An International Monetary Fund (IMF) mission has recommended that Uzbekistan reconsider plans to maintain systemically important state-owned commercial banks (SOCBs) as development banks performing state functions. The organization's specialists warned that this approach could lead to increased risks to financial stability and higher budget expenditures, potentially harming the country's economy.

The IMF report emphasized that accelerating reforms and privatization of SOCBs is crucial for ensuring financial stability and improving resource allocation efficiency. The organization highlighted the need to focus on specific aspects, particularly attracting qualified strategic investors and enhancing accountability. It also stressed the importance of clear performance indicators in evaluating SOCBs and reliable monitoring of operational results.

Experts outlined several key priority tasks to boost competitiveness in the banking sector, beyond accelerating SOCB privatization. This includes phasing out exemptions for borrower-focused macroprudential measures to curb risks associated with microfinance, as well as paying attention to risks related to extending foreign currency loans to unhedged borrowers amid increasing exchange rate flexibility.

The IMF cautioned against compromising financial stability while expanding access to financial services. The report stated that state credit programs with quantitative targets lead to inefficient allocation of credit resources to non-creditworthy borrowers. It advised continuing to avoid the practice of setting interest rate caps, as such measures restrict financing opportunities and encourage the growth of the informal sector.

More sustainable development of financial inclusion can be achieved by strengthening competition in the banking sector, expanding the use of credit information, improving credit scoring models and tools, modernizing payment systems and digital infrastructure, enhancing financial literacy, and bolstering consumer protection.

Source: www.gazeta.uz