PROJECT FINANCЕ IN UZBEKISTAN
KEY OBSERVATIONS OF ECONOMIC ENVIRONMENT IN UZBEKISTAN
Macroeconomic indicators of Uzbekistan, in general, correspond to the profile of a rapidly developing country:
Macroeconomic indicators of Uzbekistan, in general, correspond to the profile of a rapidly developing country:
- High GDP growth rates of the recent years and positive growth forecasts for the next periods
- Relatively moderate inflation (in particular as a result of a relatively high key rate of the Central Bank), keeping the devaluation of the national currency at acceptable levels
- Moderate level of the public debt - approximately 37% of GDP for 2023 and forecasted to remain at the level of less than 40% of GDP in the next years
6%
GDP growth from 2022 to 2023
8,77 %
Inflation rate in 2023
37% of GDP
Level of public debt in 2023
BB-/B | Stable
Ba3 | Stable
BB- | Stable
AREAS FOR DEVELOPMENT IN SHORT AND MID TERM PERSPECTIVE
Despite Uzbekistan's growing economy, businesses may still encounter certain challenges in seeking ways to get additional financing, therefore following areas are subject to the development:
Despite Uzbekistan's growing economy, businesses may still encounter certain challenges in seeking ways to get additional financing, therefore following areas are subject to the development:
- Stock exchange market and financial instruments enhance access to financing for companies seeking to raise capital for growth
- Currency exchange infrastructure may lead to increased currency liquidity in the banking sector (which affects, among other things, the possibility of providing loans), as well as increases the options for businesses to hedge currency risks
- Project finance provides additional source of financing
PROJECT FINANCE AS AN IMPORTANT FINANCIAL INSTRUMENT
Across the world project finance is recognized one of the most suitable financing instruments for large investment projects.
Project finance has become increasingly widespread particularly in the energy sector.
There is a potential for commercial banks involvement in the project finance.
Uzbekistan continues to demonstrate growing energy deal pipelines, attracting international developers. The project finance that have closed so far have mostly been DFI backed, but there is an opportunity for local banks to be involved.
Across the world project finance is recognized one of the most suitable financing instruments for large investment projects.
Project finance has become increasingly widespread particularly in the energy sector.
There is a potential for commercial banks involvement in the project finance.
Uzbekistan continues to demonstrate growing energy deal pipelines, attracting international developers. The project finance that have closed so far have mostly been DFI backed, but there is an opportunity for local banks to be involved.
SWOT analysis of project finance from the banks’ perspective
- Mainly secured and guaranteed loans with long term , stable returns on investment
- Building relations with government agencies and international investors
- Government support and incentives to attract investment in key sectors
- Diverse loan portfolios
- Additional media coverage and improvement of reputational profile
- Large scale and long term project finance demands substantial volume of liquidity
- Issuance of long term loans requires having constant long term sources of funding
- Ordinary types of financing may bring faster returns for banks
- Challenges in enforcing loan agreements and recovering assets in case of project defaults
- Complexity of project finance : involvement of different parties and international elements
- Potential for growth and expansion of loan portfolios
- Potential to collaborate with international development banks and international financial institutions to co finance projects, such as ESG programs
- Opportunity to contribute to the development of the economy by providing financing to businesses
- Vulnerability to currency fluctuations and economic downturns
- SOB financing projects at interest rates below market rates
- Regulatory uncertainty may lead to project delays
Win-Win-Win for Government, Banks, and Investors
- Government
- Infrastructure and green energy projects
- Foreign investors
- Foreign currency inflows
- Employment
- Value added products
- Banks
- Long term secured loan agreements
- Growth and expansion of loan portfolios
- Collaboration with international financial institutions
- Participation in ESG programs
- Investors
- Additional source of financing
- Possibility of financing in local currency
- Familiarity with local regulations and market conditions of local banks
- Relationship building opportunities
Typical Project Finance Structure
CONTACT DETAILS
Dilovar Mavlonov
Managing partner
+998 90 069 94 34
Mikhail Loginov
Director, Tax Consulting
+998 90 061 17 39
Maria Burtseva
Director, Tax Consulting
+998 50 077 15 08
Maxim Vyatkin
Director, Technology Consulting
+998 90 069 94 34
Khurshida Artikkhodjaeva
Manager, Legal Consulting
khurshida.artikkhodjaeva@beone-uz.com
+998 93 550 00 99
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