Development finance assessment

additional
annual 
spending of roughly 7.9 percent of GDP to reach SDGs in social and infrastructure sectors by 
2030 (3.4 percent of GDP for SDG 3 on health, 2.4 percent of GDP on SDG 9 road infrastructure, 
11
Development partners have supported the construction of the largest solar power plant (100 MW) in Central Asia. 
With two additional solar plants of similar capacity planned, it is expected to bring up the share of solar energy in the 
total energy balance of the country to 6 percent by 2030.

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18
DEVELOPMENT FINANCE ASSESSMENT FOR THE REPUBLIC OF UZBEKISTAN
1.0 percent of GDP on SDG 6 water, 0.8 percent of GDP on SDG 7 electricity and 0.3 percent 
of GDP on SDG 4 education). 
Uzbekistan currently also faces the largest infrastructure capacity needs in the region. The 
road sector presents a sizeable backlog in deferred maintenance estimated at USD 1 billion 
per year (SDG9.1) (OECD, 2019b)
12
. ESCAP (2019)
13
estimated the additional infrastructure 
investment needs for clean water and sanitation, transport, and ICT, along with the costs to 
enhance climate resilience to be about 4.6 percent of GDP. The energy sector (SDG7) also 
faces large inefficiencies, costing the economy around USD 1.5 billion per year, while the 
costs associated with the poor quality of existing water and irrigation infrastructure (SDG6 
and SDG2.4) are up to 8% of GDP per year (World Bank, 2016). The Uzbekistan Fund for 
Reconstruction and Development and the Republican Road Fund finance an important share 
of the GoU’s centralized investment.
Underperforming infrastructure is a binding constraint to Uzbekistan’s economic 
diversification and growth. The revision of the Investment Program towards funding 
infrastructure projects of the highest priority that provide opportunities for development of 
entrepreneurship and ensuring employment of the population as part of the response to the 
COVID-19 crisis is an opportunity to address the most critical infrastructure constraints to 
enable a greener and more durable recovery. Such efforts would benefit from developing a 
holistic and coordinated, mid-term recovery program.
Demographic trends are also expected to underpin growing social spending needs. 
For example, prior to the pandemic, the IMF calculated the required increase in pension 
spending between 2015-2030 amounts to an estimated 4.0 percent of GDP (SDG1.3 and 
SDG10); while the required increase in healthcare spending between 2015-2030 amounted 
to 0.6 percent of GDP (SDG3) (IMF, 2019). Furthermore, despite rapid pre-pandemic increases 
in per capita income and poverty reduction, the country faces pervasive regional inequalities 
and lags its regional peers regarding human development (SDG10). Additional investments 
in renewables and energy efficiency measures will also be required to mitigate and adapt to 
climate change, and safeguard rural livelihoods (SDG7.2 and SDG13).
Acknowledging the methodological limitations of these types of comparative SDG costing 
analyses, they do reveal that bridging the financing gap will require significant additional and 
sustained resource mobilization efforts from both public and private resources. Furthermore, 
these pre-COVID estimates have likely become too optimistic: addressing the external shock 
and the domestic impact of COVID-19 is expected to require additional external financing of 
about USD 4 billion (7 percent of GDP) according to the IMF (2020). 
The strong fiscal pressures emanating from the COVID-19 crisis threaten fiscal space for 
social spending over the medium-term (box 2). Therefore, a key message emerging from 
this DFA is the importance of safe-guarding social spending, within a context of scarcity 
of resources and competing spending priorities, to protect the country’s SDG progress. 
In response, the GoU’s COVID-19 stimulus package includes several measures to rapidly 
increase social spending. 
Current levels of public investment by the GoU will not suffice to bridge this financing 
gap. In 2018, consolidated government capital spending – both on-budget and off-budget 
– amounted to 5.2 percent of GDP (World Bank, 2019). This is below the 7.7 percent of GDP 
12 
Road infrastructure capacity should increase by 486% by 2030 and by 1365% by 2050 to meet the expected volume 
of freight that will pass through Uzbekistan. By 2050, the share of road traffic is expected to increase by 50% from 
less than 30% in 2015.
13 
https://www.unescap.org/publications/economic-and-social-survey-asia-and-pacific-2019-ambitions-beyond-
growth

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19
SUSTAINABLE DEVELOPMENT CONTEXT
average of regional comparators and the lower limit of the public investment level that the 
Growth Commission Report
14
identified as a feature of fast-growing economies. Significant 
increases in public investment will therefore require both mobilizing additional public 
revenue as well as ramping up spending efficiency. The COVID-19 pandemic complicates 
mobilizing additional domestic revenue in the short term (see next chapter).
Furthermore, for capital spending to translate into productive capital requires strengthening 
the legal, institutional, and procedural elements of public investment management. ESCAP 
(2019) estimates cumulative savings of up to 50 percent could be achieved in infrastructure 
investments by strengthening project appraisal, selection and management, coordination 
among government branches and a steady flow of resources for maintenance
15
. Improving 
14
Growth Commission. 2008. Growth Report. Report. https://openknowledge.worldbank.org/handle/10986/6507. 
The report indicated that the governments of the 13 successful countries it studied invested 5-7 percent of GDP
15
Calculated for all ESCAP member countries. Considering Uzbekistan’s very weak governance indicators, potential 
efficiency savings for Uzbekistan are likely to represent that order of magnitude.