Narrative
Full Description
Project narrative
On 17 October 2022, Uzbektelecom entered into a supply agreement with ZTE Corporation for the delivery of equipment totaling USD 64,393,880.78 (equivalent to 818,952,924 thousand soums) (S1UZ2022022002FDD) Under the terms of the agreement, 15% of the total contract amount is payable in advance, while the remaining 85% is payable over a two-year period following the end of a grace period. The repayment is structured as six equal quarterly installments, with a 0% interest rate, and the final payment due by 26 December 2027. Deliveries under the contract commenced in 2024, with goods received under three separate purchase orders. At initial recognition, the liability was measured at fair value using a market interest rate of 9.7%, which was observable for similar instruments at the time of the transaction. As of December 2023, the amount outstanding balance is 0 Uzbekistan Soums; As of December 2024, the loan's amount outstanding is 576,993,493,000 Uzbekistan Soums.
Staff comments
1. This loan is interest-free. The 9.7% fair market value is an accounting adjustment mechanism: when the loan was first recorded, auditors had to discount the future payments using the prevailing market rate for similar loans (6.7%) to reflect their fair value. Therefore, the future cash outflows (the 8 payments) were discounted back to their present value at 9.7%. 2. In the 2024 consolidated report, there are references to two maturities for the same loan: December 26, 2027 and June 25, 2027. For the time being, AidData uses December 26, 2027 as the final maturity date because it has a detailed description. This issue warrants more investigation. 3. In Uzbektelecom's consolidated financial statements starting in 2020 (https://uztelecom.uz/uploads/media/НоваяПапка/Consolidated_financial_statements_of_JSC_Uzbektelecom_2020.pdf) , there is a reference to three new loans committed in 2019. However, the reports do no provide descriptions on these loans. This issue warrants more investigation.