TASHKENT, Uzbekistan, November 28. Uzbek Central Bank expressed the necessity to reduce subsidies on energy resources, Trend reports.
According to the Central Bank's project on Main Directions of Monetary Policy for 2024-2026, in order to achieve macroeconomic stability, budget rules aimed at increasing fiscal policy transparency, reducing volatility of the Uzbek soum exchange rate, and reducing inflationary pressure through external channels must be developed.
Furthermore, the Bank emphasizes the significance of coordinating monetary and fiscal policy in order to achieve the inflation target.
"Macroeconomic stability will be ensured by the introduction of fiscal rules and the disciplined implementation of fiscal policy by the government," the paper stresses.
According to the calculations of the Central Bank, in the last five years, fiscal policy has moved into a pro-cyclical direction, increasing pro-inflationary pressure in the Uzbek economy.
"Subsidies for energy resources undermine budget discipline and increase public debt. Tariff liberalization while maintaining targeted social support is one of the important factors of budget consolidation by reducing subsidies for energy resources at the present stage," the document says.
Meanwhile, the World Bank has also advised Uzbekistan to remove energy subsidies.
As per the WB’s Country Climate and Development Report, removing energy subsidies in Uzbekistan's gas, electricity, and heating markets is an essential component of a green transition, as well as introducing carbon pricing through a carbon tax, which will spur the investments needed to reach net zero emissions.
The Bank believes that key policy areas to support green finance include constructing clear regulation and supervisory frameworks for green finance, rolling out new instruments that provide market-based incentives for green investments, and developing insurance and other instruments to better manage disaster- and climate-related risks.
