IMF Urges Uzbekistan to Accelerate State Sector Reform

Tashkent, Uzbekistan (UzDaily.uz) — The International Monetary Fund (IMF) has called on Uzbekistan to accelerate efforts to reduce the state's role in the economy, saying government involvement remains substantial despite ongoing reforms and privatization programmes.

The IMF said the implementation of the country's state-owned enterprise reform strategy had fallen short of its original objective of significantly reducing the state's presence in the economy.

According to the IMF Selected Issues report, Uzbekistan has gradually shifted its state asset management system from a decentralized to a centralized model since 2019. During that period, the State Assets Management Agency was established and given responsibility for managing state property, privatization, enterprise transformation, corporate governance and monitoring the financial and economic performance of state-owned enterprises.

In 2020, the Ministry of Economy and Finance assumed the role of shareholder for the country's largest and most strategically important state-owned enterprises. During the same period, state-owned companies were required to adopt International Financial Reporting Standards and introduce key performance indicators.

Later, the state-owned company UzAssets was established to manage government shareholdings in the country's largest state-owned enterprises and improve their performance.

The IMF noted that Uzbekistan adopted a strategy for managing and reforming state-owned enterprises for 2021–2025 in 2021. The strategy aimed to reduce the state's presence in competitive sectors of the economy by 75%, introduce the "sell or explain" principle, establish independent supervisory boards, implement competitive selection of senior executives and strengthen corporate governance.

The fund also gave a positive assessment of improvements to the legislative framework. In particular, Uzbekistan adopted the Law on State Property Management in 2023, defining the criteria for state participation in the economy, followed by the Law on Privatization of State Property in 2024, which established the principles of legality, transparency, accountability, equal treatment of participants and anti-corruption measures.

At the same time, the IMF said the practical results of the reforms had been limited. The report said the number of large state-owned enterprises privatized remained small, slowing overall reform progress and improvements in economic efficiency.

Since 2020, Uzbekistan has implemented seven privatization programmes. During that period, the number of state-owned enterprises declined from nearly 3,000 to about 2,000 by the end of 2025. According to the State Assets Management Agency, the country had 1,917 state-owned enterprises as of the end of February 2026.

The IMF said the decline resulted from the privatization of 515 enterprises, the liquidation of 1,313, the reorganization of 757, and the transfer of 260 enterprises into the charter capital of other organizations or public-private partnership projects. At the same time, companies belonging to large state-owned holding groups that had previously not been counted because they were not directly state-owned were added to the list of state-owned enterprises.

The IMF described the results of privatization as moderate. Total proceeds from the sale of state assets amounted to about US$2.5 billion during 2021–2024. Most of the revenue came from the sale of small state-owned enterprises, non-agricultural land and real estate assets, mainly to domestic buyers.

Among the most significant transactions, the IMF highlighted the privatization of Coca-Cola Bottlers Uzbekistan, the Ferghana Oil Refinery and Ipoteka Bank, which attracted foreign investors. Privatization was most active in the energy sector, banking, the chemical industry, construction materials manufacturing and the hotel business.

However, the IMF noted that many strategic enterprises remain fully state-owned. It cited the ongoing transformation of Uzbekistan Railways, Uzbekistan Airways and Uzbekistan Airports, unresolved structural issues including delays in electricity and gas price liberalization, the strategic importance of certain companies, and external factors related to the geopolitical situation and changes in global trade.

The fund also pointed to the limited diversification of the investor base, particularly the relatively low participation of foreign companies capable of bringing new technologies, management practices and investment.

The report also examined the National Investment Fund of Uzbekistan (UzNIF), established in 2024 and placed under the management of Franklin Templeton. Shareholdings of between 25% and 40% in 12 large non-financial state-owned enterprises and one financial institution were transferred to the fund. The IMF said the fund could improve corporate governance, transparency and the investment attractiveness of these companies but could not replace comprehensive state sector reform.

As further steps, the IMF recommended that Uzbekistan adopt a transparent state ownership policy defining which enterprises should remain state-owned, which should be privatized and which should be liquidated.

The fund said profitable state-owned enterprises operating in competitive sectors should be privatized in line with international best practices, while loss-making enterprises should be liquidated with appropriate social support measures for affected employees.

For strategic enterprises that remain under state ownership, the IMF recommended strengthening corporate governance, ensuring the independence of supervisory boards, eliminating overlapping responsibilities among government bodies, achieving market-based returns and fully compensating public service obligations through the state budget.

The IMF also highlighted the state's significant share of the banking sector. According to the report, state-owned banks account for about 63% of the country's banking assets, compared with an average of about 23% in middle-income countries. The fund said such a high level of state ownership in the commercial banking sector could create additional risks for both the financial system and the state budget.

The report also noted that about 84% of state-owned enterprises operate in competitive sectors of the economy, including agriculture, services, tourism, pharmaceuticals and retail trade.

At the end of 2024, the combined assets of state-owned enterprises were equivalent to 101% of the country's gross domestic product. Only 982 of the country's 2,148 state-owned enterprises, or 46%, were profitable.

The largest losses were recorded in the electricity, housing and utilities, and water sectors, while the mining industry generated about 80% of dividend revenues paid into the state budget.

According to the IMF, the state continues to generate relatively low returns from a significant share of the assets it owns.