Uzbeks Secure Major Loan

The four loan agreements, signed at an ADB board meeting held in the Uzbek capital Tashkent in early May, cover a 32-year period and envisage an annual interest rate of one per cent for the first eight years, and 1.5 per cent after that.

Uzbek human rights activists attempted to hold a demonstration near Tashkent’s International Business Centre, where the ADB meeting was taking place, to urge the institution not to lend to a government that abuses political rights and freedoms. The security service prevented the protest taking place.

“We wanted to tell the bankers from 67 countries attending the ADB meeting… that if they were going to grant the loan, they should ensure it was transparent and publicly accounted for,” said Yelena Urlayeva, who heads the Uzbek Human Rights Alliance.

The government intends to use the loan money to upgrade road links with Afghanistan and Uzbekistan’s Central Asian neighbours, to build a gas-fired power station in the southern Kashkadarya region, to improve the water supply, and to build up the assets of commercial banks.

NBCentralAsia experts say the government was keen to secure the funds as the isolated economy is heavily dependent on exports of natural gas and cotton, and world prices for these have fallen.

The authorities have made every effort to show to the ADB they are worthy of the loan. The banks cut interest rates on deposits, and the monetary authorities attempted to ease circulation problems by paying wages onto plastic card rather than in cash.

As the rest of the world suffers the effects of global economic crisis, Uzbekistan told the ADB it achieved 8.1 per cent growth last year.

“When bankers saw Uzbek economic growth, they decided to provide lending,” said Viktor Ivonin, an economist in Tashkent, who dismisses concerns expressed by rights activists that the money might be used for improper purposes.

“If the ADB has provided the money, that means the question of how its expenditure is going to be overseen has been resolved,” he said. “The Uzbek government has prepared a loan agreement clearly setting out the aims of the loan and a repayment schedule”.

Another supporter of the loan, who did not want to be named, said the arrangement carried no risk to the lender, adding, “The state has never been late with its foreign debt service payments.”

An economic journalist who views the deal less positively, believes the ADB has swallowed stories of economic growth and transparent fund use only because it was keen to approve the loan and earn interest.

“The bank is citing Uzbek economic growth to cover its back with the investors [banks that lend to it],” says the journalist. “The ADB tells them it’s lending to Uzbekistan because its GDP is growing, and they are happy. To secure lending, [President Islam] Karimov came up with a fairy-tale about economic growth and now he’s now pretending he believes it in order to justify the loan.”

Dilmurod Kholmatov, an independent economist, points out that the argument lacks consistency.

“The president, senior officials and the official statistics assert that GDP is rising, inflation is falling, and the standard of living is improving,” he said. “If that is the way things are, there’s no need to borrow money externally. But we’re getting it anyway.”

This article was produced as part of IWPR’s News Briefing Central Asia output, funded by the National Endowment for Democracy.