Development finance assessment

DIMENSION 2: 
INTEGRATED PLANNING AND BUDGETING
ANNUAL BUDGETING PROCESS
The MoF oversees the budget process. Based on the requests from the heads of sub-
national units, the MoF prepares a draft budget for submission to the Cabinet of Ministers 
by September 15
th
. Jointly with the other responsible central government agencies, the MoF 
prepares a comprehensive draft Budget Message, which includes: 
„
Main results for social and economic development for the previous year and forecasts on 
budget implementation for the current year; 
„
State budget implementation report for the previous year and the draft State budget for 
the next year;
„
Draft of main guidelines for budget and tax policies for the year;
„
Comments to the guidelines for the budget and tax policies for the ensuing year;
„
Information on the internal and external public debt and respective expenditures; and,
„
Draft State budget for the fiscal year. 
The completeness of this Budget Message has been improving year on year. It includes 
additional information on state finances, public debt and the fiscal strategy . The budget 
document is presented using administrative, economic and functional classifications. A major, 
recent improvement in the budget process is its approval by the Parliament, as historically 
the State Budget was introduced as a Presidential Decree.
The Cabinet of Ministers sends the draft version of the State Budget Law and the Budget 
Message to the Administration of the President and to the Chamber of Accounts for issu-
ing an opinion on on the draft Law and Fiscal Strategy. Subsequently, the complete budget 
package, including the opinion of the Chamber of Accounts is sent to the lower, Legislative 
Chamber of the Oliy Majlis.
The Committee on Budget, Banking and Finance
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is a major coordinating committee in 
this process. The Committee collects the opinions of the various parliamentary groupings and 
MPs, including other Committees of the House, as well; and produces the final report on the 
budget, to be considered by the Legislative (lower) House. Once approved, budgetary users 
can make necessary adjustments up to four times a year, but within their total appropriation 
and upon approval of the Parliament. 
The development of the State Investment Program remains separated from the 
regular state budget preparation process, essentially delinking responsibilities for capital 
expenditure from maintenance and other current expenditures (WB, 2020). The reform of 
public investment
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management in Uzbekistan needs to be accelerated and streamlined. An 
important change will be the shift from an annual exercise to a multi-year perspective from 
2020 onwards. The lack of transparent data on the scope and nature of public investment in 
Uzbekistan complicates a detailed analysis of the performance of pubic investment program 
as well as its efficient management. The 2019 public expenditure review (PER) finds that: 
“
The volatile institutional environment and fragmentation and overlap of public investment 
management functions makes it difficult to ensure that the investment pipeline is the most 
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Referred to as the Budget and Economic Reform Committee (Комитет Законодательной палаты по бюджету и 
экономическим реформам) in the Law on Parliamentary Control (2016).
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“Public investment” is not defined in any Uzbek regulation. The legislation recognizes only the concept of ‘centralized/
decentralized investments’ in the annual investment program. ‘Centralized’ investments comprise investments funded 
through: (i) the state budget or state targeted funds9; (ii) project financing of budget institutions financed by IFIs and 
bilateral creditors; (iii) project financing of SOEs through IFIs, bilateral institutions or through on-lending of funds from 
the Fund for Reconstruction and Development (FRD) via commercial banks. ‘Decentralized’ investments comprise (iv) 
foreign direct investment and private investments. (World Bank, 2019)

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DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN
optimal for the country. There are bottlenecks at different stages of the PIM cycle, including 
ambiguity in project selection criteria, ineffective use of project appraisals, emphasis on meeting 
formal procedures, and lack of ex-post evaluation
.” The PER further recommends to: 
„
Clarify roles and responsibilities of the main actors involved in managing public 
investment.
„
Upgrade capacity over the project cycle in terms of guidance, identification, assessment, 
selection, and implementation of projects.
„
Adopt a socio-economic cost-benefit analysis methodology (along with affordability, 
and potential contingent liabilities) for project assessment and prioritization which is 
aligned with the GoU’s long-term development priorities.
„
Integrate investments into the regular budget process more transparently.
The State Budget remains more a technical than a policy-driven document. The latest PEFA
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(2018) exercise revealed weaknesses that impede aligning the budget with the GoU’s longer-
term policy objectives. A critical flaw was the lack of strategic multi-year programming tools 
at all levels of economic, budgetary and financial management hampers progress on more 
strategic allocation of resources. Under the PFM Reform Strategy critical progress has been made. 
Increasingly the State Budget (in 2019 and 2020) is reflecting sector priorities, institutional plans 
and agreed national priorities. Mid-term planning has been implemented gradually and from 
the 2024-2026 cycle the full mid-term budgeting should be in place. The strengthening of the 
budget process and its alignment with longer-term development objectives is moving in the right 
direction. Maintaining the high pace of reform will require prioritizing and sequencing reform 
measures appropriately. For this purpose, the ongoing development partner support to PFM has 
been updated and streamlined into a revised Strategy that focuses on the critical findings from the 
recent PEFA assessment and the IMF’s fiscal transparency assessment.
STRATEGY ON PFM REFORM
With development partners’ support, the GoU adopted an updated ‘Strategy for 
Improvement of the Public Finance Management System of Uzbekistan in 2020-2024’. This 
Strategy foresees introducing a medium-term budget framework for the implementation 
of a strategic approach to fiscal policy and the introduction of a new “results/performance-
based budget” system in forming the annual budget, among other objectives. This 
would involve introducing a new program
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classification
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that enables planning resource 
allocations over the medium-term, while considering the future impact of present resource 
allocation decisions. This program classification should be anchored in a wider strategic view 
that describes how government operations contribute to the achievement of nationwide 
objectives and the 2030 Agenda (UNDP, 2016).
While the Government has formulated various reform policies, plans and strategies at 
(cross-) sectoral and territorial levels, there is currently no single, integrated macro-level 
social-economic reform plan reflecting policy goals from which a program classification 
could be derived. An INFF could help bringing together these different existing policies, 
plans and strategies into a strategic program classification, aligned aligned with the draft 
Poverty Reduction Strategy and the rapidly evolving COVID-19 response and recovery 
efforts. It would provide an effective dialogue platform to support achieving this culture 
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PEFA was funded and implemented by the EU in collaboration with the WB in 2018 and 2019.
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Programs are essentially integrated groups of activities and outputs, which consume resources to contribute to 
specified policy objectives.
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A program classification is a way of describing the expenditure plan of the government in terms of its objectives.

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