Development Finance Assessment for the Republic of Uzbekistan
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DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN UZBEKISTAN 2021 DEVELOPMENT FINANCE ASSESSMENT for the Republic of Uzbekistan UZBEKISTAN 2021 The Analytical report “Development Finance Assessment for the Republic of Uzbekistan” has been prepared Mr. Gregory De Paepe, Independent Consultant within the framework of UNDP Project on “Financing for Sustainable Development in Uzbekistan” and with the support of the UN Resident Coordinator’s Office in Uzbekistan. The views expressed in this publication are those of the author(s) and do not necessarily represent those of the United Nations, including UNDP, or the UN Member States. UNDP works in nearly 170 countries and territories, helping to achieve the eradication of poverty, and the reduction of inequalities and exclusion. We help countries to develop policies, leadership skills, partnering abilities, institutional capabilities and build resilience in order to sustain development results. UNDP assistance to Uzbekistan is aimed at achieving common interrelated goals: supporting the Government in accelerating reforms in sustainable economic development, effective public administration, adaptation to climate change and environmental protection. © UNDP, 2020 (www.uz.undp.org) TABLE OF CONTENT TABLE OF CONTENT ..............................................................................3 ABBREVIATIONS . .4 EXECUTIVE SUMMARY ............................................................................5 INTRODUCTION . .10 SUSTAINABLE DEVELOPMENT CONTEXT ............................................................12 Economic development ........................................................................12 Social development ............................................................................14 Environmental development ....................................................................16 SDG financing needs and priorities ..............................................................17 DIMENSION 1: ASSESSING DEVELOPMENT FINANCE FLOWS. .21 Overview of total development finance ..........................................................21 Public domestic financial flows . .25 Public International financial flows. .35 Private financial flows . .42 DIMENSION 2: INTEGRATED PLANNING AND BUDGETING. .47 Long-term development vision. .47 Medium-term development planning ............................................................48 Annual budgeting process. .49 Strategy on PFM reform ........................................................................50 SDG alignment of the State planning system and annual budget ....................................51 DIMENSION 3: PRIVATE-PUBLIC COLLABORATION . .53 Investment climate ............................................................................53 Financial sector development ...................................................................58 Harnessing remittances and the diaspora ........................................................59 Civil society partnerships ......................................................................60 DIMENSION 4: MONITORING AND REVIEW ........................................................62 Monitoring public spending ....................................................................62 Monitoring development outcomes and agenda 2030 .............................................66 DIMENSION 5: TRANSPARENCY AND ACCOUNTABILITY . .69 Political transformation and governance. .69 Transparency . .70 Accountability ................................................................................71 KEY FINDINGS. .73 RECOMMENDATIONS ............................................................................77 Recommendations for public finance ............................................................77 Recommendations for private finance ...........................................................82 strengthening the enabling environment . .86 INFF roadmap to support financing the COVID-19 recovery ........................................90 BIBLIOGRAPHY . .92 ANNEXES ......................................................................................97 1. DFA and INFF process ........................................................................97 2. Development finance flows . .98 3. Summary of SDG financing needs and opportunities ...........................................102 DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN ABBREVIATIONS AAAA Addis Ababa Action Agenda ADB Asian Development Bank Amcham American Chamber AMIS Aid Management Information System BMGF Bill and Melinda Gates Foundation CCA Caucasus and Central Asia CMDA Capital Market Development Agency COVID-19 Corona Virus Disease DAC Development Assistance Committee DFA Development Finance Assessment EBF Extra-Budgetary Fund EIB European Investment Bank EBRD European Bank for Reconstruction and Development FAO Food and Agriculture Organization of the United Nations FDI Foreign Direct Investment FOREX Foreign Exchange FTTP FAO-Turkey Partnership Programme GoU Government of Uzbekistan IBRD International Bank for Reconstruction and Development IDA International Development Association IsDB Islamic Development Bank IFIs International Financial Institutions IMF International Monetary Fund INFF Integrated National Financial Framework JICA Japan International Cooperation Agency MDGs Millennium Development Goals MoEDPR Ministry of Economic Development and Poverty Reduction MoF Ministry of Finance MoJ Ministry of Justice MSME Micro, Small and Medium Enterprise MTEF Medium-Term Expenditure Framework MTFF Medium-Term Fiscal Framework MTRS Medium-Term Revenue Strategies NCDs Non-Communicable Diseases NDS National Development Strategy NGOs Non-Government Organizations ODA Official Development Assistance OECD Organization for Economic Cooperation and Development OOFs Other Official Flows PM Prime Minister POL Petroleum, Oil and Lubricants PPG Public and Publicly Guaranteed PPP Public Private Partnership SAI Supreme Audit Institution SAMA State Assets Management Agency SBS State Budgeting System SDGs Sustainable Development Goals SOE State-owned Enterprise UAE United Arab Emirates UNCTAD United Nations Conference on Trade and Development UNDP United Nations Development Programme USAID United States Agency for International Development UZS Uzbek Som VAT Value Added Tax WB World Bank 4 EXECUTIVE SUMMARY EXECUTIVE SUMMARY The UNDP Development Finance Assessment (DFA) is a tool to identify opportunities to mobilize additional finance sources and use existing financial resources more efficiently to achieve the Sustainable Development Goals (SDGs). Misalignment between the planning and finance policy functions of government, a narrow focus on public resources to finance the SDGs, and the participation of only a narrow group of stakeholders in the SDG financing dialogue and decision-making process are key challenges in many countries, including Uzbekistan. Through a process of informed dialogue, a DFA offers support for governments and their partners in identifying and building consensus around priority solutions to address these important financing challenges. Uzbekistan’s first DFA assesses the country’s SDG financing architecture. It addresses critical knowledge gaps around the volume and trends of available development finance in the country considering current SDG progress and the impact of the unfolding COVID-19 crisis. It provides the context analysis for the UN SDG Fund’s two-year Joint Programme (2020-2022) to implement priority SDG financing reforms in Uzbekistan. Finally, it aims to inform progress towards adopting an Integrated National Financing Framework (INFF), in support of a cohesive, nationally owned sustainable development strategies, as per the Addis Ababa Action Agenda. The Government of Uzbekistan is strongly commitment to achieving the SDGs. In 2018, the 16 national SDGs and their 125 corresponding targets were adopted. Simultaneously, an inter-agency Coordination Council for implementing the national SDG Roadmap was established, along with the creation of a bicameral Parliamentary Commission on SDGs. The implementation of the SDGs in Uzbekistan coincided with large-scale reforms in the framework of the national Action Strategy for 2017-2021, which provides the pathway to achieving the SDGs. In 2020, Uzbekistan presented its first Voluntary National Review on SDG progress. The COVID-19 crisis risks slowing down Uzbekistan’s impressive SDG progress. The country’s substantial informal sector is leaving a large amount of people vulnerable to the slowdown, driving up poverty and inequality. These socio-economic vulnerabilities are further compounded by environmental threats. In response to the pandemic, the GoU adopted an Anti-Crisis Program with a USD1 billion fund to support businesses and employment, and to expand social assistance to the most vulnerable. ESTIMATED SDG FINANCING NEEDS IN UZBEKISTAN 2019 2020 PER-COVID-19 FINANCING GAPS (USD billion) COVID-19 additional SDG 2 Hunger): 0,55 financing SDG 3 (Health): 1,9 needs SDG 4 (Education): 1,1 SDG 6 (Water): 0,58 SDG 7 (Energy): 0,46 USD 4 billion SDG 9 (Infrastructure): 1,4 (7% GDP) = annual USD 6,0 billion 5 DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN ESTIMATED AVAILABLE DEVELOPMENT FINANCE 2019 2020 Projected total development finance 2020 Estimated total (USD billion) development finance 2019 Public finance: (USD billion) 20,5 Private finance: Public finance: 23,7 24,7 Private finance: 31,4 Total = Total = USD 45,1 USD 55,1