Tashkent, Uzbekistan (UzDaily.com) —  The rating agency S&P Global Ratings has confirmed the long-term credit ratings of Ferghana region, Uzbekistan, at "B+" in both local and foreign currencies. The outlook remains stable.

The basis for this decision lies in legislative restrictions that prohibit local authorities (LRGs) in Uzbekistan from taking out commercial loans or running a budget deficit.

The region is characterized by low debt, which is entirely covered by the central government of Uzbekistan, and a balanced budget. However, per capita income in the region remains low, although it is showing growth.

The stable outlook reflects expectations that Ferghana region will maintain a balanced budget and continue to receive transfers from the central government. The agency also assumes that the region will not have debts to commercial creditors, as this would require changes to national legislation.

The rating may be downgraded if support from the central government weakens, which could lead to a deterioration in budget indicators. Risks are also associated with a possible increase in debt obligations, which may negatively affect liquidity.

The rating may be upgraded if the institutional framework within which Ferghana region operates improves, or if per capita income significantly increases. A substantial improvement in financial management and policy could also serve as a basis for an upgrade.

Ferghana region continues to meet national requirements for maintaining a balanced budget and avoids commercial borrowing. According to S&P Global Ratings' base case forecast, the existing debt from loans provided by the central government will decrease as it is repaid.

The rating is limited by the centralized and unstable nature of Uzbekistan’s institutional structure, where key decisions are made at the central government level. Additionally, the region's income level remains low, with per capita GDP estimated at approximately $1,700 in 2024.

Local authorities in Uzbekistan have limited influence on central government policy, making the region vulnerable to changes. Since 2016, there has been gradual decentralization, but key decisions still rest with the central government. For instance, in 2024, it took on financing for child welfare benefits, support for the needy, and investments in school and kindergarten construction, which led to a 50% reduction in regional investments.

The region’s economy is focused on less productive sectors, such as agriculture. However, local authorities are striving to attract foreign investment, including projects in agricultural machinery and car production. Regional tax incentives and infrastructure support provide favorable conditions for investors.

Ferghana region complies with national legislation that prohibits a budget deficit. According to S&P Global Ratings, in 2022-2023, the region showed a deficit after capital accounts averaging 0.8%, covered by advances from the central government. The total debt remains low, and the region has no commercial loans.

Although the region has significant infrastructure needs, they are unlikely to lead to a substantial increase in debt due to legislative restrictions. Liquidity remains stable due to support from the central government.