Page 10 - Uzbek Outlook 2024

However, the effect will be partially offset by continued tight monetary policy and a sizable fiscal consolidation. Staff welcome the commitment of the Central Bank of Uzbekistan (CBU) to keep monetary policy relatively tight until inflation decelerates clearly toward the target and to raise the policy rate if core inflation surprises to the upside.
Efforts to strengthen monetary policy transmission, which remains constrained by a low level of financial intermediation, high dollarisation and still sizable policy lending, should continue. Exchange rate flexibility is important to absorb potential shocks and safeguard reserves.
4.2 Fiscal Policy
Fiscal policy needs to return to a consolidation path after the expansionary stance in 2023. The IMF estimates of the consolidated fiscal deficit is expected to reach 5.5% of GDP in 2023, exceeding the 3% of GDP budget target due to additional wage hikes as well as higher social benefits, energy subsidies and policy lending.
The government appropriately aims to reduce the consolidated deficit to 4% of
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