Development finance assessment

participation
3
. The country has started to explore its shale oil and gas potential and assessing 
its renewables potential, mostly wind and solar energy. 
Uzbekistan has one of the more diversified export baskets in Central Asia and trades 
with a wider range of countries than most of its regional peers. Strong export growth and 
remittance contributions have contributed to a narrowing of the current account deficit from 
7.1 percent in 2018 to 5.6 percent in 2019 (IMF, 2020). Uzbekistan has built up substantial 
external buffers, with reserves at 13 months of imports, and external debt a moderate 35 
percent of GDP at end-2018. Plummeting oil and gas prices, combined with a sharp fall in 
exports are projected to widen the current account balance to almost 10 percent of GDP in 
2020, to be financed mostly by development partner assistance and international reserves. 
The COVID-19 response was partly financed by drawing down international reserves (USD 
2.5 billion). 
2
Uzbekistan has been the seventh largest gold producer in the world, and has significant reserves of natural gas and 
some minerals copper, zinc, led, tungsten and uranium)
3
It is expected that restrictions on foreign engagement will be removed soon.
BOX 1: UZBEKISTAN’S COVID-19 RESPONSE AND RECOVERY MEASURES
Monetary policy: CBU decreased its policy rate by 1 percentage point mid-April to 15 percent. The bank 
also has offered several targeted refinancing operations for commercial banks (UZS 350 billion), but did 
not change regulatory, capital or liquidity requirements. CBU also suggested banks defer loan payments for 
firms in sectors affected by COVID-19. Consequently, state-owned banks are extending maturities of loan 
repayments for the affected sectors.
Economic support measure: An Anti-Crisis Fund of UZS 10trn – EUR 950 m – (1.5 percent of GDP) has 
been set up to cover immediate medical and quarantine expenses, increase the number of social benefit 
recipients, provide liquidities, interest subsidies, loan repayment deferrals, guarantees to businesses, and 
finance infrastructure work in regions to sustain employment. The Fund also finances an allocation of UZS 
200 bn (EUR 19 m) to the Public Works Fund to support employment and the construction of additional 
infrastructure, and of UZS 500 bn (EUR 47m) to the ‘State Fund for Entrepreneurship Support’ to assist job 
creations by businesses. 
Additional fiscal measures include: tax deferrals for most affected SMEs and individual entrepreneurs; a 
moratorium on tax audits and on bankruptcy procedures; a deferral of the scheduled increase of tax rates; 
an extension of tax declaration submission; an ease of VAT calculation and payment requirements for small 
businesses; no excise tax and customs duties for the import of 20 types of basic consumer goods; and the 
suspension of rent payments for the use of state property by business entities that have been forced to 
suspend their activities. The central government also asked local governments to reduce taxes by 30 percent 
and provide a 6-month grace period on paying property tax. Households, parents are granted a 100 percent 
temporary disability benefit, and childcare benefits and material assistance are automatically extended for 
all beneficiaries. 
Source: OECD (2020), IMF (2020).

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14
DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN
The global COVID-19 pandemic is having a significant negative impact on the economies 
of Central Asia. Trade has been severely disrupted, healthcare systems are coming under 
strain, and consumption and investment are plummeting. These global and regional 
COVID-19 dynamics also severely affect the Uzbek economy, notably through the fall of 
prices and sales of natural gas to Russia and China, the curtailing of remittances flows from 
workers in Russia, the partial closing of Kazakhstan, the country’s main export market for 
fresh agricultural products, and the weight of announced relief measures on public finances 
(OECD, 2020). 
Uzbekistan responded swiftly to the first wave of COVID-19 infections by establishing 
an Anti-Crisis Fund to finance containment measures, expand social protection and support 
businesses and key sectors of the economy (see Box 1). To some extent this Anti-Crisis Fund 
contains both COVID-19 response and recovery measures, including significant share of 
investments in infrastructure and support to SMEs.
To date, the GoU hasn’t yet developed a more comprehensive, strategic approach towards 
a durable and resilient recovery from COVID-19 designed to ‘build back better’, i.e. not 
only getting the economy and livelihoods back on its feet quickly, but also safeguarding 
prosperity for the longer term. This means triggering investments and societal changes that 
will both reduce the likelihood of future shocks and improve our resilience to those shocks 
when they do occur, whether from disease or environmental degradation (OECD, 2020b).
This DFA explores whether an INFF could be a good fit to support financing GoU’s 
COVID-19 recovery efforts towards building back better. Building back better will require 
strategies that simultaneously address challenges and deliver reforms across many aspects of 
public, private, domestic and international financing, to mobilize the necessary investments. 
Operationalizing an INFF could achieve increased coherence across the COVID-19 response 
measures, including the multilateral response, the ‘Action Strategy for 2017-21’, and the 
medium-term Poverty Reduction Strategy Paper, currently being formulated. The DFA’s main 
purpose therefore is to provide context analysis to shape the inception phase in the process 
of operationalizing such an INFF, and to identify priority SDG financing reforms in support of 
the UN SDG Fund’s two-year Joint Programme to be implemented in Uzbekistan.
SOCIAL DEVELOPMENT
Uzbekistan made great progress in reducing poverty and inequality. The poverty rate 
declined from 27.5 percent in 2001 to 11.4 percent in 2018
4
. The latest available data 
estimates the official Gini coefficient to be 0.29 (World Bank, 2016) and the proportion of 
people with income below 50 percent of median income fell from 12.7 percent in 2010 to 
7.8 percent in 2018. In the short-term, however, poverty is expected to rise in 2020 because 
of the COVID-19 crisis
5
. To accelerate poverty reduction the GoU is preparing a Poverty 
Reduction Strategy Paper. 
While the country was on course to achieve the poverty and inequality goals prior to 
the COVID-19 crisis, related challenges such as rural-urban and regional disparities persist 
(World Bank, 2016). Women and youth represent by far the largest group of vulnerable 
populations in Uzbekistan, with significantly lower than average access to labor markets, 
tertiary education, decision-making, and business opportunities. The World Bank survey 
‘Listening to the Citizens of Uzbekistan’, conducted in June, provides relevant insights to 
4
http://nsdg.stat.uz/en/databanks/indicator-table?id=1.2.1
5
1.3 percent of the population, or 448,000 people, may already have fallen into poverty because of the crisis 
(Consolidated Multilateral COVID-19 Socio-Economic Response & Recovery Offer 2020)

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15
SUSTAINABLE DEVELOPMENT CONTEXT
develop differentiated COVID response and recovery measures according to citizens’ needs. 
The survey could be conducted monthly to monitor the socio-economic impact of COVID 
and response measures on households’ livelihoods
6
.
Between 2000 and 2018, Uzbekistan’s HDI value increased by 19.2 percent from 0.596 
to 0.710, placing it in the ‘high human development category’
7
. However, this HDI score 
remains below the average of 0.750 for countries in the high human development group and 
below the average of 0.779 for countries in Europe and Central Asia. 
Unemployment is on the rise and the growth rate of formal employment has been 
decreasing in recent years (Figure 2). The dependency ratio is projected to peak in 2022 at 
51.15, up from 47.96 in 2014. According to the Ministry of Labor, only 5.7 million people are 
employed in the formal sector out of 19 million in the labor force
8
. 
The country’s substantial informal sector is leaving a large amount of people vulnerable 
to the slowdown. The ongoing restructuration of the SOEs increases the labor supply which, 
in combination with returning migrants due to the COVID-19 crisis, may further exacerbate 
difficulties to create sufficient jobs (IMF, 2019). This bourgeoning working-age population 
and the significant informal sector calls for a more job-rich and inclusive COVID-19 recovery
9
. 
Accelerating formal job creation would in turn generate additional revenue for the National 
State Budget.
Deficiencies in provision of material and technical base in the education system result 
in a poorly trained labor force and uneven territorial distribution of demand for various 
professions
10
. There is shortage of specialists in individual regions of Uzbekistan, especially 
doctors and teachers, as well as skilled blue-collar workers, which causes graduates to seek 
6
To provide the government with timely evidence to guide the policy response, a new high-frequency survey – the 
Nigeria COVID-19 National Longitudinal Phone Survey (COVID-19 NLPS) – has been initiated in Nigeria. This survey 
is being implemented by the National Bureau of Statistics with technical support from the World Bank and is designed 
to measure and monitor the economic and social impacts of the COVID-19 crisis by tracking households’ welfare and 
behavior every month over a period of 12 months. 
7
2019 UNDP Human Development Report.
8
Official unemployment in 2019 was 9.0 percent.
9
About 200,000 to 250,000 people enter the labor market every year (GoU, 2020).
10
Threats identified by the GoU’s draft Concept 2030.
Figure 2 Labour Market Structure and Demographic Trends in Uzbekistan