S&P Upgrades Ferghana Region’s Credit Rating to ‘BB-’ Amid Stable Growth and Low Debt

Tashkent, Uzbekistan (UzDaily.com) — On 28 November 2025, S&P Global Ratings upgraded the long-term credit ratings of Uzbekistan’s Ferghana Region in both local and foreign currency from ‘B+’ to ‘BB-’, with a stable outlook.

The stable outlook reflects the region’s history of maintaining a balanced budget and a strong debt position, alongside existing risks linked to the limited institutional capacity of local authorities in Uzbekistan. Major fiscal decisions are made by the central government, and regions, including Ferghana, have limited influence over them.

The rating could be downgraded if changes in the relationship between Ferghana and the central government weaken support, negatively affecting budget discipline or debt levels. Conversely, over the long term, the rating could be raised if the institutional environment for local authorities in Uzbekistan significantly improves, enhancing predictability, transparency, and regional influence over central decisions, along with improvements in Ferghana’s financial management.

S&P notes that Uzbekistan’s macroeconomic policies have become more deliberate in recent years. Since the 2017 exchange rate liberalization, structural reforms have focused on market-based pricing mechanisms and attracting investment to reduce the historically significant state role in the economy. Key measures include energy tariff adjustments, strengthened regulatory oversight, privatization of state-owned enterprises, and preparations for World Trade Organization accession in 2026.

Record gold prices doubled Uzbekistan’s international reserves between 2023 and 2025, supporting expected real GDP growth of nearly 6% annually in 2026–2028. Ferghana is likely to directly benefit from these changes, given the central government’s key role in regional financing. The national administration not only provides transfers but directly funds most investments in the regional public sector—over 80% in 2024.

Economic growth in Ferghana is expected to continue over the next two to three years, raising average incomes from historically low levels. In 2024, GDP per capita reached US$1,800, up from US$1,200 in 2019. Growth prospects are supported by ongoing investments, including tourism development, expansion of agricultural exports, and production of cars and farm machinery. Real GDP growth is projected at 6.0–6.5% on average through 2027, with per capita income gradually rising to US$2,500 by 2028.

Ferghana maintains a strong debt position, with only one loan from the central government (less than 0.5% of operating revenue) and no other debt. Under Uzbek law, which is expected to remain unchanged over the next three years, local authorities may borrow only from the central government. The region is expected to maintain a balanced budget and avoid significant borrowing in the next one to two years.

The region’s rating is constrained by high volatility and the centralized institutional system of local and regional authorities. Centralized control limits Ferghana’s ability to influence its budget discipline, and financial management remains relatively weak, with limited planning beyond the current year. Local authorities operate in a highly centralized and unstable institutional environment, and incomes remain low despite recent improvements.

Since 2016, partial decentralization has occurred: more tax revenues now go to local budgets, giving authorities greater discretion in spending above planned levels, such as VAT revenues. However, the effect of these reforms has been partially offset by central government interventions, such as assuming social benefits and investment in schools and kindergartens in 2024.

Financial management capabilities are limited due to the centralized structure and frequent top-down changes. Medium-term planning began in 2018, but discrepancies between forecasts and actual outcomes remain frequent and significant. Debt and liquidity management practices are at an early stage, limiting regional creditworthiness.

Ferghana aims to attract international investment to expand production in key sectors: agriculture, textiles, building materials, and chemicals. The region plans to expand manufacturing, including foreign investment in passenger and agricultural vehicle production. Uzbek laws provide tax incentives and support for investors accessing regional infrastructure and export markets.

There are risks from U.S. and EU sanctions targeting Uzbek companies working with Russia. Some companies dealing in electronics, telecommunications, and defense products have faced sanctions since 2022. Public investigations claim some cotton pulp from Ferghana was supplied to Russia’s military sector, though the Uzbek government ensures compliance with international sanctions.

Ferghana complies with legislation prohibiting budget deficits at the local level. S&P reports that after capital operations, the region had a near-1% surplus in 2024, supported by high personal and corporate income tax revenues. In 2022–2023, the region averaged a post-capital deficit of 0.8%, covered by cash and advances from the central government—51 billion UZS in 2022 and 65 billion UZS in 2023. The post-capital balance is projected to remain positive through 2027.

Revenue sources may be volatile due to frequent central government revisions of taxes, spending, and transfers. For example, in 2025 healthcare expenditures were delegated to the region from cities and districts, with most central transfers directed to Ferghana’s budget to maintain balance.

The region faces significant infrastructure needs, limiting budget flexibility but unlikely to generate substantial debt due to the prohibition on commercial borrowing. Ferghana controls several state-owned enterprises without ownership stakes and has not provided subsidies or capital injections. Subsidized services, such as transportation, are provided by private companies, with costs borne by the central government.

Liquidity remains strong: direct debt consists of only one central government loan due in 2026. If allowed to borrow, debt service coverage could worsen, which is not included in the baseline scenario. Ferghana has limited access to external financing and no experience with non-state borrowing. Uzbekistan’s capital markets and banking sector remain underdeveloped.