Uzbekistan Quality Job Creation as a Cornerstone for Sustainable Economic Growth

Figure 1.5: CPI and Food Inflation Rates, Uzbekistan, 2000–2018
CPI=consumer price index.
Sources: For 2000–2011, ADB (2018) and for 2012–2018, Uzbekistan Statistics. http://stat.uz (accessed
11 November 2019).
Percent
–10
–5
0
5
10
15
20
25
35
30
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
CPI inflation rate
Food inflation rate

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Uzbekistan Quality Job Creation as a Cornerstone for Sustainable Economic Growth
8
competitive markets, as discussed in section 1.8, would have the additional 
side effect of bringing down inflation.
1.3. fiscal Policy and reform
Uzbekistan has a history of prudent fiscal policy. As a result, public external debt 
is low, at 24.5% of GDP, despite the large currency devaluation in September 
2017. Uzbekistan’s fiscal policy is moderately pro-cyclical, meaning that when 
GDP increases by 1%, fiscal spending grows by less than that (Aizenman et al. 
2018). During the resource boom years of 2011–2013, the government ran a 
fiscal surplus. In response to the external shock of lower commodity prices 
from 2014 onward, the authorities moderately loosened fiscal policy. The 
augmented fiscal balance recorded a deficit from 2015 to 2018, except in 2017 
when government lowered expenditure significantly resulting in a brief surplus. 
The government has indicated its commitment to fiscal tightening with the 
aim of not letting fiscal deficits exceed 2% of GDP during 2019–2021. In the 
future, a move toward an even more counter-cyclical fiscal policy would be 
beneficial along various dimensions (Box 1.1).
The fiscal deficit is driven by a decline in both total revenue and expenditure. 
Total revenue in the government’s budget decreased from 26.8% of GDP 
in 2013 to 23.0% in 2018. The drop in revenue is in large part explained by 
lower value-added tax (VAT), excise taxes, and mining tax (Figure 1.7). Total 
expenditure decreased slightly less, from 28.2% in 2013 to 24.6% of GDP
in 2018.
The government was able to use its fiscal buffers to increase public investment 
and the wages of public sector employees. Public spending on education and 
health was maintained at close to 10% of GDP, which is unusually high in 
international comparison given Uzbekistan’s level of income (Figure 1.7). More 
specifically, in 2014, education accounted for 6.1% of GDP. But due to the 
overall trend of falling expenditure, it declined to 5.4% in 2018. 
The government is in the process of implementing a tax reform, which will 
significantly overhaul the tax system. As of January 2019, small businesses will 
no longer receive preferential treatment, except those with yearly revenues not 
exceeding SUM1 billion. All other businesses will be subject to a compulsory 
20% VAT. At the same time, the reform seeks to reduce tax rates on social 
contributions, the corporate tax rate, turnover tax, property tax, and the 
administrative burden in order to decrease costs. 

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