Page 28 - Uzbekistan rising bne IntelliNews special report

28 I Special Report: Uzbekistan Rising bne December 2021
expanded by $1bn to $24.2bn, but had surged again by the end of September to a record high of $36bn, or 57% of GDP. Of the external debt, the public debt amounted to $22bn, up 3% YTD. Private debt was $13.9bn, up 11% YTD.
The plan is to expand debt again modestly next year to continue the investments into the economy. During the deliberations on the new 2022 budget the Accounting Chamber
on the 10-year note and was greeted with an air of optimism among investors who attended Uzbekistan’s New York, Boston and London roadshows. The issuance is set to pave the way for regular debt sales.
Now Uzbekistan’s leading corporates are getting into the game, with the state-owned oil and gas company Uzbekneftegaz launching plans for
a Eurobond issue in November. The
initially financed with loans that carried a state guarantee, but new projects at the plant are now being funded with private and commercial investments.
“We are starting to use more private investment via PPP,” says Isakov. “In five years we have invested
into power stations using public money but now they are all PPP, with no public money at all.”
Those power projects include a solar power plant at Navoi and plans for
more that were co-funded by the
Asian Development Bank (ADB) and European Bank for Reconstruction and Development (EBRD), who continue
to play an important role in Uzbekistan funding plans, especially for green energy, which is supposed to make up 25% of the generating capacity by 2030, according to the government’s plans.
The overarching theme of all these investments is to comply with the UN’s Sustainable Investment Goals, 16 goals in total, that cover things like the green economy, social issues such as education and health, clean water and the like, says Isakov.
“We are the first sovereign in the region to have a SDG framework,” says Isakov. “We are spending on 11 out of the
16 goals at the moment and we will have to issue more bonds to cover a $5bn-$6bn funding gap. In all we will spend around $15bn on the SDG if you also include the private investment.”
The Ministry of Finance is not
just looking at London but is also
in talks with the ADB, looking at green sukuk bonds and the Islamic Development Bank and the Gulf Cooperation Council from the Middle East as possible sources of funds.
Banking sector privatisation
The Ministry of Finance is also playing a central role in Uzbekistan's bank privatisation drive, as it is the owner of the big state-owned banks. Here too, the IFIs play a central role, as they are helping to restructure the banks and have been invited
to become stakeholders in the first
“In five years we have invested into power stations using public money but now they are all PPP, with no public money at all”
decided to increase the debt up to 60% of GDP next year with limits on new agreements of $4.5bn.
From these funds, $2bn will be allocated to support the state budget and finance non-project activities, and another $2.5bn will go to finance investment projects.
Most of this debt – Isakov estimates about 90% of it – has been raised from the IFIs, but he says it is still very moderate and Uzbekistan maintains a BB- with stable outlook from Fitch and S&P.
However, after the coronacrisis-related spending recedes the Finance Ministry says it wants to bring debt down
again to the pre-corona level of 27%
of GDP. The government also plans to keep the level of public debt and the budget deficit within 50% and 2% of GDP in coming years respectively.
Another option is to issue bonds on the international exchanges. Uzbekistan’s debut $1bn Eurobond issued on
the London Stock Exchange (LSE)
in February 2019 proved a smash hit, with demand of over $8.5bn, or eight-times oversubscribed.
The launch was made with yields of 4.75% on the 5-year note and 5.375%
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company is marketing its debut USD- denominated Eurobond with a tenor of five and/or 10 years and estimated a yield of 4.7-5.2%, according to preliminary deal terms unveiled
by VTB Capital (VTBC) at the start
of November. That bond will join UzAuto Motors, the country’s leading carmaker and the only other Uzbek corporate bond on the market.
Investments
The epidemic has been an economic shock to the economy, but underlying that has been a large state investment programme to rapidly modernise the economy.
The previous government under- invested, leaving the country with poor infrastructure, education and health services among other problems. We need to spend the money now.
We have a brain drain because of the low salaries. The government needs to invest into our human capital.
As the government gets more into its investment programme it is starting to look at diversifying its funding options. In the energy sector, for example, it has conducted the first private-public partnership (PPP) investments to build power stations. Likewise, money for the expansion of the NavoiAzot chemical plant was