Moody's Ratings has changed the Government of Uzbekistan's outlook to positive from stable and affirmed the Ba3 long-term issuer ratings. Moody’s have also affirmed the Ba3 senior unsecured ratings and (P)Ba3 senior unsecured medium-term note programme ratings.

The change in outlook to positive reflects our view that ongoing reforms to enhance governance and institutional frameworks, if effective, could strengthen policy effectiveness and the quality of institutions over time. The government's privatization program could also raise trend growth, if implemented successfully. These reforms, alongside strong fiscal prudence, could bolster economic resilience over the medium term and enable the full realization of the country's growth potential.

The affirmation of the Ba3 rating reflects Uzbekistan's relatively diversified economy,  robust growth prospects with favorable demographics, and a moderate debt burden – largely on concessional terms. These strengths are offset by low per-capita income and competitiveness, institutional weakness (albeit improving), and moderate political risks.

Uzbekistan's local and foreign currency country ceilings remain unchanged at Ba1 and Ba3, respectively. The two-notch gap between the local currency ceiling and the sovereign rating reflects the government's large footprint in the economy and weak policy predictability, balanced partially by moderate external vulnerability risk that reflects a persistent, though declining, current account deficit and moderate external debt stock that is on largely concessional terms.

RATIONALE FOR THE CHANGE IN OUTLOOK TO POSITIVE

ONGOING REFORMS TO IMPROVE POLICY EFFECTIVENESS AND INSTITUTIONS

Moody’s expect that the ongoing reforms to enhance institutional framework and governance, if effective, could strengthen policy effectiveness and quality of institutions.

Efforts to improve governance are underway. As of 2024, supervisory boards across all SOEs and state-owned banks (SOBs) have been restructured, with independent board members now comprising 25% of SOE and 40% of SOB boards. The authorities aim to increase this share to over 50% in all SOBs by 2027. To address still weak control of corruption and governance, the authorities have adopted several measures, including the recent enactment of a law on conflict of interest. The law on asset declaration for civil servants and whistle-blower protection are to be under public discussion. Continued improvements in data reporting and transparency will also lead to more informed policymaking, and instill greater confidence in our assessments of policy effectiveness.

The ongoing energy sector reforms demonstrate the government's capacity and commitment to implement further challenging reforms. This includes the liberalization of energy tariffs that led to significant increases in prices in 2024 and 2025, aimed at achieving full cost recovery for electricity and gas by 2027–2028. While the sharp increases in energy tariffs have kept inflation elevated in recent period, the authorities have implemented a series of wage and pension hikes to cushion households from inflationary pressures, while simultaneously reducing energy subsidies for SOEs.

SUCCESSFUL PRIVATIZATION WOULD SUPPORT PRODUCTIVITY GROWTH

Recent measures to privatize large SOEs and banks, if implemented successfully, will lead to further improvements in productivity and competitiveness. This follows privatization of Ipoteka Bank in 2023 along with smaller SOEs and banks. The government plans to privatize two major banks—SQB (JSCB Uzsanoatqurilishban) and Asaka Bank, which account for 11% and 8% of total banking sector assets, respectively, with the aim to reduce the share of state-owned banks in total banking assets from 65% to 46%.

In 2024, the government established The National Investment Fund of the Republic of Uzbekistan, managed by Franklin Templeton, which will hold stakes in 18 major SOEs and banks undergoing privatization. In April 2025, a Presidential Decree outlined the 2025 privatization program, focusing on public offerings of shares in 29 large SOEs. This includes IPOs and SPOs for 12 major SOEs, such as Navoi—the country's largest mining company and top taxpayer, contributing 18% of government tax revenue. If managed effectively, this could create a more level playing field for the private sector and enhance overall productivity and competitiveness.

Moody’s expect the pace of privatization to remain slow and gradual due to a challenging external environment and global uncertainty around US trade policy, which may dampen interest from suitable strategic investors. Improving corporate governance and operational efficiency of SOEs may also delay privatization. That said, Moody’s anticipate the privatization process will continue, with an emphasis on preserving fiscal stability, minimizing social costs, and enhancing governance.

ROBUST GROWTH AND FISCAL METRICS TO SUPPORT RESILIENCE

Uzbekistan's growth rose to 6.5% in 2024, supported by strong consumption and investment. Moody’s expect growth to remain resilient over the medium term. In particular, significant investment in infrastructure—especially in the energy and transportation sectors, aligned with the Uzbekistan 2030 Strategy—is set to drive growth, supported by rising foreign investment. While remittances from Russia are likely to moderate, rising remittance from other countries, particularly Europe and Asia, could partially offset the decline. Moody’s forecast growth at 5.8% in 2025 and 5.7% in 2026.

The affirmation of the Ba3 ratings also takes into account Uzbekistan's relatively low debt burden compared with its similarly rated peers. The fiscal deficit narrowed to 3.3% of GDP in 2024, from 4.9% in 2023, driven by reduction in untargeted energy subsidies, more targeted social spending, and higher gold prices, which helped offset weaker VAT revenues. Moody’s expect the government will keep a fiscal deficit below 3% of GDP over the medium term, in line with 2025-27 medium term fiscal strategy. Public and publicly guaranteed debt is projected to stay just below 40% of GDP over the medium term amid strong nominal GDP growth, narrowing fiscal deficits, and adherence to the annual external borrowing limit. While the majority of the government's debt is foreign currency denominated debt, its debt affordability is very high due to the concessional nature of most outstanding borrowing.