• Uzbekistan’s economy continues to show strong growth. In 2011 the economy was reported to have grown by 8.3 per cent, driven by strong domestic demand and fiscal stimulus, including through the state industrialisation programme. To support further growth the government approved a number of sector development programmes for 2011-15. 
  • The authorities announced a new privatisation programme for 2012-13. The new programme includes minority and majority stakes in almost 500 enterprises that will be offered to local and foreign investors via open public tenders. 
  • The overall business environment remains difficult, notwithstanding the streamlining of a number of registration and licensing procedures. Firm registration and tax reporting procedures have been simplified and a significant number of licenses and permits have been abolished. At the same time, the overall business environment remains difficult and businesses remain constrained by foreign exchange restrictions. 


  • The economy needs to be liberalised with government intervention further reduced. Priority measures include reducing discriminatory barriers against imports and eliminating state procurement quotas in agriculture. The role and the function of a regulator in each sector should be clearly defined. Privatisation should proceed in a transparent fashion.
  • Distortions and indirect restrictions in the foreign exchange market need to be eliminated. Increased exchange rate flexibility and easier access to foreign currency are crucial in order to reinvigorate trade and private investment.  
  • Financial sector development will require better banking supervision and reduction of state interference in the banking system. Direct lending at preferential rates distorts competition among banks, interferes with a sound risk culture and challenges effective banking supervision. More transparent banking practices would enhance the supervision ability of the central bank. 


Uzbekistan’s economy continues to grow at above eight per cent according to official statistics. Official GDP growth amounted to 8.3 per cent in 2011, driven mainly by fiscal stimulus and strong domestic consumption, and supported by large wage and pension increases and continued state investment as well as increasing remittance inflows. According to official estimates, growth has continued in the first half of 2012 and reached 8.1 per cent year-on-year. Despite lower global food prices in 2011 and early 2012, inflation in Uzbekistan remained on the rise caused by fiscal stimulus, currency depreciation and administrative price hikes. The fiscal and current account balances remained firmly in surplus. Imports have increased, reflecting growing capital goods imports under the ongoing government programme for industrial modernisation.

The banking sector remains stable but has required continued capital injections by the authorities. Banking supervision and regulation remain weak. According to the rating agency Moody’s, the banking sector outlook remains stable in 2012-13 based on the assumptions of favourable growth prospects and continued state support. The non-performing loan portfolio of state-owned banks was massively restructured in 2011 with nearly 20 per cent being debt-to-equity swaps and capital injections by the state to support funding needs. This has positively affected the banks’ balance sheet. 

Uzbekistan signed the CIS free trade agreement at the beginning of 2012 that eliminates custom duties for its products including those going to its major trade market, Russia. While it is likely that Uzbekistan will remain outside of the custom union, the elimination of customs duties will increase the competitiveness of its products in CIS markets. 

The government is expected to keep economic growth high at around eight per cent in 2012 and 2013, with the help of continued large government spending. In the medium-to-long term, however, Uzbekistan’s growth prospects will likely be constrained by the slow progress with structural reforms, continued directed lending practices by the state, limited currency convertibility and continued disengagement with international financial organisations. 


State ownership and interference in the economy remain dominant. The authorities have recently renewed a privatisation programme that includes a list of almost 500 enterprises, with minority or majority stakes possibly being offered to private and foreign investors. The list includes enterprises across all sectors of the economy, including oil and gas and mining. In addition, the authorities drafted a list of over 50 enterprises where production facilities are currently unfinished or inactive. These can be transferred to interested investors free of charge in exchange for binding investment obligations on the part of investors. While this programme could signal the beginning of a renewed transition process, the prospects are still uncertain given previous privatisation announcements that did not materialise. Major investment programmes and projects will be supported by the Fund for Reconstruction and Development into which the government has accumulated nearly US$ 10 billion. 

There has been some progress with improving banking regulations and state directed lending practices. All banks are currently audited by international agencies under IFRS standards, and the banking system has remained stable due to the capital injections by the government. However, the regulatory framework remains weak. While some foreign banks are operating in the country, the state still owns 70 per cent of the banking sector. There has been increasing competition in the sector and major state-owned banks are undergoing internal restructuring and transformation. The state support programmes now target specific sectors, with control over use of funds performed by the relevant line ministries and specialised agencies. 

The situation in non-banking financial institutions has deteriorated. In 2011 the government revoked the licenses of all credit unions, on the grounds that they lacked transparency and were engaged in money laundering. At that time there were nearly 140 licensed credit unions providing funding access to entrepreneurs and involved in the micro lending industry. This move has potentially pushed a sector accounting for 15-20 per cent of loans to the grey economy. 

There has been no progress with eliminating distortions in the foreign exchange market. Foreign traders continue to experience major market distortions with respect to trade and foreign exchange, related to delays in currency conversion for imports, restrictions on cash and foreign exchange availability and a restrictive trade policy. The lack of a liberal trade and foreign exchange regime continues to be a major constraint to foreign investment and private sector development. 

The energy sector remains largely unreformed and state controlled and has only recently embarked on a programme of efficiency improvements. However, implementation of this programme is complicated by obsolete equipment that requires substantial investment for modernisation and reconstruction. Based on its renewable energy programme, the government has received nearly US$ 500 million in support from the Asian Development Bank. There are now four solar panel plants in the country with two already in operation. In the telecommunications sector the license of a major mobile operator, subsidiary of MTS of Russia, was suspended in July 2012 on the basis of alleged tax irregularities and other violations. Other foreign operators remain present in the market. 

The business climate remains very poor but may benefit from a number of recent initiatives. Uzbekistan ranked 166th among 183 countries in ease of doing business in the 2012 World Bank Doing Business Report. The country scored poorly in every component of the ranking, although improvements were recorded in the area of starting a new business as the authorities reduced the minimum capital requirement, eliminated a number of procedures and lowered the cost of registration. Moreover, a presidential decree signed in July 2012 significantly reduced the number of financial, statistical and tax reporting procedures as well as procedures for obtaining licenses and permits. Eighty permission procedures and 15 licenses were eliminated from 1 August 2012, and the requirement for monthly tax reporting by businesses will be abolished from 2013. From 2014 businesses should be able to obtain licenses and permissions online. In August 2012 procedures for opening business bank accounts and authorising bank payments have been streamlined. A law on pledge registry has been drafted and is expected to be adopted by the end of 2012. 


icon-pdfOther Reports

Annual Report 2012
pdf English
pdf French
pdf German
pdf Russian

Financial Report 2012
pdf English
pdf French
pdf German
pdf Russian

pdf Donor Report 2013

pdf Sustainability Report 2012