Previous Quarterly Editions
Expropriation Risk: 65 64 63 63 ►Political Violence Risk:51 50 49 48 ▼Terrorism Risk:50 50 50 50 ►Exchange Transfer and Trade Sanction Risk: 64 64 64 64 ►Sovereign Default Risk:65 65 65 65 ►
TREND ►
Protest intensity to date* 2022 2023 Low Low Unrest risk in 2024**Cost of living: HighAnti-austerity: Medium
*Note: Protest intensity is calculated based on ACLED. **Risk levels are calculated by WTW. Where data are missing no risk level will be displayed. For details of 'anti-austerity' calculations, see the essays in the introduction; for details of 'cost-of-living' calculations, see the previous edition of the Index.
Uzbekistan’s gross public debt was US$29.2 billion (equal to 36.4% of GDP) at the end of 2022, up by almost US$3 billion year on year. Despite the increase in absolute terms, its share of GDP was 1.6 percentage points down on the year, thanks to steady economic growth and the official cap of US$4.5 billion worth of new external liabilities in each year.
It has been estimated that public debt service will have amounted to 2.4% of GDP or 11.2% of total government revenue in 2023, posing no material risk to debt repayment. Still, public debt is projected by the Uzbek authorities to reach as much as US$32.1 billion by the end of this year.
The last official assessment of Uzbekistan’s gross external debt dates to January 2022, when the central bank reported it to be US$39.6 billion. Official statistics show sustained growth in the country’s total debt load, which was less than US$10 billion in 2013 and hardly exceeded US$17 billion
in 2018. This began to expand considerably the following year as President Shavkat Mirziyoyev’s administration embarked on an ambitious modernization agenda. Government borrowing during the COVID-19 pandemic also played a role.
With the Uzbek economy on a steadily upward growth trajectory, the country’s evolving debt situation is unlikely to have notable implications either for domestic political stability or for the overall socioeconomic wellbeing of its population.
Since coming to power in 2016, Mirziyoyev has engaged in a pro-market reform program that has resulted in a degree of liberalization of the economy. One of the key pillars of the program is privatization, a critical reform area given that state-owned enterprises account for 55% (as of 2020) of the entire economy. While this program has seen several successes, it has not lived up to expectations, in part due to the unrealistic goals set by the Uzbek government and a drop in investor sentiment following Russia’s invasion of Ukraine in February 2022.
In March, the president attempted to reinvigorate his privatization program by announcing a new wave of privatizations and the sale of government property. Despite the stated ambition of the presidential administration, however, the rule of law remains weak and the government’s presence in the economy is overbearing.
The same month that Mirizyoyev relaunched his program, Spanish engineering company Maxam was reported to have filed a claim against Uzbek state chemical company Uzkimyosanoat in London for alleged non-fulfillment of contractual obligations on a “systematic basis.” The case is pending, and there may be no movement on it for quite a while, given how long arbitration cases usually take to resolve.
TREND ▼
In July 2022, the Uzbek province of Karakalpakstan — among the poorest ones in the country — was rocked by mass protests against proposed amendments to the constitution that would have seen the region lose its autonomous status. Despite the government’s swift withdrawal of the amendments, the protests continued for several days, resulting in the deaths of approximately 20 people.
The unrest in Karakalpakstan, while a major political shock, is symptomatic of underlying popular discontent over lagging economic development, the lack of opportunities for employment especially among young workers, and chronic shortages of utilities such as gas and electricity.
Mass outages of power and heat in the capital Tashkent and other cities during a severe cold snap at the end of 2022 further lowered trust in the government. While a systemic threat to the Mirziyoyev administration and Uzbekistan’s overall stability is unlikely, localized protests are likely to remain a feature of the current authoritarian, centralized political system.
The rise of Islamic State Khorasan in the northern regions of Afghanistan has created new security concerns in Uzbekistan. In 2022, at least two incidents were recorded of rocket fire from Afghanistan into Uzbekistan. On March 7, 2023, 10 Western nations issued a joint communique that expressed grave concern about the “increasing threat” of terrorist groups such as Islamic State Khorasan.
Within Uzbekistan, the security services have consistently suppressed any open demonstrations of religious commitment, such as Islamic dress. Periodic arrests of extremists are typically overreported in the media, likely to send a message to other Islamist groups and to justify the repressive activities of the security apparatus. In practice, the threat of a serious terrorist attack within Uzbekistan remains low.
In June 2022, an Uzbek logistics company, Promcomplektlogistic, was listed on the U.S. Department of Commerce Entity List for supplying prohibited electronics to Russia. This year, Uzbekistan and other Central Asian countries have been subject to even greater scrutiny over their compliance with Western sanctions regimes as Western governments increasingly focus their attention on Moscow’s trade partners that could be facilitating Russian sanctions evasion.
Already, in February 2023, two Uzbek nationals were sanctioned by the U.S. Department of Commerce, and in a March advisory note, the U.S. government cited Uzbekistan (together with Kazakhstan, Kyrgyzstan, Uzbekistan and Tajikistan) as a potential transhipment hub through which goods might be re-exported to aid the Russian war effort in Ukraine. In June, the European Union imposed sanctions on two Uzbek firms suspected of facilitating sanctions circumvention.
Nevertheless, any sanctions against Uzbek nationals or entities are likely to be highly selective, meaning that the majority of the Uzbek economy will not be affected by any forthcoming sanctions action.
Uzbekistan has maintained consistently strong growth, despite the COVID-19 pandemic of recent years and geopolitical dislocations following the Russian invasion of Ukraine in 2022.
This year, the International Monetary Fund predicts Uzbek GDP growth to reach 5.3% (up from the earlier forecast of 4.7% in October 2022), continuing this trend of strong growth. The European Bank for Reconstruction and Development expects even stronger growth of up to 6.5% in both 2023 and 2024. While it is the case that the population as a whole may not be feeling the benefit of relatively high growth, there is little threat to Uzbekistan’s sovereign position.
In September 2023, the Uzbek central bank reported US$32.7 billion worth of international reserves, mostly composed of gold (72%), down from US$35.8 billion in January. The decline was mainly due to open market interventions by the regulator and gold’s depreciation.
All three major credit rating agencies — Standard & Poor’s, Moody’s and Fitch — have a stable macroeconomic outlook for Uzbekistan. Their current long-term ratings are BB–, Ba3 and BB–, respectively.
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