The Republic of Uzbekistan for the first time placed “green” international bonds in the national currency

For the first time, the Republic of Uzbekistan has placed green sovereign international bonds worth 4.25 trillion soums and international bonds worth $660 million on the London Stock Exchange.

For information: On October 2-4 of this year, the delegation of the Republic of Uzbekistan, consisting of representatives of the Ministry of Economy and Finance and the Central Bank, held meetings with more than 50 investors in New York, Boston, and London.

At the meetings, investors highly appreciated the reforms carried out under the leadership of the President of the Republic of Uzbekistan, including the transition to a green economy, the liberalization of the natural gas and electricity price market, the privatization of state-owned enterprises, and the policy of trade liberalization through membership in the World Trade Organization, as well as the goals and measures outlined in the strategy “Uzbekistan-2030".

It is worth noting that the sovereign international bonds issued in soums are the first “green” sovereign bonds among the CIS countries.

For information: proceeds from green bonds will be used to finance green projects, such as the introduction of water-saving technologies, the development of rail transport and metro, the organization of sanitary cleaning and maintenance of cleanliness in settlements, as well as the creation of protective forest plantations against wind erosion and siltation of water bodies.

In this direction, cooperation is underway with the United Nations Development Program, which includes assistance in selecting projects that will be financed from proceeds from the issuance of green bonds, as well as reporting throughout the entire period of their circulation. The second third-party positive conclusion was obtained by Sustainalytics under the green bond program.

Additionally, in cooperation with UNDP, work will be carried out to ensure transparency in monitoring the implementation of projects, and to provide investors and the general public with all the necessary information about the impact of investments on Uzbekistan's achievement of green and sustainable development goals.

Taking into account the high demand for “green” bonds of the Republic of Uzbekistan in the national currency, it was possible to reduce interest rates (coupon payment) on 3-year sum international bonds from the expected 18% to 16.25%. This transaction prematurely repaid international bonds in the amount of 1.9 trillion soums with a maturity date of November 23 of this year.

For reference: at the last auction on the domestic financial markets (September 26), the interest rates on 2-year government securities amounted to 17.57%.

Based on secondary market quotations, as well as investor proposals, the initial interest rate on 5–year sovereign international bonds of the Republic of Uzbekistan in US dollars was announced in the range of 8.50-8.625 percent.

The interest rate on international bonds of the Republic of Uzbekistan repayable in 2029 on the secondary market has reached 8.1 percent. In particular, over the last week (September 27 – 7.67 percent), interest rates increased by 0.43 percent.

When the order book reached $1.7 billion, interest rates were reduced to 8.25-8.375 percent.

When the final demand reached $2 billion, $660 million worth of bonds were issued at a rate of 8.125% and a coupon of 7.85%. This coupon rate, recommended by financial advisors, means that international bonds are sold to investors at a price of 98.888% (that is, $ 652.6 million will be received from this transaction).

Interest rates are rising in the global financial markets today. In particular, interest rates on 5-year US Treasury bonds rose by almost 4% per month in July 2021 (the last period of issuance of sovereign bonds), reaching 4.7% compared to 0.8% in July 2021.

The increase in interest rates from global financial markets, respectively, also causes a sharp increase in the preferred interest rates of international financial institutions.

The SOFR (formerly LIBOR) rate used in international credit markets has increased from 0.17% to almost 5.3% since July 2021, reaching 5.5% today.

Therefore, interest rates on soft loans attracted by international financial institutions have also increased from 1-2% in two years to 6.3-7.0% today.

Due to current market conditions, other countries are also attracting government debt at higher interest rates than before. For example:

Turkey issued $2.75 billion in January of this year 10-year sovereign international bonds at 9.75%;

Hungary issued 30-year bonds worth $ 1.25 billion in January this year at 7.1% per annum;

Romania issued 30-year bonds worth $ 1.25 billion in January this year at 7.67% per annum;

Mongolia issued 5-year international bonds worth $445 million in January this year at 8.65%;

Egypt issued 3-year sovereign international bonds worth $1.5 billion in February this year at 11% per annum;

Bahrain placed a 12-year interest rate worth $7.75 billion in April this year.

A report on the expenditure of funds received from the placement of green bonds will be formed and published in accordance with international standards.