The Central Bank unveiled plans to liberalize regulated prices (for electricity, gas, heat supply, communal services) within the framework of the conceptual draft of the Main axes of monetary policy for 2022-2024”.
Reportedly, the Uzbek government planned to increase tariffs for electricity and gas in February-March 2020. In April, the Deputy Finance Minister Odilbek Isakov said that in the wake of the coronavirus pandemic and lower incomes of the population, the liberalization of energy prices was postponed indefinitely.
Now these measures are reflected in the main and alternative scenarios for the development of the economy of Uzbekistan for the next three years developed by the Central Bank.
In the main scenario, it is planned to "float prices" completely at one time in 2022 or in stages in 2022-2023. After the implementation of these measures, the inflation rate is expected to be 8-9% in 2022 and decrease to 5% in 2023-2024, as “the impact of price changes on administratively regulated goods and services will decrease”.
Given the potential of the economy in the first half of 2022, liberalization of regulated prices and external inflationary risks, monetary policy conditions will remain “relatively tight”.
In addition, in the case of straight liberalization of regulated prices, measures will be taken to form real interest rates (actual interest rates minus the current inflation rate) in the money market around 2-3%. And if a gradual increase in tariffs is chosen, then this figure will be increased to 4-5%.
It is expected that the consequences of this decision will be temporary and will not lead to significant changes in real interest rates in the economy. The Central Bank will take measures to curb inflation by providing the population with comprehensive explanations through communication on monetary policy.
The alternative scenario will require postponing the liberalization of regulated prices for future years (after 2023). As a result, headline inflation is projected at 7.5-8.5% in 2022 and about 5.6-6.6% in 2023.
One of the important factors in the decisions of monetary policy in 2024 will be the process of liberalization of regulated prices.
