IMF Warns State-Owned Enterprises Pose Budget Risks in Uzbekistan

Tashkent, Uzbekistan (UzDaily.uz) — Only 46% of Uzbekistan's state-owned enterprises were profitable in 2024, while the remainder were loss-making, inactive, undergoing liquidation or did not disclose their financial results.

The findings are contained in the International Monetary Fund's Selected Issues report, which assesses the financial condition of state-owned enterprises and the fiscal risks associated with them.

Citing data from the State Assets Management Agency, the IMF said 982 of the country's 2,148 state-owned enterprises were profitable last year.

The mining sector made the largest contribution to profits as a share of gross domestic product. The oil and gas industry, along with the banking and financial sector, recorded substantially lower contributions. The electricity, housing and utilities, and water sectors posted the largest losses.

The IMF said losses in these sectors were partly linked to the provision of public services for which costs are only partially reimbursed or not compensated at all.

The structure of dividend payments to the state budget also reflects the government's heavy reliance on the mining sector. According to the IMF, about 80% of dividends from state-owned enterprises in 2024 came from mining. The oil and gas sector accounted for 9.5%, while all other profitable sectors together generated only 10.5% of dividend income. The fund said this indicates low returns on a significant share of state-owned assets.

The IMF also analyzed the financial position of 21 of the country's largest non-financial state-owned companies that publish audited financial statements prepared under International Financial Reporting Standards. Their combined assets were equivalent to about 48% of gross domestic product.

The assessment examined profitability, liquidity and solvency indicators. Between 2021 and 2023, four companies consistently remained in the low-risk category, mainly representing the mining sector. Seven enterprises, primarily operating in the electricity, gas and chemical industries, were classified as high risk. Another 10 companies remained in the moderate-risk category, mainly because of high debt levels and insufficient liquidity.

According to 2024 data, the financial position of 16 of the 21 companies improved compared with the previous year. The IMF attributed this mainly to the significant increase in regulated electricity and natural gas tariffs introduced in May 2024, which improved the performance of three companies in the energy and gas sectors.

Overall, the fund described developments between 2021 and 2024 as a moderate improvement. Of the 15 companies for which data were available throughout the period, risk indicators improved for six and deteriorated for three. Five of the six companies showing improvement operate in the electricity and gas sectors.

The IMF also noted that state-owned enterprises continue to receive various forms of government support, including budget subsidies, external loans channelled through the government, financing from the Fund for Reconstruction and Development, bank loans and state guarantees.

The report also pointed to non-financial forms of support, including exemptions from legislation governing market discipline, as well as preferential access to land resources and public procurement.

Although government support as a share of gross domestic product has gradually declined due to tighter eligibility conditions, the IMF said the continued existence of "soft budget constraints" still weakens incentives for enterprise management to improve efficiency and undertake restructuring.

The report also highlighted the lack of a clear distinction between the commercial activities of state-owned enterprises and their public service obligations, making it difficult to assess their performance. According to the IMF, such obligations should be clearly defined, assessed and fully compensated through the state budget.

Among other issues, the IMF identified the absence of requirements for state-owned enterprises to achieve market-based returns, the continued existence of legislative exemptions that provide them with advantages, and insufficient separation of ownership responsibilities among the State Assets Management Agency, sector ministries and local authorities.

The fund also pointed to limitations in the corporate governance system. It said supervisory boards of state-owned enterprises lack sufficient autonomy because of the limited number of qualified independent directors and restricted powers, while corporate governance principles are applied inconsistently.

In the area of transparency, the IMF noted inconsistencies in the structure of the state-owned enterprise register, the absence of a clear definition of a state-owned enterprise and the lack of centralized monitoring of privatization programmes. It also said ensuring that all state-owned enterprises prepare audited financial statements under International Financial Reporting Standards remains an unresolved challenge.

According to the IMF, about 84% of state-owned enterprises operate in competitive sectors of the economy, including agriculture, services, tourism, pharmaceuticals and market trade, where the need for state ownership requires further justification. The assets of state-owned enterprises were equivalent to 101% of the country's gross domestic product at the end of 2024.

The report also cited data from Fitch Ratings showing that Uzbekistan privatized approximately US$5.1 billion worth of state assets between 2021 and 2025. According to the agency's preliminary estimate, privatization reached US$1.6 billion in 2025 alone.