S&P Upgrades Uzbekistan’s Sovereign Rating to ‘BB’ Amid Stable Growth and Reforms

Tashkent, Uzbekistan (UzDaily.com) — On 21 November 2025, S&P Global Ratings upgraded Uzbekistan’s long-term sovereign credit ratings in both foreign and local currency from ‘BB-’ to ‘BB’ with a stable outlook. Short-term ratings were affirmed at ‘B’, while the transfer and convertibility risk rating was raised to ‘BB+’.

The agency notes that the stable outlook reflects a balance between Uzbekistan’s strong economic growth and favorable public debt profile on one hand, and risks related to rising external and fiscal obligations on the other.

S&P warns that ratings could be downgraded if the budget and current account deficits grow faster than expected—for example, due to deteriorating trade conditions, rising government expenditures, increased borrowing costs, or the realization of large contingent government liabilities, as the state sector still holds a significant share of the economy. Negative action is also possible if growth falls significantly below forecasts due to low returns on debt-financed investment projects or the need for substantially higher spending to complete them.

Ratings could be raised if budgetary and external trade deficits decline without undermining economic momentum.

According to the agency, the rating upgrade reflects the consistent strengthening of macroeconomic policies. Since the currency liberalization in 2017, Uzbekistan has promoted market-based pricing mechanisms, increased investments, and gradually reduced the state’s role in the economy. Key measures include energy tariff adjustments, enhanced regulatory oversight, privatization of state assets, and preparations for World Trade Organization accession in 2026.

Although privatization has progressed more slowly than planned and state corporations continue to exert significant influence, the reform agenda, combined with stable consumer demand supported by remittances and rising incomes, is expected to enable the economy to grow at an average rate of 6.3% in 2025–2028.

Ongoing adjustments to electricity and gas tariffs have reduced state support in the energy sector: subsidies fell from US$1.5 billion in 2023 to US$0.8 billion in 2024. While these measures accelerated inflation, they strengthened fiscal resilience.

Record-high gold prices have doubled international reserves between 2023 and 2025. Gold and other metals account for about 40% of the country’s exports. Despite persistent balance-of-payments risks, they are mitigated by concessional external financing, a long debt profile, and a moderate level of external debt.

At the same time, S&P cautions that rapid growth of debt, particularly when investment projects are inefficient, could increase vulnerabilities.

Uzbekistan remains one of the fastest-growing economies in the CIS. Investments account for around 32% of GDP, with growth supported by strong domestic demand. S&P projects that GDP per capita will rise to US$3,500 in 2025, though this remains low by global standards.

The country is actively developing public-private partnership projects, primarily in the energy sector, including green energy. By 2030, the share of renewable sources is expected to rise to 54%, compared to roughly 20% today.

Privatization is progressing slower than planned. Nevertheless, authorities intend to reduce the role of 1,800 state-owned enterprises, while the National Investment Fund (UzNIF), established in 2024, is expected to place shares of major companies and banks on domestic and international markets.

The economy remains sensitive to developments in Russia, which accounts for 78% of remittances and remains a major trading partner. Despite compliance with sanctions, there is a residual risk of secondary EU and US sanctions targeting Uzbek companies interacting with Russia.

Thanks to high commodity prices and tariff reforms, authorities expect to keep the budget deficit at around 3% of GDP. However, total public debt is growing faster than official deficits indicate, partly due to government-sector borrowing and weakening of the net asset position.

S&P forecasts that net government debt will rise to 35% of GDP by 2028, compared with a net asset position in 2017, while 84% of external debt is concessional.

The Central Bank of Uzbekistan is gradually increasing the effectiveness of its policies, although regulatory independence remains limited. Inflation is expected to reach about 9% in 2025 before gradually declining.

Dollarization is gradually decreasing but remains high, with 37% of loans and 25% of deposits denominated in US dollars. The banking sector is supported by stable economic growth but remains reliant on external long-term financing.