Development finance assessment

Efficient Use of Resources for Service Delivery 
The significant share of off-budget spending, through both EBFs and off-budget accounts, 
presents a critical challenge to monitoring the efficiency of public finances. Many of these 
parastatal funds are controlled and managed by the line ministries and are used for specific 
policy purposes. Furthermore, line ministries operate many minor funds, which raise the 
revenue directly, outside MoF and State Treasury. For example, public wages are sometimes 
paid from both budgetary and off-budgetary sources, resulting in disparate compensation 
for the same work across regions. 
Off-budget spending is not subject to the same budget processes, monitoring, or 
accountability. Therefore, authorities have no comprehensive view of all government 
spending when making decisions. Most EBFs do produce annual financial reports and annual 
budgets. However, many of them are not integrated into the State Budget, or are not used to 
produce the General Government Budget. The authorities intend to increasingly consolidate 
these funds into the budget from 2020, but progress has been slow. 

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DIMENSION 4: 
MONITORING AND REVIEW
Besides EBFs, there is a need to also fully identify and reflect the operations of the State 
Targeted Funds and SOEs in the State Budgets
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. The exclusion of possible contingent liabilities 
from SOEs in the State Budget poses fiscal risks to public finances. The economic and financial 
situation of public corporations is being monitored using specific key performance indicators.
The GoU may want to consider introducing ESG criteria in their SOEs’ corporate reporting 
requirements to better monitor how they are contributing to sustainable development. 
Subsequently, annual consolidated reporting of this information along with their financial 
performance could made available publicly. 
Monitoring of subnational governments is part of the regular budget monitoring and 
is strong due to the role of the territorial financial departments. Reporting on subnational 
finances is consolidated in the report on the financial position of the State budget and State 
targeted funds that is audited by the Chamber of Audit. However, a report on contingent 
liabilities and other fiscal risks is not compiled.
The institutional environment for public investment has been subject to significant 
reforms since 2018. It is expected that the ensuing increased clarity concerning the roles and 
responsibilities of the main actors
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involved will benefit public investment management. 
The effective implementation of the new public investment framework requires building 
the capacity of all staff involved across the entire investment project cycle (guidance, 
identification, assessment, selection, and implementation). Although all investment projects 
are prioritized by central entities based on published general and broad standard criteria for 
project selection, political considerations remain influential. Appraisals of public investment 
projects are not always published. 
Maximizing the development impact of the GoU’s planned increase in public investment 
projects soon would require a stronger alignment of selection procedures and project 
performance monitoring frameworks with the SDGs. Uzbekistan’s nationalized SDGs can 
provide a useful over-arching framework to maintain coherence across the performance 
monitoring criteria and indicators used across the different areas of public finance 
management. 
Uzbekistan’s tax incentives’ magnitude
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, opacity and uncertainty as to their cost-
effectiveness represent a clear opportunity to improve the monitoring of public finances 
along with rapidly generating additional resources. Policy makers including the parliament 
need to have the full information as to the cost and benefits of the tax incentives to make 
informed and transparent decisions regarding their use. This requires making periodic 
assessment of the impact of tax incentives, in terms of the investment that has been promoted 
and its impact in relation to economic and other sustainable development objectives, along 
with including annual tax expenditure statements within the budget process. These tax 
expenditure statements should cover all tax incentives under all the major taxes including 
customs exemptions.
Nearly a third of the overall tax benefits are provided by government decrees
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. Discretion 
on provision of tax incentives reduces the efficacy of the investment policy regime as it creates 
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The State sector still makes about 40 percent of the entire economic activity in the country and contribution to 
GDP, although in terms of numbers, private companies are dominating (over 90 percent of total number of economic 
agents in the country).
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National agency for Project Management (NAPM), the State Investment Committee, the Ministry of Finance, the 
Ministry of Economy and other actors in the public investment management cycle.
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See section on government revenue in the first chapter.
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The Tax code stipulates that tax incentives can be effected by the Tax code itself or by the decisions of the President 
of the Republic of Uzbekistan only to reduce the tax rate by not more than 50% and for a term not exceeding 3 years 
on certain taxes, except for VAT, excise tax under production and/or sales of goods, as well as the resource tax.

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DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN
a barrier for the investment opportunity because investors need to go through approvals 
which is costly both in terms of time and money. If incentives are provided in the laws, the 
incentives are subject to parliamentary scrutiny. Taxpayers would also have the option of 
using the tax appeals process to air their grievances when the tax incentives are availed 
through the usual tax filing process.