad cement concern in which a lot of Kazak and Russian money had been invested; and the problems experienced by the Zaravshan-Newmont and InterContinental Hotels concerns have all aggravated the investment climate.
Given facts like these, international financial institutions should be more cautious about Uzbekistan, especially when it comes to working with the government. They should minimise their economic and political engagement.
Until this year, the IMF took all the data supplied by the Uzbek government on trust. It gave its seal of approval to the annual report produced by the state statistics agency. This only sowed confusion among prospective foreign investors.
Now the IMF has acknowledged that the figures are not transparent. That suggests the IMF should alter its approach to Uzbekistan to err on the side of caution, as the European Bank for Reconstruction and Development, EBRD, has already done. Local experts say the EBRD’s business activities in Uzbekistan have largely dried up since 2009, as can also be seen from the bank’s own information on lending to the country. The EBRD has publicly criticised Uzbekistan for its authoritarian system, unfulfilled economic reforms, lack of free media and the use of torture.
The EBRD's presence now amounts to no more than a representative office in Tashkent. For a major Central Asian state like Uzbekistan, that is a ridiculous situation.
Tashpulat Yoldashev is an Uzbek political analyst based in the United States.
This article was produced as part of News Briefing Central Asia output, funded by the National Endowment for Democracy.
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