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[ OKOZ: 1. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.03.00.00 Monetary System and Money Circulation. Inflation / 07.03.02.00 Cash Emission, Organization and Regulation of Money Circulation. Inflation] [ TSZ: 1. Finance / Monetary System. Accounting]

Decree of the President of the Republic of Uzbekistan

On Improving Monetary and Credit Policy through a Phased Transition to an Inflation Targeting Regime

The implementation of measures to further reduce the inflation rate is an important factor in ensuring the effectiveness of economic reforms aimed at improving the standard of living of the population and creating conditions for sustainable economic growth.

International experience shows that one of the effective methods of conducting monetary policy in a market economy is the inflation targeting regime, where the active participation of the central bank in the money market, as well as regular analysis of economic development and broad coverage of state policy plans, ensure the achievement of quantitative inflation targets.

At the same time, introducing the inflation targeting regime requires coordinated preparatory work by the Central Bank of the Republic of Uzbekistan and the Cabinet of Ministers in the following areas:

gradually reducing the role of non-monetary factors of inflation, including reforming tariff regulation, ensuring the effectiveness of structural economic reforms in the real sector of the economy, and filling the domestic market with consumer goods;

improving the quality of the Central Bank's macroeconomic analysis and communication policy;

introducing new tools for regulating the money market that ensure the effective impact of the regulator on the credit market.

In order to expand the use of market mechanisms and instruments for regulating the economy to ensure macroeconomic stability, as well as to fundamentally increase the effectiveness of monetary policy: [ OKOZ: 1. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.03.00.00 Monetary System and Money Circulation. Inflation / 07.03.01.00 General Issues; 2. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.19.00.00 Banking System / 07.19.01.00 Central Bank, its structural divisions and institutions]

1. Ensure the phased transition of monetary policy mechanisms to the inflation targeting regime starting from January 1, 2020, by reducing the inflation rate to 10 percent in 2021 and establishing a permanent inflation target (target) at the level of 5 percent in 2023. [ OKOZ:

07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.03.00.00 Monetary System and Money Circulation. Inflation / 07.03.01.00 General Issues; 2. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.19.00.00 Banking System / 07.19.01.00 Central Bank, its structural divisions and institutions]

2. The following are established as the main principles of the monetary and credit policy of the Central Bank of the Republic of Uzbekistan:

establishing a permanent target for inflation and communicating it to the broad public;

using a wide range of monetary policy tools to regulate interest rates in the money market and manage inflationary processes;

conducting detailed macroeconomic analysis and forecasts taking into account open data available in domestic and foreign markets in order to make objective decisions in the field of monetary policy;

improving the communication policy of the Central Bank of the Republic of Uzbekistan to communicate the goals of monetary policy to the broad public, ensure predictability of the macroeconomic situation, and build confidence among market participants. [ OKOZ: 1. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.03.00.00 Monetary System and Money Circulation. Inflation / 07.03.01.00 General Issues]

3. Ensure the implementation of comprehensive measures by the Cabinet of Ministers and the Central Bank of the Republic of Uzbekistan to create conditions for a full transition to the inflation targeting regime, in particular:

conducting coordinated monetary-fiscal and anti-monopoly policies;

continuing to implement structural reforms in economic sectors by accelerating the transition to a competitive market economy, increasing the competitiveness of local manufacturers, and forming complete markets for goods and services;

gradual liberalization of regulated prices aimed at transitioning to modern methods of anti-monopoly competition and price regulation, as well as expanding production infrastructure;

reforming the banking system and financial markets, as well as creating opportunities for long-term planning of financial flows, in order to develop financial intermediation institutions for transforming savings into investments. [ OKOZ: 1. 02.00.00.00 Fundamentals of State Administration / 02.08.00.00 General Issues of State Administration in the Field of Economy, Social and Cultural Construction / 02.08.01.00 State Programs, Concepts, etc.; 2. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.03.00.00 Monetary System and Money Circulation. Inflation / 07.03.01.00 General Issues]

4. The following are approved:

The Concept of Joint Actions of the Cabinet of Ministers and the Central Bank of the Republic of Uzbekistan on Reducing Inflation and Ensuring Price Stability (hereinafter referred to as the Concept) according to Appendix 1;

the "Roadmap" for 2020 on Reducing Inflation and Ensuring Price Stability (hereinafter referred to as the "Roadmap") according to Appendix 2. [ OKOZ: 1. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.03.00.00 Monetary System and Money Circulation. Inflation / 07.03.01.00 General Issues; 2. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.19.00.00 Banking System / 07.19.01.00 Central Bank, its structural divisions and institutions]

5. The Central Bank of the Republic of Uzbekistan shall take measures to align monetary policy instruments, mechanisms, and processes with the standards of the inflation targeting regime by introducing the following:

market instruments affecting money market interest rates by January 1, 2020, including Central Bank bonds, overnight deposits, permanent deposit auctions, auctions for loans under government securities and foreign currency collateral, and overnight loans;

the gradual increase in the role of commercial banks in the formation of exchange rates and the use of derivative instruments (swaps, options, and futures) in managing interest and currency risks throughout 2020;

the interest rate corridor mechanism of the key interest rate in implementing an adaptive interest policy through regular interventions by the Central Bank into the interbank money market within one month;

a macroeconomic analysis and forecasting system that involves the development of econometric modeling tools based on the technical assistance of international financial institutions and advanced international experience by April 1, 2020;

modern principles of communication policy that involve the timely disclosure by the Central Bank of the current situation in the economy, the main factors of inflationary processes, and monetary policy measures within two months;

continuous study of inflation and inflationary expectation factors, and studying advanced foreign experience by involving technical assistance from international financial institutions and central banks of other states. [ OKOZ: 1. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.03.00.00 Monetary System and Money Circulation. Inflation / 07.03.01.00 General Issues]

6. A Commission for Coordinating Measures to Reduce Inflation and Ensure Price Stability (hereinafter referred to as the Commission) shall be established in the composition according to Appendix 3.

The following are established as the main tasks of the Commission:

analyzing and critically evaluating the factors of inflation and the causes leading to price increases directly on the ground;

directing the efforts of all ministries and departments to reduce the inflation rate in the economy and ensure the mutual coordination of the implemented policy;

identifying shortcomings and problems in the timely and effective implementation of measures aimed at transitioning the republic's monetary policy to the inflation targeting regime, as well as developing proposals for eliminating them and increasing the responsibility of the heads of authorized bodies and organizations in this field;

organizing the discussion of the implementation of measures aimed at stabilizing prices in the domestic market and reducing inflation at least twice a month with the participation of heads of authorized bodies and organizations and other representatives, as well as providing information to the President of the Republic of Uzbekistan on the work done. [ OKOZ: 1. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.03.00.00 Monetary System and Money Circulation. Inflation / 07.03.01.00 General Issues; 2. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.19.00.00 Banking System / 07.19.02.00 Commercial Banks. Private Banks. Foreign Banks]

7. It is established that:

starting from January 1, 2020, interest rates on all types of loans newly issued by commercial banks (in national currency), including loans issued within the framework of state programs, shall be set at a level not lower than the Central Bank's refinancing rate, except for state programs for mortgage lending and loans issued to enterprises producing agricultural products for cotton raw materials and grain crops;

starting from January 1, 2021, the practice of providing loans at preferential interest rates shall be abolished, in cases of necessity, by introducing mechanisms for compensating a certain part of interest expenses, while granting commercial banks the right to independently set interest rates. [ OKOZ: 1. 07.00.00.00 Legislation on Finance and Credit. Banking Activity / 07.03.00.00 Monetary System and Money Circulation. Inflation / 07.03.01.00 General Issues]

8. The Ministry of Finance of the Republic of Uzbekistan shall:

by February 1, 2020, jointly with the Ministry of Energy, the Committee for Competition, the Ministry of Economy and Industry, and other interested ministries and departments, develop a schedule for the liberalization of regulated prices (tariffs) for 2020-2021, taking into account their impact on inflation targets, and submit it for approval to the Cabinet of Ministers of the Republic of Uzbekistan;

ensure the gradual reduction of the total fiscal balance deficit to a level not exceeding 1.5 percent in 2022;

ensure strict implementation of the established parameters of the State Budget of the Republic of Uzbekistan, as well as the coordination of tax-budget and monetary policy together with the Central Bank.

9. The Agency for the Development of the Capital Market of the Republic of Uzbekistan, jointly with the Ministry of Finance and the Central Bank, shall submit proposals to the Cabinet of Ministers of the Republic of Uzbekistan by July 1, 2020, on the conditions, mechanisms, and deadlines for granting access to the financial market for non-residents, having developed clear mechanisms and instruments to eliminate possible negative consequences.

10. The Cabinet of Ministers of the Republic of Uzbekistan and the Central Bank shall:

ensure the high-quality and timely implementation of the Concept and the "Roadmap";

ensure the consideration and discussion at the meetings of the Economic Council on the implementation of the "Roadmap" for the main directions of structural reforms in the Republic of Uzbekistan for 2019-2021, issues of coordination of tax-budget and monetary policy, and the status of the implementation of structural reforms;

conduct adaptive macroeconomic policy based on the development of the real situation in world markets and the practical results of structural economic reforms, as well as the reduction to the level of the long-term target indicator (target) of inflation;

ensure the quarterly submission of information to the Administration of the President of the Republic of Uzbekistan on the effectiveness of measures taken to ensure the implementation of the "Roadmap" and price stability, as well as the factors and risks of achieving the set inflation target.

11. The Central Bank of the Republic of Uzbekistan, jointly with the Ministry of Higher and Secondary Special Education, the Ministry of Finance, and the Committee for Competition, shall develop and approve by April 1, 2020, a plan of measures aimed at increasing financial literacy within the framework of the National Strategy for Increasing Financial Inclusion being developed on the basis of the World Bank's technical assistance.

12. The Central Bank of the Republic of Uzbekistan, jointly with the Ministry of Finance, the Ministry of Justice, and other interested ministries and departments, shall submit proposals to the Cabinet of Ministers of the Republic of Uzbekistan within two months regarding amendments and additions to legislative acts arising from this Decree.

13. Control over the implementation of this Decree is entrusted to the Prime Minister of the Republic of Uzbekistan A.N. Aripov and the Chairman of the Central Bank of the Republic of Uzbekistan M.B. Nurmuratov.

President of the Republic of Uzbekistan Sh. MIRZIYOYEV

Tashkent city,

November 18, 2019,

PF-5877

Appendix 1 to the Decree of the President of the Republic of Uzbekistan dated November 18, 2019, No. PF-5877

CONCEPT of Joint Actions of the Cabinet of Ministers and the Central Bank of the Republic of Uzbekistan on Reducing Inflation and Ensuring Price Stability

The purpose of this Concept is to ensure a reduction in the inflation rate in the economy in the context of deep structural reforms.

The Concept defines the main directions for improving monetary policy, as well as necessary measures in the fields of tax-budget policy and structural changes in economic sectors.

CHAPTER 1. ANALYSIS OF INFLATION FACTORS

The gradual increase in regulated prices (tariffs) and wages in the state sector, as well as the specifics of monetary policy (accumulation of gold and foreign exchange reserves along with the growth of the money supply in the economy, constant devaluation of the national currency, and the existence of a speculative parallel currency market) have been the fundamental factors of inflation formed in previous years in the republic.

Investment shortages accumulated over the years and imbalances formed in the economy require taking important steps to resolve these issues in the new stage of the country's development.

In the context of these positive structural changes in the economy, an objective (inevitable) formation of inflation pressure in the economy was observed.

In this process, the following are manifested as the main factors:

a) increased economic, credit, and investment activity. The tasks of modernizing social and production infrastructure, the need to improve living conditions of the population in regions, reforms in the agrarian sector, adjustments in the wage level in the state sector, the development of entrepreneurial activity, and measures to create conditions for self-employment of the population required the allocation of significant financial resources to the economy;

b) liberalization of regulated prices. Reforming the price regulation system and forming market prices for this group of goods and services creates inflationary pressure. World experience shows that delaying the price liberalization process can reduce the effectiveness of reforms and, as a result, lead to long-term inflationary expectations. Bringing regulated prices to market levels allows attracting private capital to the relevant sector of the economy.

In this regard, the reform of the administrative price regulation system and the gradual increase in tariffs may create a certain level of inflationary pressure from this group of goods and services;

c) adjustment of nominal wages. Over the past two years, the average annual growth of the population's real incomes has amounted to 10-12 percent. The liberalization of the economy has led to a gradual increase in wages for qualified specialists in some sectors of the economy due to increased demand for them;

d) liberalization of foreign trade and simplification of the cross-border movement of goods, services, labor resources, and goods. The liberalization of foreign trade and the growth of imports have significantly affected the formation of exchange rates, as well as the prices of both imports and local goods.

In 2018, under relatively stable exchange rate conditions, the import of some goods contributed to price stabilization, and the prices of fruits and vegetables were adjusted to the level of prices in neighboring countries. Currently, the acceleration of devaluation this year has had a negative impact on the price level in the economy.

Macroeconomic stability, high-quality economic growth, and achieving low inflation are ensured not only by the use of monetary policy instruments, but also by a comprehensive approach that includes the following:

gradual liberalization of regulated prices with an emphasis on increasing the competitiveness of local manufacturers;

continuing to implement structural changes in economic sectors by accelerating the transition to a competitive market economy and forming a complete market for goods and services;

expanding and modernizing production, transport, and social infrastructure;

ensuring the effective redistribution of financial resources by increasing the inflow of private investments and developing the financial market, as well as forming a source of "long-term" money in the financial market.

CHAPTER 2. IMPROVING MONETARY AND CREDIT POLICY AND TRANSITIONING TO INFLATION TARGETING

In the context of deep structural changes and economic liberalization, the priority directions for improving monetary policy include:

preventing sharp price increases and spiral inflation;

maintaining pressure against devaluation of the national currency;

forming the money market and eliminating conditions for preferential lending and segmentation of the money market;

maintaining the solvency of the population and business, taking into account internal and external factors, and, in general, ensuring the stability of the financial sector.

Taking into account advanced international experience, the implementation of the above priority directions requires transitioning monetary policy conditions to the inflation targeting regime.

Inflation targeting reflects a monetary policy regime in which the Central Bank of the Republic of Uzbekistan announces a permanent target (target) for the inflation rate, and its actions are aimed at bringing current inflation to its target indicator through the active use of monetary policy instruments and communication.

The inflation targeting regime has found wide application in both developed and developing countries. This regime is an effective tool for reducing the volatility and inertia of inflation, which, in turn, creates additional conditions for solid and sustainable economic growth in the medium term.

In addition, this regime envisages significant freedom of action for the Central Bank in achieving target inflation indicators, clear identification of goals and monetary policy objectives and priorities, as well as the responsibility of the Central Bank in achieving target inflation indicators. High transparency of the Central Bank's activities for the public allows for the formation of acceptable economic expectations in the economy.

For the effective introduction of the inflation targeting regime, monetary policy should be implemented through the effective management of interest rates in the interbank money market through Central Bank interventions using the influence of market instruments, based on the need to achieve the established target level of inflation.

To fully introduce the inflation targeting regime in the medium term, the following measures will be implemented:

strengthening the role of the Central Bank of the Republic of Uzbekistan in reducing the monetary and non-monetary factors of inflation;

determining the trajectory of short-term inflation targets and announcing the transition to the long-term target by the Central Bank of the Republic of Uzbekistan;

introduction of new instruments by the Central Bank (overnight, deposit and credit auctions, swaps, REPO, short and medium-term bonds, etc.);

use of the interest rate corridor as the main criterion for operations in the money market;

timely response to external and internal factors by conducting an adaptive interest policy;

conducting operations in the money market with government securities and creating a single platform for placing the treasury's idle funds in commercial banks;

forming the yield curve of securities and effectively managing the long-term expectations of economic entities;

systematic assessment of the interdependence of monetary and macroeconomic indicators through the development of econometric modeling tools and the full implementation of the macroeconomic analysis and forecasting system;

improving the communication policy of the Central Bank of the Republic of Uzbekistan by objectively, clearly, and simply communicating information to the broad public about the essence and goals of the inflation targeting regime, the conditions for its successful implementation, direct and indirect positive effects, and the target deadlines for achieving it;

use of econometric models to assess the impact of monetary policy on the dynamics of macroeconomic indicators in the medium and long term.

The ability of the Central Bank of the Republic of Uzbekistan to influence the interbank money market interest rate allows it to shape market conditions and ensure the achievement of monetary policy goals in accordance with the requirements of the economic situation.

The Central Bank of the Republic of Uzbekistan evaluates and forecasts the volume of liquidity in the money market, identifies shortages or surpluses of funds, as well as the availability of relevant tools (for providing and absorbing liquidity).

When an imbalance arises between demand and supply for liquidity in the banking system, the rates of permanent operation transactions hold the fluctuations of interest rates in the interbank money market.

At the same time, the mechanism of bringing mandatory reserves to a medium level creates additional flexibility in the process of managing interbank market rates. In the medium term, an upward change in the coefficient increases the activity of banks in the interbank money market, thereby strengthening the operation of the transmission interest channel.

On Improving Monetary Policy Through a Phased Transition to an Inflation Targeting Regime

One of the necessary conditions for a successful transition to an inflation targeting regime is a freely formed exchange rate, the changes of which are fully caused by significant factors of demand and supply. This, in turn, requires the modernization of the interbank currency market and the corresponding improvement of the policy of the Central Bank of the Republic of Uzbekistan in the field of currency interventions.

One of the main factors in the development of the currency market is the gradual decrease in the activity of the Central Bank of the Republic of Uzbekistan in the domestic currency market and the increase in the role of commercial banks as market-makers.

The transition to a flexible formation of the exchange rate and the implementation of interbank currency trading implies the improvement of currency intervention methods. In this regard, the Central Bank of the Republic of Uzbekistan plans to develop a Currency Intervention Strategy aimed at minimizing interference in market activity and not affecting the fundamental trend of change in the exchange rate.

Taking the above into account, the following are considered necessary conditions for transitioning to inflation targeting by completing the process of liberalizing the currency market:

• Encouraging the activity of banks in the market as market-makers and increasing their role in forming the exchange rate;
• Improving the policy of currency interventions and developing strategies and tactics that define the goals and methods of interventions by the Central Bank of the Republic of Uzbekistan;
• Developing a market for derivative instruments that allow currency market participants to hedge currency risks.

Ensuring price stability in the long term requires the stable operation of the entire financial system. In this regard, systemic risks may arise in the banking sector even under stable macroeconomic conditions.

To bring inflation close to the set target and maintain it, the Central Bank of the Republic of Uzbekistan must reduce financial risks, including through prudential control measures.

Bank supervision and measures to financially strengthen banks. Cleaning the balance sheets of commercial banks creates the basis for increasing their stability, preserving the funds of depositors and creditors, strengthening trust in the financial system, and further development of financial markets.

The timely and effective application of macroprudential control measures that reduce the probability of risks for banking and financial systems allows for the balanced operation of the economy and the provision of macroeconomic stability.

In the inflation targeting regime, price stability supports financial stability, because market participants can foresee and understand monetary policy actions, making economic entities more consistent in making decisions. This helps eliminate elements of uncertainty and stabilize the entire financial system with minimal participation of the Central Bank of the Republic of Uzbekistan.

Increasing the trust of the population and entrepreneurs in banks and the national currency is considered a priority direction of banking system reform.

The functioning of a reliable banking system and financial market in the country serves the full operation of monetary policy transmission channels and increases the effectiveness of measures taken by the Central Bank of the Republic of Uzbekistan to ensure price stability.

To achieve these goals, a comprehensive set of measures is implemented, including the further development of the banking system:

• Increasing banks' attention to customers;
• Improving the quality of banking services and the population's access to banking and other financial services by fully implementing electronic and remote services for customers;
• Reforming the system of providing banking services and transforming banks, improving the quality of corporate governance;
• Creating effective infrastructure, automating bank activities, and introducing modern financial technologies;
• Accelerating the process of reforming state banks and taking effective measures for their privatization;
• Increasing the speed of providing banking services in state banks, including introducing a system for evaluating the performance of key performance indicators (KPIs) of employees;
• Strengthening prudential control measures by ensuring strict compliance with established economic norms by banks and, if necessary, applying measures to temporarily restrict the asset operations of individual banks.

CHAPTER 3. JOINT MEASURES OF THE CABINET OF MINISTERS AND THE CENTRAL BANK TO REDUCE INFLATION

To ensure price stability and prevent a significant increase in inflation, the Cabinet of Ministers of the Republic of Uzbekistan and the Central Bank must carry out joint actions in coordinating tax-budget and monetary policies and implementing structural reforms in the economy.

Measures in the field of tax-budget policy:

• Gradually reduce the general fiscal balance deficit to a level not exceeding 1.5% in 2022;
• Ensure effective control over compliance with budget discipline by legislative and executive authorities;
• Establish the procedure for attracting external sources of deficit financing, including resources that do not generate inflation risks, and enshrine it by law;
• Increase the efficiency of centralized investments aimed at socio-economic goals;
• Introduce modern information and communication technologies in the tax administration system;
• Increase responsibility for timely compliance with tax discipline and ensure the inevitability of punishment for tax evasion.

Measures in the field of structural policy:

a) Modernization and expansion of production and transport infrastructure:

• Expand production capacities and modernize the fuel and energy complex, including by attracting private investments;
• Use the state-private partnership mechanism in the construction and maintenance of automobile roads;
• Develop new mechanisms for attracting the private sector to the cargo transportation sector via railways and air transport;
• Reduce tariffs and prices for transport services provided to a level not exceeding that of other countries along the main foreign trade and tourist routes;
• Improve the quality of logistics services, wholesale trade, and storage infrastructure.

b) Improving the competitive environment and creating equal opportunities for business:

• Strengthen the institutional basis for property rights and guarantees of entrepreneurial activity;
• Reduce the state share in the authorized capital of enterprises operating in competitive goods and financial markets, including selling objects not characteristic of the main activities of natural monopolies to the private sector;
• Ensure transparency in pricing by monopolistic enterprises and establish deadlines for liberalizing regulated prices (tariffs) in the medium-term perspective, taking into account inflation targets;
• Critically review the practice of granting individual tax and customs exemptions, subsidies, preferences, and preferential loans;
• Develop market mechanisms in the field of state procurement, increasing their transparency and accountability;
• Conduct an active communication policy to explain and justify the essence, goals, implementation stages, and achieved results of reforms on price liberalization.

c) Growth of private investment flows and development of the financial market:

• Expand instruments for financing loans;
• Activate the processes of primary and secondary placement of shares of local enterprises on world fund markets;
• Simplify the mechanism for establishing and liquidating joint-stock companies;
• Create opportunities for the entry of private investors and direct foreign investments into the electricity and gas supply sectors on a competitive basis and actively attract them.

d) Increasing the productivity of production factors:

• Implement modernization and technological renewal programs aimed at increasing production productivity and reducing energy consumption;
• Implement state programs aimed at encouraging productivity and improving quality, and effectively implement the agricultural development strategy by allocating land to expand the production of socially significant food products;
• Optimize the cost structure of finished products in sectors by increasing labor productivity and paying decent wages;
• Implement special sectoral programs to increase energy efficiency by introducing international standards and regulations;
• Publish the efficiency ratings of enterprises with state shares to increase public control over their activities;
• Develop and approve requirements for the efficiency and productivity of equipment, including service life.

CHAPTER 4. EXPECTED RESULTS

The improvement of monetary policy and the implementation of coordinated actions by the Cabinet of Ministers of the Republic of Uzbekistan and the Central Bank will ensure price stability in the economy and achieve the long-term goal of 5% inflation.

Price stability has a positive impact on the standard of living of the population, employment activity, strengthening their trust in the national currency, reducing the level of dollarization in the economy, and increasing the growth of domestic and foreign investments in the national economy.

At the same time, the effective implementation of the specified measures will contribute to increasing the trust of economic agents in the monetary policy implemented by the Central Bank of the Republic of Uzbekistan, which, in turn, will allow for a significant reduction in inflation expectations.

Stability, as well as ensuring the transparency and predictability of economic policy, increases the country's investment attractiveness and serves as a factor in reducing the risk premium on external sources of lending.

Decree of the President of the Republic of Uzbekistan No. PF-5877 dated November 18, 2019 ANNEX 2

"ROADMAP" for reducing inflation and ensuring price stability in 2020

No.	Measures	Form and mechanism of implementation	Implementation period	Responsible executors
I. In the field of monetary policy
1.	Improvement of monetary policy tools for regulating the volume of liquidity and interest rates in the money market.	Decision of the Board of the Central Bank on introducing monetary operations, including:

• Overnight deposits of the Central Bank;
• Regular deposit auctions with a term of up to 2 weeks;
• Issuance of Central Bank bonds;
• Overnight loans of the Central Bank under collateral of state securities and foreign currency;
• Credit auctions of the Central Bank for up to 2 weeks under collateral of state securities and foreign currency. | January 2020 | Central Bank (Nurmuratov) | | 2. | Establishment of the main rate and interest corridor for the Central Bank's monetary operations. | Decision of the Board of the Central Bank providing for:
• Establishing the Central Bank's main rate as the main target for monetary operations;
• Introduction of an interest corridor for monetary operations. | January 2020 | Central Bank (Nurmuratov) | | 3. | Ensuring high flexibility of interest rate policy. | Decision of the Board of the Central Bank providing for:
• Increasing the frequency of meetings to review the main rate level to respond in time to risks of deviation from the inflation target by introducing additional meetings between regular meetings;
• Announcing the main rate at least eight times a year. | January 2020 | Central Bank (Nurmuratov) | | 4. | Further development of the interbank money market and the secondary market for state securities. | Organizational measures to create a single platform for conducting operations with state securities in the money market and placing treasury surplus funds in commercial banks. | February 2020 | Central Bank (Nurmuratov) Ministry of Finance (Ishmetov) | | 5. | Development of a system for making decisions based on econometric analysis and forecasts and discussing them before setting the main rate. | Decision of the Board of the Central Bank on full implementation of the macroeconomic analysis and forecasting system (FPAS), providing for:
• Development of econometric modeling tools;
• Systematic assessment of the interrelationship of monetary and macroeconomic indicators;
• Assessment of the impact of monetary policy on the dynamics of macroeconomic indicators in the medium and long term;
• Improvement of forecasting the liquidity of the banking system and its formation factors. | April 2020 | Central Bank (Nurmuratov) | | 6. | Development and adoption of a strategy for further development of the currency market. | Decision of the Board of the Central Bank providing for:
• Encouraging banks' activity in the market through their active participation in determining the exchange rate;
• Development of the derivatives market, hedging instruments, and the market-maker institution;
• Transition from the current "fixing" method of interbank currency trading to the continuous auction trading "matching" method. | Throughout 2020 | Central Bank (Nurmuratov) | | 7. | Attracting technical assistance from international financial institutions for the successful introduction of the inflation targeting regime and achieving target inflation levels. | 1. Sending requests for technical assistance to the International Monetary Fund and other international financial institutions.

2. Selection and attraction of a permanent advisor (expert) on inflation targeting. Agreement on the terms of the permanent expert contract and financing sources. | December 2019 Depending on agreement with donors | Central Bank (Nurmuratov) | | 8. | Preparation and publication of monetary policy reviews and inflation expectations surveys every quarter. | Preparation and publication of monetary policy reviews and surveys of inflation expectations of the population and economic entities. | Every quarter | Central Bank (Nurmuratov) | | 9. | Improving the qualifications of participants in money and currency markets. | Conducting seminars and trainings in the field of macroeconomic analysis and forecasting. | On a permanent basis | Central Bank (Nurmuratov) Commercial banks | | 10. | Improvement of macroprudential bank supervision mechanisms. | Strengthening macroprudential control practice through:

• Gradual implementation of Basel Committee requirements;
• Introduction of a countercyclical buffer for bank capital to prevent sharp growth in credit activity during economic growth periods;
• Establishing additional requirements for bank capital adequacy in case of deviation from critical values of certain indicators. | February 2020 | Central Bank (Nurmuratov) | | 11. | Increasing the personnel potential of the Central Bank. | 1. Improving the qualifications of specialists and studying the experience of foreign central banks.

2. Organizing training for promising young specialists in master's and doctoral programs at advanced foreign higher education institutions.
3. Comprehensive support and effective motivation of young specialists of the Central Bank. | On a permanent basis | Central Bank (Nurmuratov) | | 12. | Improvement of the communication policy of the Central Bank. | 1. Development and approval of a new communication policy strategy providing for the objective and clear delivery of information about the essence and goals of the inflation targeting regime to a wide range of the population.
4. Ensuring transparency of the Central Bank's operations in the field of monetary policy. | February 2020 | Central Bank (Nurmuratov) | | 13. | Organizing press briefings and issuing press releases to further explain the essence and goals of inflation targeting to the public. | Holding a press conference of the Central Bank. Issuing press releases. | Within one week | Central Bank (Nurmuratov) | | II. In the field of tax-budget policy | | | | | | 14. | Conducting coordinated tax-budget policy. | Gradually reduce the general fiscal balance deficit to a level not exceeding 1.5% of GDP starting from 2022. | May 2020 | Ministry of Finance (Ishmetov) | | 15. | Introduction of a mechanism for setting upper limits for attracting state external debt. | Draft Decree of the President of the Republic of Uzbekistan "On Improving the Efficiency of Managing State Debts", including the provision to annually update the medium-term strategy for managing state debts, taking into account changes in external and internal factors. | December 2019 | Ministry of Finance (Ishmetov) | | 16. | Increasing the efficiency of centralized investments aimed at socio-economic goals. | Draft Government Decision providing for:

• Introduction of the Public Investment Management Assessment (PIMA) system to analyze existing problems related to the selection and implementation of investment projects;
• Establishment of the procedure for setting criteria and importance for selecting investment projects in social sector branches, road transport infrastructure, and other sectors;
• Creation of a single database of information on projects implemented and proposed for implementation from centralized investments and funds of international financial institutions, updated annually;
• Gradual reduction of the state share by implementing regional projects within the Investment Program outside the budget of local resources or sectoral ministries and departments. | August 2020 | Ministry of Economy and Industry (Khojayev) Ministry of Finance (Ishmetov) Ministry of Investments and Foreign Trade (Umurzakov) | | III. In the field of ensuring coordination of macroeconomic policy | | | | | | 17. | Implementation of state policy measures to replenish the domestic market with consumer goods. | Implementation of a set of measures providing for:
• Maintaining the liberalization of foreign trade aimed at developing competition in the market;
• Encouraging production and developing production infrastructure necessary for industrial sectors to replenish the domestic market with consumer goods. | On a permanent basis | Ministry of Economy and Industry (Khojayev) Ministry of Investments and Foreign Trade (Umurzakov) Ministry of Finance (Ishmetov) Central Bank (Nurmuratov) | | 18. | Improvement of the mechanism for identifying problems and risks hindering the implementation of socio-economic reforms. | Consideration and discussion of issues of consistency between tax-budget and monetary policies and the status of implementation of structural reforms at meetings of the Economic Council "to ensure the implementation of the 'Roadmap' for the main directions of structural reforms in the Republic of Uzbekistan for 2019-2021". | On a permanent basis (at least 4 times a year) | Secretariat of the Economic Council (Ishmetov) | | 19. | Introduction of the practice of announcing the schedule for issuing state securities in advance with specific dates for each year. | Draft Government Decision providing for:
• Increasing the frequency and volume of issuing state securities with different maturity periods to form the money market "benchmark";
• Issuing and placing long-term state securities (maturity 5-10 years) in the domestic market to form the yield curve in the economy. | Before the beginning of each year and when it is necessary to update the schedule 2020-2023 | Ministry of Finance (Ishmetov) Central Bank (Nurmuratov) | | 20. | Establishment of a constant practice of mutual information exchange between the Ministry of Finance and the Central Bank. | Implementation of a set of joint measures by the Ministry of Finance and the Central Bank providing for:
• Establishment of daily communication channels for information exchange;
• Determination of the list of information necessary for the analysis of financial and economic indicators and the deadlines for their submission;
• Submission of advance (one day in advance) assessments of the expected volume of daily revenues and expenditures of the state budget for short-term forecasting of liquidity in the banking system;
• Connection of software allowing for the export of information in online mode for specialists of the Ministry of Finance and the Central Bank. | February 2020 | Central Bank (Nurmuratov) Ministry of Finance (Ishmetov) | | 21. | Introduction of courses to improve the financial literacy of the population. | Development and introduction of courses to improve financial literacy in institutions of secondary and vocational education. | September 2020 | Ministry of Higher and Secondary Special Education (Majidov) Ministry of Public Education (Shermatov) Central Bank (Nurmuratov) Ministry of Finance (Ishmetov) Committee for Competition Protection (Sharipov) | | IV. In the field of structural reforms in other sectors and areas of the economy | | | | | | 22. | Establishment of a regime based on principles and tasks corresponding to the strategy and program for the development of economic branches and sectors, aimed at constantly increasing the volume of domestic production and ensuring price stability. | Introduction into practice of a Government Decision providing for the establishment of regime and control over the system of developing strategies and programs for the development of the economy, its branches, and sectors, based on the following tasks:
• Increasing the competitiveness of local producers and their adaptability to changes in external economic conditions;
• Development of production, transport, and social infrastructure;
• Increasing the efficiency of using centralized financial resources, optimizing the structure of sources for long-term investment financing by increasing the share of private and direct foreign investments;
• Increasing labor productivity and production energy efficiency;
• Reducing the cost of produced products based on the constant search and elimination of factors leading to unjustified increases in production costs. | February 2020 | Ministry of Economy and Industry (Khojayev) Ministry of Finance (Ishmetov) Interested ministries and departments | | 23. | Reduction of the cost of produced products based on the constant search and elimination of factors leading to unjustified increases in production costs. | A set of organizational measures for reducing production costs in industrial sector enterprises belonging to ministries, departments, and other organizations, providing for the establishment of annual target parameters for reducing production costs annually. | By the end of December every year | Ministry of Economy and Industry (Khojayev) Sectoral ministries and departments | | Monitoring the implementation of measures adopted in 2020 for reducing production costs at sectoral industrial enterprises and review every quarter. | Every quarter | | | | 24. | | | | |

Annex 3 to the Decree of the President of the Republic of Uzbekistan No. PF-5877 dated November 18, 2019

Coordination Commission for Reducing Inflation and Ensuring Price Stability

COMPOSITION See previous edition.

R.A. Gulyamov — Advisor to the President of the Republic of Uzbekistan, Chairman of the Commission

Zh.A. Kuchkarov — Deputy Prime Minister of the Republic of Uzbekistan — Minister of Finance, Deputy Chairman of the Commission

M.B. Nurmuratov — Chairman of the Central Bank of the Republic of Uzbekistan, Deputy Chairman of the Commission

O.Z. Nasritdinkhuzhaev — Deputy Advisor to the President of the Republic of Uzbekistan

M.P. Olloyorov — Deputy Head of the Department of the Presidential Administration of the Republic of Uzbekistan

O.A. Hakimov — Deputy Director of the Center for Economic Research and Reforms under the Presidential Administration of the Republic of Uzbekistan

B.A. Begalov — Chairman of the State Statistics Committee

Sh.Sh. Sharakhmetov — Chairman of the Committee for the Development of Competition and Protection of Consumer Rights

O.B. Rustamov — First Deputy Minister of Economy and Industry

T.A. Ishmetov — First Deputy Minister of Finance

M.M. Mirzaev — First Deputy Chairman of the State Tax Committee

I.I. Norqulov — First Deputy Chairman of the Central Bank

A.Ya. Haydarov — Deputy Minister of Finance

A.Zh. Ortikov — Head of the Secretariat for Macroeconomic Analysis, Structural Changes, Financial and Banking System, and Private Entrepreneurship Issues of the Cabinet of Ministers of the Republic of Uzbekistan

Sh.Z. Shukurov — First Deputy Director of the Institute of Forecasting and Macroeconomic Research

Ex officio

— Executive Director of the "El-Yurt Umid" Foundation for Training Specialists Abroad and Communication with Compatriots

N. Sirojiddinov — Professor of the World Economy and Diplomacy University

Z.T. Parpiev — Professor of the Westminster International University in Tashkent

B.S. Hamraev — Director of the Monetary Policy Department of the Central Bank of the Republic of Uzbekistan, Secretary of the Commission

Notes:

1. If a Commission member changes jobs, persons newly appointed to these positions or entrusted with performing the relevant functions are included in its composition.

2. In necessary cases, specialists from relevant state management bodies, economic associations, and other organizations are involved in the work of the Commission.

(Annex 3 edited by the Decree of the President of the Republic of Uzbekistan No. PF-108 dated July 6, 2023 — , 07.07.2023, No. 06/23/108/0460) (National Database of Legislative Acts of the Republic of Uzbekistan, 19.11.2019, No. 06/19/5877/4036; , 09.11.2021, No. 06/21/3/1037; 07.07.2023, No. 06/23/108/0460 )