Development finance assessment

Source: Asian Development Bank (2020), UNCTAD (2020)
0%
2%
4%
6%
8%
10%
12%
14%
0,0%
0,5%
1,0%
1,5%
2,0%
2013 2014 2015 2016 2017 2018
P
e
rc
e
n
t
o
f
p
o
p
u
la
ti
o
n
G
ro
w
th
ra
te
Unemployment rate (right axis)
Formal sector employment growth
Working age population growth
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
[0-4]
[10-14]
[20-24]
[30-34]
[40-44]
[50-54]
[60-64]
[70-74]
[80-84]
[90-94]
[100+]
P
o
p
u
la
ti
o
n
,
th
o
u
sa
n
d
s
Age Groups
2020
2030

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16
DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN
jobs beyond their specialization. At the same time, regions with labor surplus suffer from 
growing unemployment due to a high supply of the labor force. 
ENVIRONMENTAL DEVELOPMENT
With a traditionally resource-based economy, unsustainable use of natural resources 
and climate change pose a cross-cutting threat to achievement of national SDGs. Without 
additional resource saving measures, the country may face deficiency of water resources, 
growth in land desertification and degradation, increase in occurrence of droughts and other 
dangerous phenomena, leading to instability of agricultural production and threatening to 
the country’s food security (NDC, 2017). 
The occurrence of natural disasters, compounded by climate change 
represent significant 
risks to key drivers of the economy and threaten to reverse recent gains in human welfare. 
Around 50 percent of Uzbekistan’s population is rural, of which a large part are among 
the poorest, relying on natural, over-depleted, assets for their livelihood. Climate change 
threatens to keep, or further push rural populations, into poverty, as they lack knowledge 
and resources to adopt more resilient practices and technologies. More investments in 
disaster risk reduction and preventive measures may therefore be needed to reduce such 
vulnerabilities and increase resilience of communities, but also to protect economic growth 
and development gains to build back better.
Uzbekistan is the only country in Central Asia where greenhouse gas (GHG) emissions 
have remained relatively stable since 1990 and then decreased towards 2018 (Figure 3). 
Emissions of NO
2 
declined due to increased use of organic fertilizers, However, in Tashkent, 
Farghona and Olmaliq, NO
2
and particulates exceed recommended levels, along with high 
levels of heavy metals from waste burning, fuels, metallurgy. Methane emissions increased 
almost constantly due to growth in the agricultural sector (emissions from livestock, manure) 
and in the population (waste). 
Thus, Uzbekistan’s agricultural sector nicely illustrates these tensions between economic, 
social and environmental policy objectives, which the 2030 Agenda aims to reconcile: 
increasing agricultural productivity can achieve poverty reduction in rural areas, but when 
achieved through the heavy use of agricultural chemicals it degrades the air quality in 
Figure 3. CO2 Emissions Drivers in Uzbekistan, 2000-2018
Source: International Energy Agency, 2020
300
250
200
150
100
50
0
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
GDP PPP per population index
Population index
Carbon intensity index - CO2/TPES
CO2 emissions index
Energy intensity index -
/ GDP PPP
TPES
Index (2000=100)

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17
SUSTAINABLE DEVELOPMENT CONTEXT
those rural areas (UNEP, 2015), thus directly affecting health and environmental outcomes. 
Adopting an INFF can support identifying and addressing similar policy trade-offs towards 
achieving such a reconciliation.
Uzbekistan is one of the most energy inefficient countries in the Eastern European and 
Central Asian region. Current GDP’s energy intensity of Uzbekistan is twice the average global 
level. The GoU (2020) projects electricity consumption to increase by 1.8 times by 2030, along 
with gas consumption (1.7 times) and POL consumption (2.1 times). Uzbekistan’s ageing 
electricity infrastructure struggles to meet growing domestic energy demand. Industry and 
agriculture are among the largest power consumers in the country and the largest sources 
of energy inefficiencies due to outdated technologies and high reliance on water pumping. 
Historically, investments in the country’s energy infrastructure suffered from a lack of 
well-elaborated medium- to long-term overall energy policy directions and related strategies 
(IEA, 2015). This is expected to change with the adoption of several critical policy documents, 
including the ‘Strategy on the Transition to a Green Economy’ in 2019 and a special resolution 
“On additional measures to reduce the dependence of sectors of the economy on fuel and 
energy products by increasing the energy efficiency of the economy and using available 
resources” in July 2020. The Ministry of Economic Development and Poverty Reduction is 
the designated authority for the promotion and implementation of the green economy in 
Uzbekistan, supported by a special interdepartmental commission. In addition, the new 
‘Concept for ensuring reliable energy supply to Uzbekistan towards 2030’, adopted in 2020, 
sets out specific energy targets for thermal, wind, solar and nuclear energy.
The financing of this green transition and reliable energy relies explicitly on attracting 
foreign investment, loans and grants from international financial institutions, foreign 
governmental financial organizations and other foreign grantors
11
. Investments in energy 
efficiency and renewable energy sources are high priority from both economic (decrease in 
costs for energy generation) and climate viewpoints (decrease in volumes of greenhouse 
gas emissions). The draft ‘Long-term Strategy for low-carbon development’ identifies target 
indices for energy efficiency and the “Program of measures for transition to low carbon 
development” identifies key sectors of economy (electric energy, thermal energy, housing 
and utilities sectors) that are the main contributors to GHGs emission in Uzbekistan. To this 
end, strengthening the institutional capacity, and improving the legal framework, of the 
renewable energy sector is critical to achieve these long-term SDGs. 
Meeting these financing needs and policy targets requires a coordinated and coherent 
approach that harnesses private finance, sector regulatory reforms and the COVID-19 
recovery stimulus. Operationalizing an INFF would greatly support this by leveraging the 
inter-agency council on climate change, chaired by the Deputy Prime Minister, to bring 
together these different stakeholders and support high-level discussions and coordination 
on climate change and CDM projects.
SDG FINANCING NEEDS AND PRIORITIES
Prior to the COVID-19 crisis, the IMF estimated Uzbekistan needed