Development finance assessment

Portfolio investments
Data for (foreign) portfolio investment in Uzbekistan has been reported since 2016. 
They have only started to become significant in 2019, with the issuance of the Eurobond, 
reaching USD 1.346 billion. (Compared to just over USD 2 million in 2016, USD 3.149 million 
in 2017 and USD 13 million in 2018) Uzbekistan’s planned large privatization programme 
and sovereign bond issuances are expected to increase portfolio inflows in the coming years 
as foreign investors acquire equity securities, including shares, stocks and direct purchases 
of shares in local stock markets. Continued financial market development will be vital to help 
the country absorb potentially large capital flow fluctuations and the economic shocks that 
come with them. Strong regulatory frameworks are essential to this effort. Building foreign 
reserves and, where feasible, allowing exchange rates to adjust and absorb shocks can help 
insulate economies from the impact of capital flow volatility.
Remittances
Remittances are crucial for GoU’s foreign exchange reserves as well as for poverty 
alleviation as they mostly accrue to low-income households. For 2019, the IMF estimated 
remittance inflows to have been a record USD 8.7 billion, up from USD 7.8 billion the previous 
year. Remittances were equivalent to an estimated 15 percent of GDP. The economic crisis 
induced by the COVID-19 pandemic and economic lockdown are projected to severely 
disrupt remittance flows around the globe, including in Uzbekistan. For 2020 remittances are 
projected to decrease by USD 2.9 billion to USD 5.8 billion. This is equivalent to a real decrease 
of 23 percent (Figure 21). In contrast to previous economic crises, where remittances tended 
to be countercyclical, the particularities of this crisis will see the rapidly falling remittances 
compounding the effect of domestic disruptions on the incomes of the poor and vulnerable.
Historically, over 80 percent of remittances are emitted by the Uzbek diaspora in Russia
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. 
Consequently, remittance inflows depend heavily on the performance of Russia’s economy. 
During the previous Russian economic downturn (2014-2016) the transfers fell by 60 percent 
for Uzbekistan alone (see: World Bank, 2018b). The current shocks on the energy markets 
are affecting the Russian economy and leading to lower demand for labor from neighboring 
countries. This trend will have a negative effect on future remittances to Uzbekistan as the 
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An Uzbek-German investment summit, held in Berlin in January 2019, saw €4bn ($4.5bn) worth of deals inked on 
day one.
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For a period of January-December 2018, 4 regions (Tashkent, Navoi, Bukhara, and Kashkadarya regions) accounted 
for about 51% percent of the total investment and 64% percent of the foreign investment inflow (GoU, 2020).
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It is estimated that between 2 and 3 million Uzbeks live abroad. This is equivalent to between 7 percent and 10 
percent of the population. The UN estimated the number to less than 2 million in 2012 (UNICEF, 2013).

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DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN
speed and extent of Russia’s economic recovery will have a significant bearing on remittances 
to Uzbekistan in the next few years.
The migration between the former Soviet Central Asian republics and Russia makes one 
of the top European migration corridors (IOM, 2018). At the same time, this corridor is one 
of the cheapest for the transfer of money from Russia to the country of destination (see: 
World Bank, 2018b). 
Although Russia is still by far the most important remittance originating country, the 
transfers from other countries is on the rise, notably the US and Turkey (Figure 22). The 
abolition of exit visas in 2019 will most likely lead to even further diversification of migrant 
destinations. 
Figure 22 Sources of remittances
Russia
88%
Kazakhstan
6%
USA
2%
Other
4%
2010-15
Russia
80%
Kazakhstan
7%
USA
4%
Turkey
3%
Republic of Korea
2%
Other
4%