In the recently released budget for the years 2024-2026, the Ministry of Economy and Finance has outlined its plan to manage public debt in a manner that aligns with fiscal rules and macroeconomic stability. The primary objective is to ensure that public debt remains around 37 % of the gross domestic product (GDP) in 2024, in compliance with the established upper limit of 60 % of GDP. This article delves into the measures the Ministry of Economy and Finance intends to employ in the medium term for effective public debt management.
Fiscal Rule and Safe Limits
The "fiscal rule" mandates that public debt should not exceed 60 % of GDP, a threshold considered safe for medium-term economic stability. The budget also emphasizes keeping the budget deficit within 4 % in 2024, with a sustained average of 3 % over the medium term, demonstrating a commitment to fiscal prudence.
Strategic Measures to Manage Public Debt
To meet the fiscal objectives and ensure responsible debt management, the Ministry of Economy and Finance has devised a comprehensive strategy that includes the following key measures:
Annual Limits: The practice of setting annual limits on state debt will continue. These limits serve as a mechanism to maintain fiscal discipline and curb excessive borrowing.
Currency Risk Mitigation: To mitigate currency risks, the Ministry plans to attract debt funds in the national currency. The issuance of state treasury bonds will be capped at 25 trillion soums in 2024 to minimize exposure to currency exchange fluctuations.
Debt Management Strategy: The Ministry will develop and seek approval from the Cabinet of Ministers for a public debt management strategy for the medium-term period. This strategy is designed to optimize cost and risk indicators in the public debt portfolio.
Debt Diversification: Diversifying the sources of public debt is a sensible approach. By seeking funds from various sources, the government can reduce reliance on a single funding channel, ensuring financial stability.
International Investor Attraction: Accelerating efforts to attract international investors to the state treasury bond market is crucial. International investment broadens the investor base and may enhance foreign exchange reserves, reducing currency risks.
Risk Reduction: The Ministry is committed to preventing, eliminating, or reducing risks associated with public debt servicing, including managing interest rate risk and refinancing risks to keep the cost of servicing the debt manageable.
Transparency: Ensuring transparency in public debt information is integral to responsible debt management. Transparency helps build trust among investors and the public, facilitating access to international capital markets.
The Ministry of Economy and Finance's approach to public debt management for 2024-2026 underscores its dedication to fiscal responsibility and macroeconomic stability.
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