TASHKENT

Uzbekistan’s government has approved the project to carry out a test swap operation for three years period in order to manage currency risks using a part of the Asian Development Bank (ADB) funds.

The cabinet’s resolution said that the test swap operation will be carried out in cooperation with international financial counterparties and the funds in the amount of $20 million out of $100 million ADB loan will be used for this purpose.

The Finance Ministry was given the authority to sign the General Agreement developed by the International Swaps and Derivatives Association (ISDA) with international financial counterparties on behalf of Uzbekistan.

Uzbekistan’s central bank is recommended to act as a financial agent of the project, as well as transactions with ISDA, the government resolution said.

Finance Ministry was instructed to develop and approve the procedure for carrying out operations with derivative financial instruments (derivatives) in order to hedge financial risks related to the state budget of the country within a month.

The ADB loan of $100 million was attracted in 2021 within the government’s Financial Market Development Programme. The document said that the ADB funds provided under the project would be directed to finance the country’s state budget expenditures. At the same time, the return of funds and payment of interest on it is carried out at the expense of the budget.

Uzbekistan has been taking steps to develop its capital market and increase the total volume of securities in free circulation to at least 5 percent of the country’s gross domestic product (GDP), as a part of its plan to reform its economy.

In 2021 President Shavkat Mirziyoyev dissolved the country’s Capital Market Development Agency and transformed it into a new department under the finance ministry.

In his decree, President Mirziyoyev set the priorities for regulation and development of the capital market instructing the government to ensure “increased accessibility of the capital market for all categories of investors through active integration with international financial markets … and the use of advanced approaches successfully tested abroad.”

Late last year Uzbekistan’s finance ministry and the European Bank for Reconstruction and Development (EBRD) signed the ISDA General Agreement to conduct the first test swap operation in Uzbekistan.