Uzbekistan Explores Islamic Finance and New ESG Bond Issuance to Diversify Debt

Tashkent, Uzbekistan (UzDaily.com) — Uzbekistan, the second-largest economy in Central Asia, is seeking to diversify its issuance of government debt instruments following successful entries into the green and sustainable bond markets, Bloomberg reports.

The country’s dollar-denominated bonds have yielded nearly 14% this year, significantly above the average of under 10% for emerging and frontier markets tracked by Bloomberg.

Until 2016, the most populous nation in the region was largely isolated from global markets. Under President Shavkat Mirziyoyev, Uzbekistan has gradually opened up through reforms, including adopting a floating currency exchange rate, while benefiting from rising gold prices.

In May 2024, Uzbekistan issued a €600 million (US$700 million) sustainable bond, followed by a €500 million issuance this year, as well as a soum-denominated green bond in 2023.

According to Jasur Karshibaev, advisor to the Minister of Economy and Finance, the government plans to continue expanding this practice.

"We are preparing regular ESG reports and plan to further develop such financing," Karshibaev said in an interview in Tashkent. The government is also exploring Islamic finance, with work underway to develop the corresponding legal framework.

Uzbekistan demonstrates one of the highest economic growth rates in the region, with GDP increasing by 7.2% in the first half of the year. Authorities aim to double industrial output to US$200 billion by 2030, narrowing the gap with Kazakhstan. Investor interest is also growing through bond issuance and privatization plans.

Legislative changes are being pursued to expand non-resident access to local bonds. The government also plans to diversify the debt structure: about 65% in US dollars, over 10% in soms, and the remainder in euros, yen, and yuan.

"We pay special attention to developing the domestic market, as it remains the most reliable source of funding," Karshibaev emphasized.