Fitch Upgrades Uzbekistan's Outlook to Positive, Keeps 'BB' Rating

Tashkent, Uzbekistan (UzDaily.com) — Fitch Ratings revised Uzbekistan's credit outlook to Positive from Stable on Wednesday, reflecting what the agency described as meaningful progress in structural reforms and a strengthened macroeconomic policy framework. The long-term issuer default rating was affirmed at 'BB'.

The revision marks a vote of confidence from one of the three major global credit agencies in Tashkent's economic management, coming amid a broader reform program that has accelerated privatisation, tightened fiscal discipline, and pushed inflation toward a single-digit target.

Growth and Fiscal Performance

Fitch projected Uzbekistan's GDP growth at 6 percent in 2026, moderating slightly from recent years, before recovering to an average of 6.4 percent in 2027–28. The agency acknowledged some uncertainty tied to the ongoing Iran conflict — around 8 percent of Uzbekistan's imports and 4 percent of its exports transit Iranian ports — but assessed the direct impact on growth as limited, with alternative trade routes under development.

The consolidated budget deficit for 2025 came in at 2.1 percent of GDP, well below the statutory ceiling of 3 percent, supported by broad revenue outperformance. Direct and indirect taxes ran roughly 11 percent above plan, while non-tax revenues including government dividends and interest income exceeded budget projections by 35 percent, partly lifted by elevated gold prices.

"The consolidated budget deficit for 2025 at 2.1% of GDP was lower than the 3% ceiling, supported by broad-based revenue overperformance." — Fitch Ratings

Reserves and External Position

Foreign exchange reserves rose sharply in 2025, reaching $66 billion at year-end against $41.2 billion at end-2024, a gain driven largely by the rise in gold prices, which underpin roughly 83 percent of reserve assets. Fitch projected reserves would climb further to $71 billion in 2026, providing reserve coverage of approximately 12 months of current external payments — nearly 2.5 times the median for 'BB'-rated peers.

Uzbekistan maintained a net external creditor position estimated at about 21 percent of GDP in 2026, a figure Fitch described as favorable relative to the 'BB' peer median, despite declining from around 44 percent in 2020 as investment-driven imports expanded.

Reforms and Privatisation

The reform agenda highlighted by Fitch includes a reduction in state-owned enterprise concentration and accelerated asset sales. From 2021 through 2025, approximately $5.1 billion in state assets were privatised, including $1.6 billion in 2025 alone. In May 2026, the National Investment Fund — holding stakes in key state enterprises — was listed on international capital markets, a target the government had publicly committed to.

Energy subsidies are projected to fall to around 0.3 percent of GDP in 2026, down from roughly 1.4 percent in 2023, as the government continues to phase out below-market pricing in the sector.

Inflation and Monetary Policy

Headline consumer price inflation stood at 7 percent year-on-year in April 2026, down from 10.1 percent in the same month a year earlier, yet still above the Central Bank of Uzbekistan's medium-term target of 5 percent. The central bank has held its benchmark policy rate at 14 percent since March 2025 as it continues to phase in a formal inflation-targeting regime. Deposit dollarisation declined to around 21 percent in February 2026 from approximately 40 percent in early 2020, easing — but not eliminating — constraints on monetary policy transmission.

Key Risks

Fitch identified several factors that could reverse the Positive outlook. A stall in structural reform momentum, a significant drop in remittances — which originate approximately 70 percent from Russia — a sustained fall in commodity prices, or a material widening of the fiscal deficit could individually or collectively put downward pressure on the rating. Government debt, though projected to decline to around 28 percent of GDP in 2027–28, remains predominantly denominated in foreign currency, leaving public finances exposed to sharp exchange rate movements.

Governance indicators remain a credit constraint. Uzbekistan placed in the 33rd percentile of the World Bank Governance Indicators, receiving an ESG Relevance Score of 5 — the highest weighting — for political stability, rule of law, and control of corruption. Fitch noted these factors have a negative impact on the credit profile.

Upgrade Path

The agency outlined conditions under which the rating could be raised to 'BB+': sustained implementation of structural reforms that entrench macroeconomic stability and stronger growth, a marked and durable improvement in governance standards, and continued fiscal consolidation that improves long-term public debt sustainability.