Page 58 - bne_August 2020_20200810

58 Opinion bne August 2020
Uzbekistan issued its debut $1bn Eurobond in February to high demand, but the government needs to avoid the temptation of a borrowing binge that ends in a debt trap COMMENT:
Borrower beware: Uzbekistan’s dollar debt binge could spell long-term trouble
Atabek Nazirov is Director of the Capital Markets Development Agency of the Republic of Uzbekistan
Uzbekistan’s inaugural $1bn Eurobond in February
of last year was hailed as a landmark event for my country. The placement set a benchmark interest rate for the nation, put us on the map of the global fixed income investment community, and of course provided funds for government coffers.
But the Eurobond placement – and continuing dollar- denominated borrowing by both the government and state-owned banks – gives me pause. As a banker who worked across the CIS and Eastern Europe for the last two decades, I’ve seen firsthand what excessive hard currency denominated borrowing can do to emerging market economies and their companies. Dollar debt can become a trap – and the damage it does can be painful and sometimes permanent.
www.bne.eu
Successful reforms
Since President Shavkat Mirziyoyev was elected president
in late 2016, Uzbekistan has made incredible strides to modernize and liberalize its economy. President Mirziyoyev‘s government removed currency exchange barriers, eliminating a troublesome dual exchange rate system. Uzbekistan removed restrictions for foreign companies purchasing hard currency for repatriation of profit. And
the state is moving ahead with an ambitious privatization program that will ensure our economy is market-based and competitive.
Economic growth prior to COVID-19 pandemic has been strong, coming in at 5.6% in 2019. The World Bank forecasts Uzbekistan will be one of only a few countries in the world to post positive growth this year and forecasts 6.6% growth in