TASHKENT

Uzbekistan’s government plans to reduce the foreign exchange risks for private businesses that have long-term loans in foreign currency by compensating interest expenses when converting foreign currency loans into Uzbek soums and refinancing some foreign loans.

President Shavkat Mirziyoyev signed a resolution “On additional measures to reduce the burden on business entities associated with the fulfilment of credit obligations in foreign currency.”

Mirziyoyev, re-elected for a second term this week, made attracting foreign investors one of his top priorities in an increasingly ambitious plan to open Uzbekistan to the outside world and reform the Central Asian country’s economy.

According to the document, the loans of the business entities in foreign currency, up to $1 million, will be converted into national currency by Uzbek commercial banks in order to reduce the currency risks to the business.

When loans are transferred from foreign to national currency, Uzbekistan’s State Fund to Support Entrepreneurship provides compensation to cover interest costs in the part that exceeds the central bank’s basic rate, but not more than 5 percentage points, the resolution said.

The fund also provides compensation for loans to entrepreneurs who have valid contracts for the provision of compensation not exceeding the equivalent of $1 million and an interest rate 1.75 times below the central bank’s base rate.

At the same time, the fund is allowed to recalculate the current amount of compensation for these loans and proportionally change their total amount.

Starting from November 1 this year, loans in foreign currency secured from the funds of international financial institutions and foreign government financial organisations on behalf of Uzbekistan to finance entrepreneurial projects in the country will be refinanced by financial institutions participating in the projects for a period of at least 10 years or for the duration of the loan.

Earlier this month, central bank chairman Mamarizo Nurmuratov said that banks had sent proposals to more than 15,000 enterprises, whose debt is up to $1 million (total debt – $2.5 billion) to convert their loans in foreign currency into Uzbek soums.

So far, only 561 companies have agreed to convert foreign currency loans to soums, but this practice will continue, Nurmuratov said.