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FEATURES OF BUDGET TRANSFERS IN THE FORMATION OF LOCAL
BUDGET FUNDS
Maribjonov Botirjon Ikromjonovich
Andijan State Technical Institute, "Accounting and Management"
assistant of the department E-mail:
Abstract:
This article highlights the importance and specific characteristics of budget transfers,
which are the main criterion for inter-budgetary relations linking economic relations between
budgets, widely used in the formation and management of local budget funds, which are one of
the links of the public finance system, their objective necessity, functional tasks, and general
economic and financial factors aimed at further reducing financial and economic consequences.
Keywords:
Local budget, inter-budgetary relations, budget transfer, subsidy, subvention, budget
loan, donor territory.
Introduction.
We know that as a result of the deepening of economic reforms being carried out in our
country, the role of local government bodies in the socio-economic development of the regions is
increasing, which leads to the expansion of their rights in the sphere of the local budget and the
further strengthening of their financial base. The reason for this is that in the further development
of economic reforms carried out in the regions, in the state regulation of national development
based on the geographical location of all regions, the budget system and local budgets, which are
its component, are of great importance. Today, the country's fiscal policy plays an important role
in the further development of the state's economy. At the same time, special attention is
gradually being paid to the formation and further strengthening of local budget funds in the
regions in the proper economic development of all regions of the state and increasing budget
efficiency, as well as ensuring the independence of local budgets.
Today, the execution of budget transfers, which are the main basis of inter-budgetary
relations, plays a key role in the formation of state local budget revenues. The role of local taxes
in the regions is not leading in ensuring the stability of local budget revenues, while deductions
from national taxes and budget transfers in inter-budgetary relations remain crucial. This leads to
an increase in the mood of dependency in the formation of local budget revenues in subsidized
regions of some regions of the country. Therefore, today the issues of effective formation of
local budget resources and expanding the financial capabilities of local budgets and further
increasing their revenues remain one of the pressing issues of the day.
The state budget of economically developed countries is the main financial and economic
plan of this state. This is one of the main sources of financing for socio-economic and other
activities carried out by the state. At the same time, based on the tasks assigned to the state for
the performance of its functions, budgets of various levels are formed at its disposal. Based on
this, the expenditure obligation of the state budget is also distributed among the budgets of
different levels, i.e., local budgets, which is the basis for the distribution of state budget revenues
between each budget.
Today, one of the main problems in the sphere of public finance is also directly related to
the system of redistribution of state budget revenues between budgets of different levels. Local
budgets constitute an important component of the budget system of the Republic of Uzbekistan.
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They create an appropriate financial base for each local div of state power to carry out its
activities, based on its available capabilities.
Analysis of literature on the topic.
The relationship between the state budget of the Republic of Uzbekistan and local
budgets has also been studied by a number of scientists of our country. In particular, in the
scientific work of Z.Kh.Srojiddinova, the budget system of the Republic of Uzbekistan and its
components were studied. The relationship between the state budget and local budgets is
considered in general terms [9].
In the research works of Sh.A. Tashmatov, Sh.R. Rajabbayev, and A.Kh. Islamkulov,
theoretical issues related to financing and the state budget were studied [10]. In his research
work, A.Kh. Islamkulov considered the issues of forecasting state budget revenues, while the
relationship between state budget revenues and budgets of different levels was considered only
partially [11].
Analysis and results.
Budget revenues and expenditures generated by the government are redistributed to
finance social spheres in different regions. In this case, the revision of state revenues may be
considered contrary to the financial interests of economically developed or regions with high
economic potential. Therefore, economic reforms in the state financial system, inter-budgetary
budget transfers, and the resulting problem of local budget independence are being studied by a
wide range of economists.
Old views on budget independence put forward the advantages of decentralized decision-
making in government bodies. In this case, the advantages of local government bodies in the
provision of public services, their need for public services compared to the central government,
are recognized.
There may be cases when local expenditure obligations do not fall within the relevant
competence of state authorities. When financing such expenditures, it is advisable to use inter-
budgetary transfers. For example, targeted social transfers are allocated from a higher-level
budget to a lower-level budget to cover the salaries and social tax expenses of educational and
medical institutions. As a result, the standard amount of provision of such services will be
ensured in all regions of the republic.
Under the influence of the above factors, mutual equalization of the budget system arises,
and the main instruments used in such equalization are presented in Chapter 20 of the current
Budget Code of the Republic of Uzbekistan, entitled "Inter-budgetary Relations," which
describes the movement of monetary relations between all types of budgets and the procedure for
their formalization.
One of the main inturements of inter-budgetary relations is budget transfers. The general
concept of budget transfers is defined in Article 134 of the Budget Code of the Republic of
Uzbekistan as follows: Inter-budgetary transfers are carried out in the form of subsidies,
transferred revenues, subsidies, budget loans, funds for mutual settlements, regulatory budget
transfers, and targeted social transfers. [2]
In accordance with the Law on the State Budget, a reduction in the amounts of regulating
inter-budgetary transfers allocated from the republican budget of the Republic of Uzbekistan to
the budget of the Republic of Karakalpakstan, local budgets of regions and the city of Tashkent,
as well as from the republican budget of the Republic of Karakalpakstan, regional budgets of
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regions and the city budget of the city of Tashkent to the budgets of districts and cities is not
allowed, regardless of the execution of revenue forecasts for lower-level budgets.
At the initiative of a higher financial authority, the obligations of a higher-level budget to
a lower-level budget for one form of inter-budgetary transfer can be offset by reducing the
obligations of a lower-level budget to a higher-level budget for another form of inter-budgetary
transfer [2].
In world practice, the financial capabilities of local budgets are expressed through their
absolute stability. Expenses financed by them are understood as the possibility of full financing
of assigned revenues, mainly through local taxes and fees, as well as regulatory revenues in the
form of regulatory deductions in the prescribed manner.
If there is a shortage of assigned and regulating revenues, funds are allocated from the
higher budget under the financial equalization policy through forms of financial assistance. Such
a situation is recognized as a state of instability of local budgets.
Table 1
Budget transfers in the structure of local budget revenues
Information on the share. (in billion soums)
№
Fiscal years
Total revenues
of
the
local
budget
Local
budget
taxes and fees
Inter-budgetary
transfers
Transfer
share,
(in
percent)
1
2019 yil
52 049,7
35 134,2
16 915,5
32,5%
2
2020 yil
47 190,8
27 702,9
19 487,9
41,3%
3
2021 yil
65 534,3
35 172,9
30 361,4
46,3%
4
2022 yil
88 787,5
47 390,3
41 397,2
46,6%
5
2023 yil
101 740,6
55 728,9
46 011,7
45,2%
6
2024 yil
74 896,7
47 240,1
27 656,6
36,9%
Table data; Taken from the website of the Ministry of Economy and Finance of the
Republic of Uzbekistan and analyzed by the author.
As can be seen from the data in the table above, if in 2019 the share of inter-budgetary
transfers in local budget revenues amounted to 32.5 percent in the republic, then in 2020 this
indicator increased by 8.8 percent and amounted to 41.3 percent. One of the main reasons for this
is the declaration of quarantine in the country as a result of the spread of the COVID-2019
disease in the world, and the temporary suspension of taxpayers' activities in the territory of the
republic, which sharply reduced the receipt of taxes and fees to local budget revenues. As a
result, budget transfers from higher-level budgets to lower-level budgets have sharply increased
to cover local budget expenditures in a timely manner.
The share of inter-budgetary transfers in local budget revenues in 2021 and 2022
amounted to 46.6 percent, an increase of 5.3 percent compared to 2020. The main reason for this
is that during the pandemic in 2020, the state took the necessary measures for the recovery of
many taxpayers, or as a result of the application of tax benefits to manufacturing enterprises, an
increase in inter-budgetary transfers in the share of local budget revenues was observed. By 2023,
this indicator decreased by 1.4% compared to 2022, or constituted 45.2% of local budget
revenues in 2023. In 2024, the forecast for the fulfillment of these indicators is expected to
decrease by 8.3% compared to 2023, or the share of inter-budgetary transfers in local budget
revenues is expected to be 36.9%. The reason for this is the sharp application of tax benefits by
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the President and the increase in the number of taxpayers in all regions of the republic as a result
of the attraction of foreign investors from various sectors to the country, which contributes to the
growth of the country's economic development.
Another key instrument of the state budget for inter-budgetary transfers is targeted social
transfers. This transfer is defined in Article 1381 of the Budget Code of the Republic of
Uzbekistan as follows. "Targeted social transfers are allocated from a higher-level budget to a
lower-level budget to cover the expenses of educational and medical institutions for wages and
social tax." [2]
The amounts of targeted social transfers from the republican budget to the budget of the
Republic of Karakalpakstan, local budgets of regions and the city of Tashkent - are determined
when adopting the draft law on the State Budget, as well as when making decisions on local
budgets of regions, districts and cities. It should also be noted that, according to regulatory legal
acts, unused targeted social transfers must be returned to the relevant higher-level budget at the
end of the current fiscal year.
In today's practice, for several years, funds have been allocated from targeted social
transfers in the state budget system to finance wages, unified social payments of social
organizations, and social benefits. In 2021-2023, 11 out of 14 regions of the republic used
targeted social transfers. We can see the regions that used targeted social transfers the most in
these years in the table below. The table below presents data on budget transfers allocated from
the republican budget of the Republic of Uzbekistan to the local budgets of the regions.
Table 2
Budget allocated from the republican budget of the Republic of Uzbekistan to the
republican budget of the Republic of Karakalpakstan and regional budgets of regions
Information on the amount of transfers. (in billion soums)
№ Territory names
2021 year
2022 year
2023 year
2024 year
sum
%
sum
%
sum
%
sum
%
JAMI
10
443,0
100% 14
115,6
100% 24
280,9
100% 16
836,6
100%
1
Qoraqalpog‘iston 1 301,4 12,5% 1 518,0 10,8% 2 672,4 11,0% 2 078,0 12,3%
2
Andijon
876,7
8,4%
1 682,3 11,9% 2 805,5 11,6% 1 913,8 11,4%
3
Buxoro
440,0
4,2%
442,3
3,1%
645,9
2,7%
361,1
2,1%
4
Jizzax
490,0
4,7%
824,6
5,8%
1 284,4 5,3%
888,6
5,3%
5
Qashqadaryo
1 577,3 15,1% 2 051,3 14,5% 3 819,0 15,7% 927,1
5,5%
6
Navoiy
0,0
0,0%
0,0
0,0%
0,0
0,0%
182,5
1,1%
7
Namangan
1 284,0 12,3% 1 704,8 12,1% 2 899,9 11,9% 1 984,0 11,8%
8
Samarqand
1 102,7 10,6% 1 008,0 7,1%
2 196,3 9,0%
1 588,5 9,4%
9
Surxondaryo
1 293,6 12,4% 1 987,0 14,1% 3 248,9 13,4% 1 832,8 10,9%
10 Sirdaryo
534,3
5,1%
673,2
4,8%
1 086,2 4,5%
901,8
5,4%
11 Toshkent.v
0,0
0,0%
0,0
0,0%
0,0
0,0%
517,3
3,1%
12 Farg‘ona
910,1
8,7%
1 377,5 9,8%
2 181,0 9,0%
1 943,6 11,5%
13 Xorazm
632,9
6,1%
846,6
6,0%
1 441,4 5,9%
1 203,8 7,1%
14 Toshkent.sh
0,0
0,0%
0,0
0,0%
0,0
0,0%
513,9
3,1%
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Data presented in the table; Taken from the Resolutions of the President of the Republic
of Uzbekistan "On the Forecast of the Main Macroeconomic Indicators and Parameters of the
State Budget of the Republic of Uzbekistan."[37]
These data show that from 2021 to 2023, the number of regions receiving budget
transfers was 11. At the same time, in 2021-2023, although the share of inter-budgetary transfers
in Bukhara, Syrdarya, and Khorezm regions decreased, we can see that the amount of received
transfers increased. Also, the regions that received the lowest budget transfers were Bukhara,
Jizzakh, Syrdarya, and Khorezm regions. In 2024, it is planned to provide budget transfers to all
regions of the republic in the amount of 16,836.6 billion soums. This indicator decreased by 31%
compared to 2023. From the data in the table, it can be concluded that when conducting the
state's fiscal policy, it is necessary to develop appropriate measures for the implementation of
budget policy that reduces the amount of budget transfers received by the regions.
Conclusions and suggestions.
Currently, in the practice of regulating inter-budgetary relations, some in the formation of
local budget revenues, instead of increasing local revenues, there is a dependency on the
allocation of budget transfers from the higher budget. At the same time, the increase in the
amount of budget transfers in the amount of income generation leads to a lack of a high sense of
responsibility of local government bodies in the regions. This situation does not correspond to
the policy of further development and radical reform of the country's economy. In addition, local
government bodies do not pay attention to increasing the revenue base and economic capabilities
of their territories through financing from donor regions and the republican budget. As a result,
they strive to receive more funds from the state budget. This, in turn, leads to gross violations of
the requirements of current regulatory legal acts and rules of procedure, instead of the targeted
use of budget funds.
To reduce the allocation of budget transfers from the state budget to the local budgets of
regions, districts, and cities, it is necessary to develop measures for the development of local
production enterprises, small and medium-sized businesses in the regions. Also, in order to
ensure the stability of local budget revenues and increase them, it is necessary to increase the
amount of deductions from national taxes to local budget revenues in proportion to local budget
expenditures. It is necessary to review these tax deductions and regulate the distribution systems
in percentage terms of the total number of taxpayers in the republic, depending on the number of
taxpayers in the regions.
The presence of the share of inter-budgetary transfers in the structure of local budget
revenues and their relatively high share in the structure of revenues creates problems in financing
related to their financial dependence on higher budgets and ensuring specific budget
expenditures.
Therefore, to further deepen reforms to reduce the share of inter-budgetary transfers in
the structure of local budget revenues, it would be advisable to create the "Socio-Economic
Development of Regions" fund under local government bodies in order to provide funds for the
full implementation of important priority areas of annual economic programs determined by the
state.
References:
1. Constitution of the Republic of Uzbekistan. - T.: Uzbekistan, 2010.-32 pages.
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2. Budget Code of the Republic of Uzbekistan. - Tashkent: Collection of Legislation of the
Republic of Uzbekistan, 2013.
3. Law of the Republic of Uzbekistan "On the State Budget of the Republic of Uzbekistan for
2020," No. ЗРУ-589, dated 09.12.2019.
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Uzbekistan for 2021," 25.12.2020.
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