The International Monetary Fund has Issued another Press Release following the Mission to Uzbekistan

The International Monetary Fund (the “IMF”) has published a press release following its recent mission to the Republic of Uzbekistan (“Uzbekistan”), which took place from 16 September to 24 September 2024. According to the IMF’s forecasts, Uzbekistan’s economy is expected to grow by 5.6% this year, driven by an increase in investments and the continuation of structural reforms. Inflation is expected to start declining in response to monetary and fiscal policy measures, as well as against the backdrop of the weakening impact of rising energy prices.

The IMF also forecasts a reduction in the current account deficit to 6.3% of the gross domestic product in 2024 and 6.1% in 2025, which will be driven by an increase in exports and remittances, as well as by budget consolidation. However, there are risks that could affect economic growth, including regional geo-economic challenges, volatility in commodity prices, an unexpected global slowdown in the growth rate of the world economy, as well as risks associated with the fulfillment of contingent liabilities related to state-owned enterprises and public-private partnerships. At the same time, an increase in the volume of remittances and a rise in gold prices may create new opportunities for the economy.

The IMF identifies low collection rates of value added tax and corporate income tax from companies, excluding the gold mining sector, as risks to the revenue side of the budget. Tax incentives and a declining level of tax discipline also constrain broadening of the tax base, especially in the service sector. In this regard, the IMF has given the following recommendations concerning the tax policy:

• Revise tax incentives for attracting investments to reduce their negative impact on the tax base;
• Expand the powers of tax administration to ensure compliance with tax legislation, especially for conducting effective on-site tax audits with appropriate guarantees for the protection of taxpayers’ rights.

To our knowledge, at present, there are no publicly available documents containing specific instructions to ministries and agencies to amend legislation in accordance with the IMF’s recommendations. These recommendations require careful monitoring of legislative proposals by taxpayers for timely adaptation to possible innovations in the state tax policy.

Authors:

• Doniyorbek Zulunov
• Sergey Bachmanov
• Maryna Tarnavska