On November 20, Uzbekistan issued dual tranches of Eurobonds worth US$ 555 million and 2 trillion soums with maturities in 2030 and 2023, respectively. The yield on dollar-denominated eurobonds is 3.7%, while those denominated in soums are 14.5% per annum.
In an interview to Studio 24 in Uzbekistan 24 channel, the Deputy Finance Minister Odilbek Isoqov said that most of the soum-denominated bonds were bought by almost 20 investors from the USA, UK, European countries (they account for 90% of buyers), among which fund managers and banks.
The ten-year dollar-denominated eurobonds were purchased by nearly 200 investors from the USA (54%), UK (25%), European countries (17%) and countries of Asia and the Middle East (4%). Fund managers, insurance companies, sovereign and pension funds were the main buyers.
“In general, we are satisfied with both the geography and the types of investors. During the talks, most of them expressed very warm words towards Uzbekistan. Some of them already bought our Eurobonds issued in February 2019. I think they are ready to invest in Uzbekistan for the long term,” he said.
He also explained what was the advantage of issuing the bonds in national currency.
“Until recently, loans from international financial institutions were drawn in dollars, euros and yens. The issue of Uzbek soum-denominated bonds is a very good news, because now Uzbekistan government and other local companies, when they issue soum-denominated bonds in the future, they will not have the volatility-related risk despite higher interest rate,” he said.
The deputy minister admitted that the Uzbek stock market is underdeveloped now, with very few local investors. Despite this, the Ministry of Finance every year increases the volume of issuance of government treasury bonds in the domestic market. If 600 billion soum worth of bonds were issued in 2018, then this year it is expected to be at 4.8 trillion soums.
“There is a demand for government treasury bonds, and we are increasing the supply, but this is not enough. Our ultimate goal is to attract these foreign investors to Uzbekistan and make sure that they buy government treasury bonds, shares and securities of other issuers in the Uzbek market in soums. This is a process that requires a certain amount of time,” the Deputy Minister of Finance noted.
Odilbek Isakov said that in 2021 it is planned to issue 5 trillion soum worth of government treasury bonds, as well as international Eurobonds - for 700 million dollars.
“Of course, the amounts may be adjusted based on the budget balance, revenues, expenses and other factors,” he said.
The Ministry of Finance reported that the funds from the placement of Eurobonds will go to cover the budget deficit (in January-September it was at 7.7 trillion soums or 1.9% of GDP), as well as financing a number of projects that will be implemented in 2021 for the sustainable development of Uzbekistan.
The cash from the issue of the latest Eurobonds will be contributed to:
- construction of 15 new schools;
- construction of 3 medical institutions;
- construction of 200 km of water supply and sewerage systems;
- reconstruction of 298 km of highways;
- providing financial assistance to women and families in precarious situations, women with disabilities;
- providing women with soft loans to start business;
- for initial payment for purchase of real estate for women in precarious social situations;
- payment of unemployment benefits;
- granting subsidies for creation of greenhouses, unemployed people who want to open their own business, job quotas, etc .;
- financing of targeted tourism promoting programs.
It is planned to conribute over 1 trillion soums for these purposes.
In addition, on Tuesday, President Shavkat Mirziyoyev instructed the Ministry of Finance to provide 1 trillion soums to Xalq Bank, Microcreditbank and Agrobank as resources for family business programs.