The level of dollarization of the Uzbek economy is planned to be cut from 50% to 45%, announced the Deputy Chairman of the Central Bank Behzod Khamraev.
During his address to the parliament, President Shavkat Mirziyoyev stated that it is necessary to gradually reduce the economy's dependence on the dollar. For this purpose, Shavkat Mirziyoyev instructed to reduce the share of foreign currency loans this year from the current 50% to 45%, that is, by at least US$ 2 billion.
As of December 1, 2020, the amount of banks' assets is 350.4 trillion soums, of which 172.4 trillion soums or 49.2% of the total amount in the foreign currency. At the beginning of last year, this figure was 47.3%.
In addition, as of December, the balance of loans in banks is 270.7 trillion soums (+ 27.9% over 11 months), while the volume of deposits is 105.8 trillion soums (+ 16.3%).
The gap between the balance of loans and bank deposits continues to grow. If the ratio of loans to deposits at the beginning of 2020 was 232% (284% - banks in which the state holds shares, 99% - other banks), then in December - already 256% (banks with state shares - 321%, other banks - 101%).
The Director of the Department of Prudential Supervision of Credit Organizations of the Central Bank, Abror Turdaliev, told that "the share of state financing of loans is insignificant."
“Yes, the share of deposits does not fully cover the volume of loans, but this does not mean that the rest is funded by the state. The share of state funding is insignificant, it is necessary to clarify, but it should not exceed 10%. This applies to targeted loans that are funded by the state. For example, picking cotton, grain,” he said.
According to him, banks finance loans mainly through "external borrowing and internal loans."
“In this connection, the level of dollarization is significantly high in some banks. These are large state banks, which are much more at ease at attracting external borrowings and financing large projects, ”he said.
The Director of the Department of Prudential Supervision of Credit Institutions said that in order to reduce the level of dollarization, changes are being made to the regulation of calculating banks' own funds (capital), in which "the degree is set based on interest rates."
“This will accordingly affect the implementation of lending activities in foreign currency. This will be one of the essential tools,” he said.
In addition, the methodology for calculating the short-term liquidity indicator was revised.
“If earlier the calculation did not take into account the possible outflow of external borrowings or loans in general, the current methodology takes these factors into account. This will also affect the structure of the obligation and it will be much more profitable for banks to attract resources in the national currency,” he added.
Abror Turdaliev also stressed that banks now have to conduct their credit policy "with high quality, accurate and restrained."
“Moreover, in order to ensure the current level of lending, taking into account the fact that there are mainly long-term projects in the structure and still they are related to imports, banks, first of all, will have to pursue their policy - both interest rate and foreign borrowing policy - of a better quality, carefully and discreetly,” he said.
The director of the Department of Prudential Supervision of Credit Institutions warned that the "sufficiently high" level of dollarization in some large banks not only leads to risks, but also puts pressure on capital.
“That is, they are losing a certain capital buffer ('safety cushion') due to the already elementary devaluation, which even at an acceptable level, say, 10% for the next year, this will significantly affect their buffer,” he explained.
Former first deputy chairman of the Central Bank (now Minister of Finance) Timur Ishmetov previously stated that the high dollarization of the economy is partly the result of distrust of the national currency, as well as previous economic policy, when there were a lot of currency restrictions.
In addition, from now on, projects implemented in the regions through external borrowing will be discussed by local councils and the public. The share of international bonds issued in national currency will also be increased from the current 25% to at least 40%.
According to Shavkat Mirziyoyev, external borrowings under the guarantee of the state will be reduced, and more private capital will be attracted to investment and infrastructure projects.