The first pilot swap operation between the Ministry of Finance and the European Bank for Reconstruction and Development took place in Uzbekistan

In order to develop the domestic financial market, improve the efficiency of risk management and introduce new market instruments, on March 7 this year, the Ministry of Finance conducted the first test swap operation with the European Bank for Reconstruction and Development (EBRD) on behalf of the Republic of Uzbekistan. This was done in accordance with the Resolution of the Cabinet of Ministers of our country dated February 8, 2022 No. 63 “On measures for the implementation of the Financial Market Development Program project with the participation of the Asian Development Bank“.

In this regard, the Ministry of Finance has introduced the practice of implementing swap transactions, which are one of the derivative financial instruments used to manage financial risks.

Swap transactions are a financial instrument used to manage financial risks. A currency swap is a type of swap that is used to protect debt in various currencies from currency risk.

Earlier, the Ministry exchanged experience in swap operations with international financial institutions and banks with the technical support of the TCX Fund and the EBRD, which have many years of experience in the derivatives market. Within the framework of the Economic Forum of Uzbekistan, held on September 29-30, 2021 in Tashkent, mutual agreements were reached with a number of international organizations, including JP Morgan, ICBCS and TCX fund

  By implementing this resolution, the Ministry of Finance received a positive legal opinion from an international law firm under the General Agreement of the International Swaps and Derivatives Association (ISDA). The ISDA General Agreement was signed with the EBRD, which offered the best price for the transaction, and the first swap operation was carried out for US$ 20 million borrowed from the Asian Development Bank. Thanks to this pilot swap operation, the state loan in foreign currency has been converted into a loan in national currency.

The strategic aspect of this swap operation is:

- the first test swap operation will allow the use of derivatives with international counterparties for effective management of currency risks with respect to external borrowed funds attracted from the public and private sectors of Uzbekistan;

- they will become an alternative tool for converting investments in foreign currency into uzbek sum through derivatives, taking into account the specifics of attracting foreign investments in the national currency;

- the development of the derivatives market will contribute to the effective management of financial risks in Uzbekistan, the correct assessment of assets and liabilities in uzbek sum, as well as the formation of the national currency market abroad.

Currently, in order to widely use derivative instruments with international counterparties, the Ministry of Finance together with the EBRD is working on the project "Creation of legislation on derivative and repo transactions".  In addition, the TCX Foundation expressed its readiness to contribute to the formation of the Uzbek currency market abroad, gain experience in the use of appropriate tools and the development of financial literacy in our country.

Information Service

Ministry of Finance