The government of Uzbekistan used fiscal policy as its main tool to prevent a sharp decline in production amid the global economic crisis caused by the coronavirus pandemic, announced the Deputy Finance Minister Akhadbek Khaidarov at a press conference on Monday.
Fiscal policy is the activity of the state to regulate taxes and government spending in order to influence the economy.
According to him, if in 2019 the expenditures of trust funds of the state budget topped 27% in relation to the GDP, then this figure is expected at 31-32% in 2021.
“If we didn’t use fiscal policy instruments and did not increase spending on investment and production, we would not be able to prevent a decline in GDP in 2020,” he said.
Akhadbek Khaidarov recalled that last year Uzbekistan was among the few countries that achieved GDP growth (1.6%). In 2021, GDP is expected to grow by almost 7%.
“What is our goals now for the next five years? Of course, we are no longer able to make expenses at this level. Now the main task is to reduce state budget expenditures to the pre-crisis level, that is, to a maximum of 27% of GDP. This, in turn, will help reduce the budget deficit, ”he said.
The Deputy Minister of Finance said that starting next year, the budget deficit will gradually begin to decrease.
“Now we expect that in the next two years the budget deficit will be at 2.5-2.6%. In the future, we plan to keep this figure within 2%, ”said Akhadbek Khaidarov.
He added that the reduction in state budget expenditures and the budget deficit will reduce the inflation rate to 5% planned by 2023.
He also recalled that the government has set a limit on the country's national debt within 60% of GDP, but the real goal is to keep the figure within 50%.
“The 60% limit does not mean that the public debt will reach this figure. For example, the government during the period of macroeconomic stability will need to keep the national debt within 45-50% of GDP. And during crises, for example, with a decrease in GDP or an increase in the budget deficit, this figure may rise by a certain level, but not more than 60%. And after the recovery of economic activity, the figure should again return to 45-50%,” he explained.