Uzbekistan: Public Finance Management Reform Project

Abstract

1. Uzbekistan is the most populous country in Central and West Asia and has the second largest economy. At the time of project preparation in 2006, it had a gross domestic product (GDP) of SUM21.1 billion ($17.3 billion). Uzbekistan has abundant natural resources, including gold, natural gas, copper and uranium. Its economy used to be dominated by agriculture and primary activities and is now led by the services sector. Almost 64% of the population lived in rural areas in 2006. 2. Since its independence in 1991, the country inherited economic problems associated with the collapse of the former Soviet Union and the economy declined until 1996. GDP growth accelerated at an average annual rate of 4.2% from 1999 to 2003 and at 7.3% from 2004 to 2006. Nevertheless, the economic base remained narrow and Uzbekistan was still a low-income country with a per capita GDP of SUM798,000 ($653) in 2006. 3. Since 2000, the Government of Uzbekistan has been working with international partners to prepare the public finance management reform (PFMR). After 7 years of pilot testing, the government adopted a long-term strategic approach to advance the PFMR. Initially, the Asian Development Bank (ADB) was not directly involved in PFMR but coordinated activities, largely through its involvement in financing public sector investment projects. In May 2007, the Ministry of Finance (MOF) developed the Public Finance Management Reform Strategy, 2007–2018 with support from the International Monetary Fund (IMF) and ADB. The strategy outlined a 12-year action plan to (i) establish a functioning treasury system, (ii) adopt and implement a unified budget and accounting system, and (iii) introduce a medium-term budget framework (MTBF) and program budgeting. When the envisaged assistance from the World Bank became unavailable, the government requested ADB support to develop a comprehensive treasury system and implement a unified budget and accounting systems for its PFMR strategy. In this context, ADB prepared the Public Finance Management Reform Project, which was implemented through ADB’s project loan modality.3 The project built and improved on the concept, design documents and procurement packages prepared jointly by the government and the WB in 2005.