Republic of Uzbekistan: Selected Issues

This Selected Issues paper discusses key channels by which fiscal consolidation impacts short- and medium-term growth, examines the international experience on how to make fiscal consolidation more growth friendly, and analyzes policy implications for Uzbekistan. A large part of the adjustment is implemented with high-quality efficiency-enhancing measures: reducing energy subsidies, improving the targeting of social spending, and curbing policy lending. The World Bank Public Expenditure Review notes that nonwage spending in health and education is low and crowded out by high wage bills, which have been growing in recent years as efforts to improve pay in these areas were implemented. This points to the need to review the adequacy of nonwage spending in these sectors and undertake wage bill rationalization more broadly since these are large sectors of public employment. In the specific case of health spending, consideration should be given to strengthening primary care and introducing task-shifting which will lead to greater efficiency from health wage bill expenditure by shifting its composition over the medium term. Unify the public investment process irrespective of the financing source; create a unified appraisal and selection process; establish a single project pipeline; and improve project monitoring and evaluation to increase public investment efficiency.