Overview

• Stronger gold prices should bolster Uzbekistan’s exports and fiscal revenues and keep foreign exchange reserves high.
• Ongoing economic reforms and resilient domestic demand, supported by investment and labor remittances, will help sustain relatively strong GDP growth despite global trade tensions and uncertainties.
• Alongside the fiscal consolidation effort, this GDP growth will help the government contain budget deficits and the build-up of public debt.
• We revised our outlook on Uzbekistan to positive from stable and affirmed our ‘BB-/B’ ratings.

Rating Action

On May 23, 2025, S&P Global Ratings revised its outlook on Uzbekistan to positive from stable. At the same time, we affirmed our ‘BB-/B’ long- and short-term foreign and local currency sovereign credit ratings.

The transfer and convertibility assessment on Uzbekistan remains ‘BB-‘.

Outlook

The positive outlook indicates that we expect the government will continue to implement economic and governance reforms, while progressing with fiscal consolidation measures. The upside scenario also reflects our expectation of elevated gold prices, which will buttress Uzbekistan’s export and fiscal receipts.

Upside scenario

We could raise the ratings if Uzbekistan’s reform commitment were to persist, demonstrated for example, by continued energy tariff reforms and improving supervision of government-related entities (GREs). We could also consider an upgrade if Uzbekistan moderates its budgetary and current account deficits without significantly impairing economic performance.

Downside scenario

We could revise the outlook to stable if external and fiscal deficits weaken beyond our expectations due to less favorable terms of trade, persistently high government spending, or higher borrowing costs. We could also revise the outlook to stable if growth slows significantly, for instance due to lower-than-anticipated benefits from debt-financed investment projects.

Rationale

The outlook revision to positive reflects continued efforts to liberalize and improve the resilience of Uzbekistan’s economy (a process that began in 2017), as well as enhance governance and macroeconomic management. We anticipate that ongoing economic reforms, government investments, and remittance inflows will support the country’s strong growth outlook, with real GDP expanding by 5.6% on average over 2025-2028.

To address issues related to energy security, the high fiscal cost of subsidies, and rising gas imports, the government started raising electricity and gas tariffs in October 2023. Authorities plan for energy pricing to reflect costs by 2027. Lower subsidies, favorable gold prices, and high nominal GDP growth should help Uzbekistan reduce its fiscal deficit to 3.0% of GDP, on average, over 2025-2028, from 4.9% in 2023 and 3.3% in 2024.

Government development plans require sizable debt-financed investments. We anticipate that these will continue to drive up Uzbekistan’s net general government and external leverage, but we expect that the speed of the increase will ease. The current account deficit moderated to 5.0% of GDP in 2024, and we forecast that deficits will slightly widen to 5.7% of GDP, on average, over 2025-2028, assuming declining gold prices and elevated import growth to support public investment projects.

Our ratings on Uzbekistan are supported by the economy’s still-moderate level of net general government debt. We forecast that this will reach 34% of GDP by the end of 2028. The sovereign’s fiscal and external stock positions have historically benefited from its policy of transferring some revenue from commodity sales to the Uzbekistan Fund for Reconstruction and Development (UFRD; a sovereign wealth fund).

Our ratings are constrained by Uzbekistan’s low economic wealth, measured by GDP per capita, high exposure to commodity price volatility, and relatively limited monetary policy flexibility. In our view, despite reforms, policy responses are difficult to predict, given the highly centralized decision-making process, developing accountability mechanisms, and the limited checks and balances between institutions.

Institutional and economic profile: Growth momentum projected to remain strong, despite global trade tensions

• We forecast that economic growth will average 5.6% over 2025-2028, after reaching 6.5% in 2024.
• Economic and governance reforms, including planned hikes to energy tariffs, will support the country’s investment prospects.
• Decision-making will remain centralized, and despite some improvements, perception of corruption is likely to be high.

Uzbekistan’s economy expanded by 6.5% in 2024, boosted by strong performance across a broad range of sectors, including information and communications, construction, and trade. From 2021-2023, the country’s real GDP growth was high at about 6.8% a year, on average. We predict that growth prospects will remain strong. Uzbekistan’s growth is heavily investment-led; it has one of the highest investment-to-GDP ratios globally, at about 33% in 2024. Under the Uzbekistan 2030 strategy, the government and public entities are directing investments toward the energy, transport, telecommunications, agriculture, and tourism sectors.

The government has also started raising electricity and gas tariffs. It plans to diversify and modernize the generation of electricity, particularly green energy. This will mainly be achieved through public-private partnerships (PPPs)–for instance, Saudi Arabia’s ACWA Power plans to invest in electricity generation projects worth $7.5 billion (7% GDP) through 2030. Currently, about 20% of the energy consumed in Uzbekistan comes from green sources; it aims to increase this to 40% by 2030. The government also aims to expand production of copper, gold, silver, and uranium to boost the export base.

Despite the increasing energy tariffs and elevated interest rates, we anticipate an increase in consumption. This will be sustained by remittance inflows and rising wages, combined with government measures to stimulate the economy, such as tax exemptions and regulated prices on certain consumer goods. Government efforts to strengthen the regulatory framework, privatize certain state-owned companies, and gain accession to the World Trade Organization (expected to take place in 2026) could also support private and foreign investment.

We estimate that GDP per capita will be $3,300 in 2025, which is still low by global standards, despite strong GDP growth. This constrains our sovereign ratings on Uzbekistan. A quarter of the population is employed in agriculture, which makes up about 18% of the economy. That said, the country benefits from favorable demographics–almost 90% of Uzbeks are at or below working age. The country’s relatively young population presents an opportunity for labor-supply-led growth. Nevertheless, we anticipate that job growth is unlikely to match demand. Most of Uzbekistan’s permanent and seasonal expatriates are employed in Russia; therefore, the weakness of the Russian economy could further exacerbate this issue.

Uzbekistan’s economy continues to weather the spillover effects from the Russia-Ukraine war reasonably well. Remittance inflows rose by 30% to $14.8 billion (13% of GDP) in 2024, following a large decline in 2023. In our view, the size of the increase demonstrates that demand for labor in Russia is rising, as are wages. It also reflects growing diversification of remittance sources (including the U.S., Germany, Poland, and South Korea). Nevertheless, 77% of Uzbekistan’s total remittances in 2024 still stemmed from Russia. In addition, total trade with Russia increased by about 15% to $11.6 billion in 2024. Because of the Western-alliance-led sanctions on Russia, Uzbekistan has been able to increase its exports to the country to meet growing demand. In addition, in October 2023, Uzbekistan signed a two-year deal with Russia’s Gazprom to import nine million cubic meters of gas per day. While a potential ceasefire between Russia and Ukraine could affect Russia-related trade and capital flows, we expect the economic impact for Uzbekistan to be manageable.

Although the government tries to comply with sanction requirements, we still see a risk that the U.S. and EU could impose further secondary sanctions on Uzbek companies that do business with Russia. For example, the U.S. and EU have already sanctioned a few private Uzbek companies involved in trading electronic and telecommunications equipment and goods in the defense industry. In response, the government is implementing enhanced diligence processes, automated screening measures, and stress testing.

Flexibility and performance profile: Government and external debt will rise at a moderate pace

• We expect net general government debt to reach 34% of GDP by 2028, compared with the net asset position in 2017.
• Uzbekistan’s current account deficits are forecast to average 5.7% of GDP through 2028 and be primarily funded through concessional external debt and, to a smaller extent, net foreign direct investment (FDI).
• Although monetary policy effectiveness has improved in recent years, we still consider the central bank’s operational independence to be constrained and loan dollarization remains elevated, at over 40%.

In recent years, Uzbekistan has ramped up its investment in energy, mining sector capacity expansion projects, and other infrastructure projects, along with social spending. As a result, net general government debt (including government-guaranteed debt) has increased by an average of 6.1% of GDP a year over 2020-2024, leading to a rapid rise in government and total external debt stocks.

We forecast that the government will broadly achieve its targeted fiscal deficit of about 3.0% of GDP in 2025, compared to 3.3% in 2024 and 4.9% in 2023. Gold prices have risen to record levels in 2025, which supports government revenue through associated tax receipts. About one-third of Uzbekistan’s fiscal revenue comes from commodities-related receipts including gold and copper.

Authorities expect increasing energy and gas tariffs to deliver savings of about 0.5 percentage point of GDP in 2025. Other fiscal reforms include better-targeted social spending, and the removal of some tax exemptions. As the government works to reduce the gray economy and improve operations at GREs, we expect the tax base to gradually expand.

Gross government debt (including government-guaranteed debt) is forecast to increase to a still-moderate 40% of GDP in 2028, from 33% in 2024. We include government-guaranteed debt with general government debt because of Uzbekistan’s close links with its GREs. The state debt law approved by the president in April 2023 sets a permanent debt ceiling of 60% of GDP and mandates the application of corrective measures if it breaches 50%.

We think there is some risk that nonguaranteed GRE debt, which totaled about 4.6% of GDP in 2024, could crystallize on the government’s balance sheet. In recent years, GRE borrowing has significantly increased, especially borrowing in foreign currencies. The debt is mainly being incurred to finance energy and infrastructure projects. Separately, the use of PPPs has seen a rapid increase and the signed amounts now comprise about 27% of GDP. We understand that a new PPP framework will limit future PPP commitments. In our view, these projects may struggle to repay their debt if they fare worse than expected, or if there are lapses in management or supervision.

To reduce exposure to fluctuations in currency movements and build domestic capital markets, the government is increasing domestic borrowing. The proportion of domestic debt to total debt stood at 16% at year-end 2024, up from 11% at year-end 2022. The rising proportion of domestic and commercial debt, combined with a lagged effect from the transition to Secured Overnight Financing Rate from London Interbank Offered Rate, increased nominal interest payments by about 77% year-on-year in 2024, albeit from a low base. However, given the high share of concessional debt (74% of the total debt stock), we expect interest to remain below 5% of revenue over the next three years.

The government’s liquid assets fell to 9.3% of GDP in 2024, from 33.0% in 2017. Most of these assets are owned through the UFRD, which was founded in 2006. The UFRD was initially funded with capital injections from the government, as well as revenue from gold, copper, and gas sales above certain cut-off prices, until 2019. When calculating government liquid assets, we include only the external portion of UFRD assets. The domestic portion consists of loans to GREs and capital injections to banks, and we consider it to be largely illiquid and unlikely to be available for debt-servicing.

High current account deficits and increasing external debt could raise balance-of-payment risks for Uzbekistan, in our view. We estimate that external imbalances will rise to about 6.2% of GDP by 2028, from 5.0% in 2024, due to a relative normalization of remittance inflows and gradual decline in gold prices. We also expect import growth will remain high because of the large pipeline of investment projects. In addition, Uzbekistan became a net importer of gas in October 2023 after it started importing Russian gas via a pipeline through Kazakhstan.

Most of Uzbekistan’s exports consist of commodities, particularly gold, which comprised 38% of goods exports in 2024. Favorable gold prices will boost exports in 2025. Even if we predict that prices will decline from their all-time highs this year, we project they will remain elevated in a historical context, given our view that geopolitical risks and uncertainty about trade policies could persist well beyond this year (see “S&P Global Ratings’ Metal Price Assumptions: Coal Down, Gold Up,” published May 16, 2025).

Mirroring the sizable current account deficits, the country’s gross external debt has risen in recent years across the government, corporate, and financial sectors. A significant portion of future current account deficit financing will likely still be through debt. We expect FDI inflows to increase gradually as the government implements its pipeline of privatizations, although the timeline will depend on market conditions.

We estimate that the Central Bank of Uzbekistan’s (CBU’s) usable reserves will decline through 2028 from their peak this year, partly because of valuation effects linked to the expected fall in gold prices. The CBU’s holdings of monetary gold constitute about 77% of total foreign exchange reserves, which poses a concentration risk in the event of declining gold prices. Nevertheless, usable reserves will still cover about seven months of current account payments over 2025-2028. We exclude UFRD external assets from the CBU’s reserves because we consider that the former are primarily held for fiscal reasons, rather than to support monetary or balance-of-payments needs. Our view is supported by the budgetary use of UFRD assets in the domestic economy over the past four years.

Uzbekistan’s monetary policy effectiveness has improved in recent years. One of the most significant measures, in our view, was the liberalization of the exchange rate in September 2017 to a crawl-like peg. The CBU intermittently intervenes in the foreign exchange market to smooth volatility and absorb local currency liquidity that results from large gold purchases. The CBU has priority rights to purchase gold mined in Uzbekistan. It acquires the gold with local currency, then sells U.S. dollars in the local market to offset the effect of its intervention on the Uzbek sum.

In the near term, we expect that ongoing increases in energy tariffs will keep inflation high. For 2025, we estimate inflation of 10.1%, compared with an average of 11.1% over 2020-2024, but we predict that it will gradually fall to 8.6% by 2028. To address inflationary pressures, the CBU raised its policy rate by 50 basis points to 14.0% in March 2025.

State-owned banks dominate the sector and hold 65% of total assets. This, combined with preferential government lending programs (albeit declining), reduces the effectiveness of the monetary transmission mechanism, in our view. Following the sale of Ipoteka Bank in 2023, authorities now plan to privatize two large state banks, SQB and Asaka, and could follow with smaller banks. However, we expect this to take some time, as state-owned banks will need to transform to improve their profitability and efficiency to become attractive for investors. To address very strong growth in consumer loans over the past few years, the central bank has implemented more stringent lending requirements, including limits on car loans, cash loans, and credit card and overdraft loans in total banks’ loan portfolios for banks and tighter debt service-to-income limits for retail borrowers. Although dollarization is declining thanks to CBU policies, it remains high: about 41% of loans and 26% of deposits were denominated in U.S. dollars, as of year-end 2024.

Uzbekistan’s banking sector is likely to continue to show resilient performance. We consider that favorable economic growth prospects, strengthening disposable income, and low financial inclusion, including penetration of retail lending in Uzbekistan (with household debt to GDP below 10% of GDP), will remain among the key factors contributing to further growth of banking business and strong demand for lending in the next few years. The largest Uzbek state-owned banks and few privately-owned banks have stable and diversified funding profiles, supported by sizable funding from the state and international financial institutions, as well as growing corporate and retail deposits. At the same time, the domestic capital market remains small and shallow and access to long-term funding in the domestic market remains scarce. We continue to see bank regulation in Uzbekistan as reactive, rather than proactive. Regulatory actions are not always predictable and transparent but are gradually improving.

Key Statistics

Table 1

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