On 19 July 19, inflation-linked government bonds worth 111 billion soums with a coupon payment equal to the “Consumer Price Index (CPI)+ 6%” with a maturity period of 2 years were sold for the first time at the regular electronic auctions of the Currency exchange of the Republic of Uzbekistan and the first benchmark for inflation-linked government bonds was created.
The inflation-linked government bonds were issued to implement measures for the development of the secondary market of government securities “Capital market development program for 2021-2023”, approved by the Decree of the President of the Republic of Uzbekistan dated April 13, 2021 DP-6207 as well as to fulfill the tasks defined by the Decree of the President of the Republic of Uzbekistan dated October 23, 2021, DP – 5265.
According to the results of the auction, 111 billion soums out of the total volume of applications of 191 billion soums were received by market participants for the purchase of inflation-linked government bonds are on average equal to “CPI + 8.64 percent” weighted profitability. In this case, the minimum rate of return on orders received for the purchase of government securities linked to inflation was “CPI + 7.38 percent” and the maximum rate of return at the discount price was “CPI + 9.40 percent”.
Uzbekistan’s CPI is the sum of the “year-on-year rate of increase in prices in the consumer sector” published by the State Statistics Committee on its official website during the 6 months preceding the period for which interest income is paid, in percentage. In order to calculate the interest payment for the first period (July 19, 2022- January 17, 2023) for the period of January-June 2022, the indicators of “annual rate of increase in prices in the consumer sector” published on the official website of the State Statistics Committee is used.
The issuance of medium and long-term inflation-linked government securities serves as a benchmark for attracting funds through the issuance of low-risk instruments in the national currency, diversifying financial instruments and attracting new participants to the financial market (non-residents, individuals, insurance companies, etc.).
In order to diversify the public debt portfolio and reduce currency risks, the Uzbekistan Ministry of Finance is increasing the volume of issuance of government securities and taking systematic measures to develop domestic financial markets.
In the future, the Ministry will issue government securities based on the goals of effective management of internal state debt and the development of local financial markets, taking into account the current situation and demand in financial markets.
