Executive summary 

Purpose and management 

This 2024 Public Expenditure and Financial Accountability Performance (PEFA) report provides an assessment of Uzbekistan’s progress compared to the 2019 PEFA assessment. The 2019 PEFA formed the basis of the 2020-2024 Public Financial Management (PFM) Reform Strategy and Action Plan. The 2024 PEFA will serve as the basis for the development of a PFM reform strategy and action plan for the period 2025-2030. Both PEFAs followed the 2016 methodology. 

Main strengths and weaknesses of the PFM systems in Uzbekistan 

The 2024 PEFA results reflect significant progress made during the 2020-2024 PFM Strategy period. Uzbekistan has significantly modernized its legal framework to underpin PFM policies and practices. The amended Budget Code has helped the transition to a more medium-term and results-orientated fiscal policy framework. Principles of accountability and transparency have been strengthened across the whole budget cycle from planning, budgeting, and execution. Areas of budget execution (commitment control, and cash management), revenue management, and procurement stand out as areas of progress in institutional strengthening. Significant gains were also made in terms of coverage of the budget and the Treasury Single Account (TSA). 

However, PFM outcomes have also had to contend with significant institutional changes over the 2021 to 2023 assessment period. From January 1, 2023, Uzbekistan undertook a significant institutional reform, which saw the number of independent executive authorities reduced from 61 to 28, and line agencies reduced from 25 to 21. The Ministry of Finance was reorganized to become the Ministry of Economy and Finance (MOEF) of the Republic of Uzbekistan. 

The implementation of the 2020-24 PFM Strategy suffered several implementation gaps and delays. Weak points include linkages between strategic planning, macro-fiscal forecasting, and the annual budget process. It has proved challenging to implement Program Based Budgeting and Public Investment Management across sectors and levels of government. This also has been reflected in accounting practices, although the adoption of all International Public Sector Accounting Standards (IPSAS) standards has faced challenges in terms of ambition and current quality of outcomes, including the building of wide-spread capacity building and staff resourcing. 

Information technology and associated software has been expanded to underpin PFM outcomes. IT applications were developed based on business processes (redefined as necessary) rather than the reconfiguration of business practices to suit particular software. Further integration is needed between existing GFMIS and UzASBO 2.0, the existing platform for budget preparation and execution. The integration and roll out of IT, internet and personnel enhanced skills through training, has had a positive impact on PFM performance. Performance can be further enhanced by greater availability of information on investment, fiscal risk and debt strategies in the public domain. IT systems could also be better developed to facilitate the annual and medium-term budget submission and review process by line agencies and territorial entities, reducing the workload for MEF in producing the consolidated budget. 

Aggregate Fiscal Discipline 

Both revenue and expenditures outturns have not deviated significantly from the government’s forecast. Strong revenue administration ensured that revenues were efficiently collected. Treasury operations and cash management enabled expenditures to be managed within the available resources. Control of contractual commitments was effective and limited expenditure arrears. The strong internal and external audit functions have enhanced fiscal discipline. In-year data is available to manage in-year spending supported by the built-in instruments of control. The access procedures to IT systems and its overall integrity management have also ensured sound fiscal discipline. 

PFM reforms established targets for aggregate fiscal discipline in terms of overall debt and deficit to GDP levels. While fiscal deviations have been limited in the assessment period, the authorities have also been working to strengthen mechanisms to ensure that fiscal discipline is effectively linked to medium-term budget predictability and public service outcomes. This has included macro-fiscal budget planning and forecasting, as well as the monitoring and mitigation of fiscal risks. 

Strategic Allocation of Resources 

The Chart of Accounts allows multi-dimensional analysis of expenditure along administrative, economic and functional classifications. However, the medium-term perspective in expenditure budgeting and link to strategic plans is not fully rolled out. The program budget approach set out in 2020 does not fully support the strategic allocation of resources. The quality of financial data is supported by a mature set of audit processes. However, non-financial indicators, including key outcome indicators, will need to be progressively improved in terms of scrutiny and quality. 

Public investment management practices have improved but further work is needed to integrate capital and recurrent budgeting. The selection of investment projects considers strategic outcomes and uses economic analysis to generate the best return. The coverage and quality of financial and physical project implementation monitoring for all ongoing projects has been established and is linked to the payment process for work carried out. Quarterly monitoring of the implementation of all projects has ensured that what was planned is being delivered. While Operations and Maintenance (O&M) costs are assessed on an annual basis, they are not considered from a medium-term/project lifecycle perspective. 

The quality of analysis and reporting on the overall fiscal strategy and the implication of policy changes relating to the fiscal framework have improved but further work is needed to strengthen the strategic allocation of budgets and the link to performance. Most of the key tools for strategic allocation of resources such as fiscal strategy, budget classification, regular in-year reports on expenditure according to policy priorities, regularized budget amendments and virement procedures are in place. These cover tools for planning, monitoring implementation and controlling to plan. The authorities had planned a full roll-out of program budgeting. However, to realize this, several foundational building blocks will need to be strengthened on the part of submitting ministries and agencies, as well as for MEF in its challenge function to review and then consolidate the overall annual and medium-term budgets. Annual and medium-term budget envelopes for recurrent and capital expenditures are currently subject to dual budgeting. The ability of line agencies to articulate medium-term programs and indicators remains weak. Budget predictability for individual deconcentrated/territorial administrative units is weak, hindering efforts to link budgets and service delivery performance. While some ministries have performance indicators, these are not yet substantively linked to the budget processes. The transition to program-based budgeting across central and local governments will only be possible once some of these fundamentals are addressed. Expanding the budget to the medium term and linking resources to performance indicators will need to be realistically prioritized and sequenced over the next PFM strengthening strategy horizon to deliver tangible results across key service delivery and investment sectors. 

Efficient Use of Resources for Service Delivery 

The accountability mechanisms supported by internal and external audits are effective as counter checks on inefficient use of resources. The level of competitive bidding in public procurement is low, which may impact on the efficient use of resources. Performance targets and outcomes support the efficient use of resources in service delivery units but currently these are not sufficiently extensive in coverage to be wholly effective. On the revenue side, the credibility of tax assessments and the low levels of tax arrears are indicative of effective application of the principle of equal treatment of taxpayers and operational efficiency. 

Internal Control 

The Ministry of Economy and Finance and Chamber of Accounts oversee the effectiveness of the internal control framework in the government ministries and their agencies. The Central Harmonization Unit in the MOEF annually collects, consolidates and analyzes the information based on the annual reports prepared by various Internal Audit Units that cover virtually all salary and non-salary expenditures and all revenues. Internal audit standards are aligned with international standards. The Chamber of Accounts adopted audit standards for compliance, financial and performance audits based on the International Standards of Supreme Audit Institutions (ISSAI). The annual audit program is developed based on risk analysis and classification of potential risks. The State Assets Management Agency ensures effective oversight of State-Owned Enterprises supported by an annual external audit of their financial performance. 

The State Financial Control Inspectorate has a mandate to increase the efficiency of the State Budget, strengthen the prevention of violations of budget legislation and expand remote financial control. The Inspectorate complements the activities of the Chamber of Accounts, the Ministry of Economy and Finance, the ministry’s Central Harmonization Unit and the internal audit services of ministries and departments in the area of Financial Control. 

The Ministry of Information Technologies and Communications Development ensures that financial data integrity processes are independently monitored. 

Changes since the previous PEFA 

Both the 2019 and this PEFA assessment used the 2016 methodology. Across the 94 individual dimensions compared, 37 dimensions have improved, eight deteriorated (three of which are due to lack of data for 2023) and no change in the score in 49 dimensions. This overall improvement in scoring occurred over a relatively high baseline achieved in 2018, which had 6 A scores and 12 B scores out of the 31 indicators. In the case of the revenue, it is likely that the score may well be A given the 2022 data, but the score could not be ratified because there is no data for audits carried out on the basis of risk on tax payers as identified by the risk assessment software used by the tax Committees for 2023 (Dimensions 19.3). The change in internal audit coverage score may be due to the previous score being higher than warranted. The change in the procurement legislation permits the Procurement Department to be involved in the complaint procedure whereas in the previous PEFA its equivalent did not participate. 

Improvements in dimension scores are spread across the three fiscal and budgetary outcomes: 12 in Aggregate Fiscal Discipline; 11 in Strategic Allocation of Resources and 14 in Efficient Service Delivery. 

Figure 1 presents the indicators scores for 2024 PEFA and Figure 2 the indicator scores of both PEFAs to show the changes.