In an unprecedented move, Uzbekistan has issued UZS 4.25 trillion ($ 349,177,875.00) of green sovereign international bonds on the London Stock Exchange. In tandem, the nation also placed international bonds valued at $660mn. This development was confirmed by the Uzbekistan Ministry of Economy and Finance.
The funds accrued from the green bonds will be channeled into various eco-friendly initiatives. These encompass the adoption of water conservation technologies, advancements in railway and metro transportation, sanitation, and cleanliness operations in settlements, and the establishment of tree groves to combat wind erosion and sand encroachment at water management sites.
The United Nations Development Program (UNDP) played an instrumental role in the selection process for these green projects. Moreover, the green bond program secured a favorable second-party report from Sustainalytics.
Given the robust demand for Uzbekistan’s green bonds in the national currency, the interest rates of the 3-year soum international bonds were reduced from an anticipated 18% to 16.25%. This adjustment allowed for the early redemption of international bonds totaling UZS 1.9 trillion ($156,103,050.00), set to mature on November 23, 2023.
Recent data from a domestic financial market auction on September 26 pinpointed the interest rates for 2-year government securities at 17.57%.
For the 5-year sovereign international bonds in US dollars, initial interest rates were projected between 8.50% and 8.625%, based on secondary market quotes and investor bids. The bonds due in 2029 saw their rates touch 8.1% in the secondary market, marking an increase of 0.43% within the week ending September 27. However, when the order value hit $1.7bn, these rates were revised to fall between 8.25% and 8.375%.
Final demands culminated in issuing bonds worth $660mn at an interest rate of 8.125% and a 7.85% coupon. The transaction, therefore, is expected to yield around $652.6mn, considering the bonds’ sale price at 98.888%.
Global financial markets currently reflect a rising trend in interest rates. Specifically, 5-year US Treasury bonds have surged from 0.8% in July 2021 to 4.7%. Correspondingly, the SOFR rate, a benchmark in international credit markets, has escalated from 0.17% to a staggering 5.5%. This inflation has led to a hike in preferential loan interest rates by international financial entities from 1-2% to a bracket of 6.3-7.0% over two years.
Several nations, in light of prevailing market conditions, are incurring public debts at steeper rates. Countries such as Turkey, Hungary, Romania, Mongolia, Egypt, and Bahrain have all issued bonds at heightened rates in the past months.
The Ministry assures that the allocation and utilization of the green bond proceeds will be transparent and in line with international norms.