VZCZCXRO6706
RR RUEHAST RUEHBI RUEHCI RUEHLH RUEHLN RUEHNEH RUEHPW RUEHSK RUEHVK
RUEHYG
DE RUEHNT #1536/01 3650937
ZNR UUUUU ZZH
R 300938Z DEC 08
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC 0174
INFO ALL SOUTH AND CENTRAL ASIA COLLECTIVE
CIS COLLECTIVE
RUEHNT/AMEMBASSY TASHKENT

UNCLAS SECTION 01 OF 02 TASHKENT 001536 
 
SIPDIS 
SENSITIVE 
SBU DELIBERATIVE PROCESS 
DEPT FOR SCA/CEN AND EB 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EAID EINV ETRD KCRM SOCI UZ
SUBJECT: UZBEKISTAN:  IMF ROSY ON UZBEK ECONOMY 
 
REF: a) TASHKENT 591, b) TASHKENT 951 
 
¶1. (SBU) SUMMARY:  On December 18 Sena Eken from the IMF told the 
Tashkent diplomatic community that the Uzbek economy had performed 
strongly with 9.4 percent GDP growth in the first nine months of 
¶2008.  Although Uzbekistan is not immune from the world financial 
crisis, the IMF predicts that its relative isolation will allow for 
continued strong growth in 2009, perhaps by as much as 7 percent. 
The official GOU position is that this is an ideal opportunity for 
increased foreign investment.  END SUMMARY 
 
--------------------------------------------- ----- 
THE IMF RECAPS UZBEKISTAN'S 2008 PERFORMANCE . . . 
--------------------------------------------- ----- 
 
¶2. (SBU) Six months after its Article IV consultations with Uzbek 
Government officials (ref A), the IMF was back in Tashkent in early 
December to review economic developments in 2008 and assess the 
outlook for Uzbekistan for 2009.  On December 18 Sena Eken, 
Assistant Director of the IMF's Middle East and Central Asia 
Department, briefed Tashkent's diplomatic community on the 
conclusions reached by her IMF team. 
 
¶3. (SBU)  Quoting Uzbek Government statistics, Eken said economic 
performance had remained strong with 9.4 percent GDP growth during 
the first nine months of 2008.  Eken pointed to increased external 
demand for Uzbek exports, increased investment, and increased 
consumption supported by wage growth and remittances as reasons for 
this strong performance.  Remittances nearly doubled in 2008 as 
compared with 2007.  High commodity prices -- in particular for 
cotton, gold, and energy -- contributed to a large current account 
surplus.  Eken noted that an IMF technical assistance program had 
caused Uzbekistan to revise its current account surplus downward 
but that at 13 percent of GDP, it remains quite high.  Foreign 
exchange reserves continue to accumulate, albeit somewhat more 
slowly than in the past, and are now equal to about eleven months 
of imports.  Whereas 2008 ushered in the global credit crunch, for 
Uzbekistan it brought a 38 percent increase in credit available to 
the Uzbek economy. 
 
¶4. (SBU) Eken said inflation remains high and should be 13 percent 
overall for the year.  Inflation for food, gas, and services is 
much higher, however, ranging anywhere from 20 to 40 percent.  This 
has been accompanied by a sharp increase in wages and salaries. 
 
------------------------------- 
. . . AND LOOKS FORWARD TO 2009 
------------------------------- 
 
¶5. (SBU) The IMF remains upbeat on Uzbekistan's economic outlook 
for 2009.  Eken said the world financial crisis will affect 
Uzbekistan through decline in prices for its commodity exports, 
overall weaker demand for Uzbek exports, and decline in 
remittances.  Neverthless, the IMF expects Uzbekistan's GDP to grow 
by 7 percent in 2009.  The external account surplus will decrease 
slightly but will still amount to 7 percent of GDP.  Lower import 
prices should have a favorable influence, and inflation should 
decrease.  Although remittances are likely to drop by half, this 
will put them back only to their 2007 level.  Since Uzbekistan is 
not integrated with the financial markets of developed countries, 
it is not likely to suffer in a major way from credit constraints. 
Eken said the IMF had cautioned the GOU against increasing 
protectionist measures in response to the financial crisis. 
 
¶6. (SBU) Eken continued that the GOU is putting together a series 
of measures to increase internal consumer demand.  These include 
tax reductions, wage increases on the order of 30 percent, and 
support for small and medium enterprises.  As it has ever since 
independence, the GOU will pursue a policy of import substitution. 
The GOU will put an emphasis on large government projects as a 
means to create jobs. 
 
¶7. (SBU) Eken said Uzbekistan is taking steps to increase 
confidence in the banking system and enhance the role of banks in 
economic activity, for example through subsidized loans to targeted 
sectors.  The IMF has recommended that the GOU remove noncore 
functions from banks and facilitate the availability of cash.  Eken 
commented that the IMF continues to hear stories of exchange 
restrictions but that the GOU denies these reports and says 
increased domestic production is decreasing demand for imported 
consumer goods.  (COMMENT:  Representatives of Proctor and Gamble 
have reported it now takes up to 270 days for profits to be 
converted from soum to dollars, and other importers of consumer 
goods have reported similar dramatic delays.  End Comment) 
 
¶8. (SBU) Eken concluded by saying the GOU is proud that it has 
protected its economy from the world crisis.  The official GOU 
position is that foreigners should take advantage of this 
opportunity and increase their investments in the Uzbek economy. 
 
------- 
COMMENT 
------- 
 
¶9. (SBU) The IMF is still subject to an agreement whereby the Uzbek 
Government provides them with economic data under the restriction 
that these data are for internal IMF use only.  As is its standard 
practice, the IMF focuses its attention on macroeconomic fiscal 
parameters and neither intends nor attempts to analyze the social 
and political impacts of economic policies. 
 
¶10. (SBU) During the post-briefing discussion, one economist in 
attendence highlighted this point by commenting on the incongruity 
of increasing surpluses in a country where the people live so 
poorly.  Indeed, although the IMF may be correct that the Uzbek 
economy is rosy from the macroeconomic point of view, living 
conditions for the average Uzbek remain difficult in the extreme 
(ref B).  Sena Eken could respond only that the GOU interprets 
concepts such as "controlling money supply" in a literal, almost 
childlike manner.  It is our opinion, however, that the key word 
for the GOU is "control" -- control of all aspects of the economy 
and of its citizens.  If the GOU believes running surpluses to the 
detriment of the living standard of its citizens helps it maintain 
that control, that is what it will do. 
NORLAND 
 
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