Government of Uzbekistan and International Monetary Fund

June 19, 2007

A mission of the International Monetary Fund (IMF) visited the Republic of Uzbekistan from 4 June through 13 June 2007. The mission was headed by Ms. Sena Eken, assistant director in the Middle East and Central Asia Department of the IMF.

The purpose of the mission was to review recent economic developments and policies, update the projections for 2007, and continue the constructive policy dialogue with the Uzbek authorities. The mission expressed special gratitude to the authorities for their excellent cooperation and the frank exchange of views.

Following a strong performance in 2006, the Uzbek economy has continued to perform well, with a GDP growth rate exceeding 9 percent in the first quarter, a large external current account surplus, and a further accumulation of foreign exchange reserves. Large increases in net foreign assets have been mirrored in the growth of monetary aggregates. Nevertheless, there are indications that inflation has eased and confidence in the banking system has improved. Fiscal policies have remained cautious, while the tax burden declined and important progress was made in Treasury reforms.

With prospects of continued high growth and a strong balance of payments position, the authorities and the mission agree that the key priorities for Uzbekistan are to ensure continued decline in inflation and develop the financial sector.

To further reduce inflation, the mission emphasized the need to have supportive monetary, fiscal, exchange rate, and trade policies. The mission is encouraged by the intention of the authorities to conduct an appropriately tight monetary policy during the remainder of the year; continue to pursue cautious fiscal policies; adjust their exchange rate policies as economic developments warrant; and further ease impediments to trade, including by adopting the new customs code and ensuring full foreign exchange convertibility for imports.

The authorities and the mission agreed on the importance of developing an efficient financial sector to support growth in the medium term. The mission encourages the authorities to consolidate the improved confidence in the banking system by discontinuing the role of banks in financial oversight and government treasury operations and ensuring that the anti-money laundering regime is in line with international standards.

The mission welcomes the authorities` commitment to address issues related to national income, price, and balance of payments statistics.

The Fund staff stands ready to assist Uzbek authorities in their reform efforts, including through technical assistance in financial sector and statistical data issues.