Uzbekistan remains hopeful that it is moving towards an international bond market debut that could be worth up to $1bn. However, the green light for the Eurobond issue is yet to come from the administration of President Shavkat Mirziyoyev, the Nikkei Asian Review reported earlier this week, citing Uzbek Finance Minister Djamshid Kuchkarov.
The last round of reporting on the matter, back in February, said that between $200mn-300mn of Eurobonds in 2018 would be the country’s target to create a benchmark for Uzbek corporate borrowers. The country has named Raiffeisen Bank International AG as a potential issuer for this year. The plan marks Uzbekistan out as the third Central Asian country to issue Eurobonds—the first to go ahead was oil-rich neighbour Kazakhstan, while Tajikistan made a $500mn debut last September, assisted by Raiffeisen. However, as the appetite for emerging markets has started to cool off, Uzbekistan may not necessarily find itself amid the most favourable conditions for issuing debt.
Uzbekistan last year began preparations to obtain a sovereign credit rating by signing a memorandum with Citigroup, noting that Citibank “will become [the country’s] consultant”.
If followed through and completed, the Uzbek move would further improve foreign investment opportunities for Tashkent, with Uzbekistan recently having lifted its strict currency controls. The controls long fed the Uzbek som black market, scaring away potential foreign investors who could not, for instance, easily arrange to repatriate profits. Uzbekistan is hoping that a sovereign credit rating will allow the country’s banks and enterprises to receive foreign loans at lower interest rates.
Kuchkarov has previously said that if the country’s sovereign rating gets a good review, the country plans to go ahead with its bond issuance plans.
“We want Uzbek companies to also be in the international financial market,” Kuchkarov has said. “Our aim is to turn Uzbek companies into modern corporations.”
Uzbekistan’s GDP growth was recorded at 5.5% in 2017, down from 7.8% reported in 2016 - however, the decline might be explained by dishonest practices for reporting GDP growth under the late president Islam Karimov, whom Mirziyoyev officially succeeded towards the end of 2016. The current Uzbek leader has himself admitted that the growth figures put out over the previous decade were “fiction”.
Mirziyoyev is attempting to improve the country’s transparency and more accurately reflect its economic realities. Last October, the Uzbek authorities reported GDP growth at 5.3% for the first nine months of 2017 - it was the first time the Uzbek authorities had acknowledged growth below 7% within the past decade.
The relative drop in growth could be related to a decline in foreign direct investment following the political and economic uncertainty that followed Karimov's death. The number of greenfield FDI projects dropped to four in January-August 2017, compared to a total of 14 in 2016, but investment is expected to start growing following Mirziyoyev’s decision to lift the currency controls.