Uzbekistan plans to sell between $200mn-300mn of Eurobonds in 2018 to create a benchmark for Uzbek corporate borrowers, Bloomberg reported on February 22. The country named Raiffeisen Bank International AG as a potential issuer 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 year. 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. Raiffeisen Bank helped Tajikistan issue its first Eurobond, last September.
If followed through and completed, the Uzbek move would further improve foreign investment opportunities for Tashkent, with Uzbekistan recently having lifted strict currency controls. The controls long fed the Uzbek som black market, scaring away potential foreign investors who could not, for instance, arrange to easily 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.
Finance Minister Jamshid Kuchkarov said in an interview that if the country’s sovereign rating gets a good review, the country plans to go ahead with its bond issuance plans, the news agency report said.
“We want Uzbek companies to also be in the international financial market,” Kuchkarov said. “Our aim is to turn Uzbek companies into modern corporations.”
The reform-driven Uzbek President Shavkat Mirziyoyev said in December that Uzbekistan’s GDP growth in 2017 was expected to come in at 5.5% y/y, down from 7.8% reported in 2016 - however, the decline might be explained by dishonest practices for reporting GDP growth under the late Islam Karimov, whom Mirziyoyev officially succeeded towards the end of 2016. Mirziyoyev is attempting to improve the country’s transparency and more accurately reflect its economic realities. In 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 after 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 strict currency controls.
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