State budget deficit soars to record levels

In Uzbekistan, from January to May, the state budget deficit (the excess of expenditures over income) amounted to over 29 trillion soums. In the first 10 days of June, a budget deficit of 9.1 trillion soums was recorded. Overall, Uzbekistan is consistently setting new records for budget deficits and public debt each year.

According to statistics from the Ministry of Economy and Finance, from June 1 to June 13, 2024, budget revenues and receipts totaled 7 trillion 300.2 billion soums, while expenditures reached 16 trillion 521.5 billion soums. This resulted in a budget deficit of 9 trillion 221.3 billion soums. For comparison, this figure is 1.5 times greater than the half-year deficit of 2020, which was 6 trillion 721.9 billion soums.

Economist Otabek Bakirov highlighted that such high expenditures were unusually observed in June.

"It should be noted that the first ten days of June were more challenging than January and February, which are typically tough for budget balance. The gap between June's income and expenditures was even wider than the expenses in January and February. However, at the beginning of June, the proportion of salaries for budget employees (6.9 trillion soums), the largest budget expense, decreased to 52.5%. In comparison, this share was 63.1% in January (6.8 trillion soums).

What could these costs be? Without open data, it is difficult to draw definitive conclusions.

However, the delay in stabilizing the budget balance, even after a sharp increase in energy tariffs, suggests that financing the energy system, which is dragging the economy down, continues in various forms," says economist Bakirov.

Estimates indicate that the budget deficit for the first half of 2024 has reached 40 trillion soums, setting a record. If this trend continues, Uzbekistan may end 2024 with a deficit of 80 trillion soums.

Where will the budget deficit be covered?

A natural question may arise: how will state expenses be funded? For several years, Uzbekistan has been addressing its budget deficit through foreign debt. According to the "On the State Budget of the Republic of Uzbekistan for 2024" law, the government plans to attract $2.5 billion in debt to finance the budget deficit and an additional $2.5 billion to finance investment projects.

This law also mandates that the consolidated budget deficit for 2024 should not exceed 4% of GDP. The projected state budget for 2024 includes revenues of 375 trillion soums, expenses of 427 trillion soums, and an anticipated deficit of 52.6 trillion soums.

However, Uzbekistan has a tendency to exceed its budget deficit limits. For instance, in 2023, the consolidated budget deficit limit was set at 3% of GDP, but the actual deficit reached 59 trillion soums, accounting for 5.5% of GDP. Subsequently, the "On the State Budget of the Republic of Uzbekistan for 2023" law was amended, increasing the deficit limit from 3% to 5.5% of GDP and raising the foreign debt limit from $4.5 billion to $5.5 billion.

Uzbekistan's foreign debt is rising

According to the Ministry of Economy and Finance, Uzbekistan's national debt reached $35.342 billion in the first quarter of 2024. Of this amount, $29.457 billion (83 percent) is foreign debt.

In 2022, the national debt stood at $29.2 billion. Over 1.5 years, this figure has increased by $6.1 billion.

It was anticipated that eliminating VAT on certain goods starting in April 2024 and increasing gas and electricity prices from May would reduce government expenses. However, this has not been the case. 

As state budget expenses and foreign debt continue to rise, public criticism has grown regarding the expenditures by ministry employees and state management organizations, including their use of expensive service vehicles and the hosting of lavish festivals. QALAMPIR.UZ previously reported that the Ministry of Culture allocated 2 billion soums from the budget to the "Voice" project, and employees of the Samarkand region prosecutor's office purchased costly smartphones worth 200 million soums from the budget.