Uzbekistan, Tashkent, Feb.10 /Trend D.Azizov/
The current model of interest rate policy in Uzbekistan is holding back the competitiveness of the economy and society. This view is stated a report from the Centre for Economic Research of the Republic.
The current state is characterised by a number of imbalances and their consequences which are called the phenomenon of 'fiscal restraint', in economic jargon, the report said.
It is revealed in the form of higher interest rates on loans, the excess interest rate on the term of deposits of public interest on loans, the large number of preferential loans and high interest rate spreads reflecting the monopoly position of the banking sector in financial intermediation.
According to the report, the weight-average interest rate on loans amounted to 15-16 per cent per annum and 20-22 per cent per annum on term deposits of the population in 2010.The provision of soft loans provided for up to 29 positions, 16 - for small businesses and private entrepreneurship. The share of concessional loans in the loan portfolio ranges from one in private and cooperative banks to 24 - 45 per cent for large banks with extensive branch network. The range of interest is from 1/6 to 100 per cent of the refinancing rate (12 per cent at present).
Another problem, fencing of domestic producers, including new emerging industries from strong foreign competitors, was solving by maintaining a high level of concessional lending.
The solution to these problems within the chosen model transformation led by the State implied the administration of credit resources and a high proportion of quasi-fiscal operations of government in the banking sector.
Experts at the Centre for Economic Research noted that financial liberalisation in Uzbekistan should be carried out in three stages.
The first stage, 2012-2015, is the inventory of priorities of state credit support and the streamlining of the preferential loans list and activation of the interbank money market.
The second stage, 2016-2018 is reducing the list of preferential loans issued by the banks' own funds and creating conditions for the formation of the long-term money market (insurance and retirement).
The third stage, 2019-2021 will see the completion of the non-prescriptive regulation of interest rates to ensure equal competitive conditions for all banks, and encouraging adaptability of the banking business to reduce costs.
The success of these measures involves activation of some macro-economic components. In particular, it is necessary to move to inflation targeting which will greatly speed up the liberalisation measures. Also important will be the strengthening of the role of reforms in the law enforcement sector, aimed at promoting competition in the financial sector and creating a favourable investment climate.