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Banking

Uzbekistan outlines path to banking sector reform

New plans to clean up Soviet-style banking sector will see underperforming legacy loans transferred to state fund.

Uzbek policymakers have announced plans to clean up the balance sheets of the country’s largest banks as part of a drive to restructure and privatize the state-dominated sector.

Nearly 30 years after the end of the Soviet Union, publicly owned lenders still account for more than 80% of total banking assets in Uzbekistan.

Odilbek Isakov 160x186

Odilbek Isakov

Under former leader Islam Karimov, most were used as policy banks, channelling subsidized funding from the country’s sovereign wealth fund to state-owned enterprises (SOEs) and government projects.

Loans were routinely rescheduled, profitability was meagre and the banks required regular recapitalization from the state budget.  

The government of Shavkat Mirziyoyev, who took over as president after Karimov’s death in September 2016, is now looking to overhaul the sector as part of a wider drive to reform and revitalize the Uzbek economy.

Speaking on the sidelines of the IMF/World Bank annual meeting in Washington DC, first deputy finance minister Odilbek Isakov outlined policymakers’ strategy for the sector.

“Our intention is to transform the state-owned banks into proper commercial lenders that in due course we can either sell to strategic banks or IPO,” he said.

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