Uzbekistan Faces US$40 Billion Water Crisis by 2040

Tashkent, Uzbekistan (UzDaily.com) — Uzbekistan is racing to avert a water crisis that could cripple its economy within 15 years, as government officials, private investors and international experts gather to coordinate responses to growing demand and shrinking supplies in a region already under severe environmental stress.

Analytical data presented at the Tashkent International Investment Forum show that national water demand will rise 23% over the next two decades driven by population growth and economic expansion, while available water resources are forecast to fall 17% by 2040. Under the worst-case scenario, the combined shortfall could reach 22 billion cubic metres per year.

"Without improving water use efficiency, we cannot achieve our goals," said Nuriddin Kushnazerov, an adviser at the Ministry of Agriculture, during a panel session on water, energy and food security. "This is an emergency."

The stakes are immense. Agriculture accounts for 19% of gross domestic product, employs millions of people and consumes 90% of the country's water. The government aims to increase agricultural output from US$40 billion to US$60 billion by 2030 — a 50% rise — even as climate change threatens the glacier-fed river systems that supply much of that water.

A harsh calculation

Water inflows are declining by roughly 2% per year, while demand grows by 1% annually. That trajectory is unsustainable over the long term, said Dr Shihab Albarai, a consultant specialising in sustainable resource management.

"Something has to change," he said, noting that water productivity — measured as economic output per cubic metre — lags far behind global averages. Uzbekistan generates less than US$3 of economic value per cubic metre of water, compared with a global average of around US$23.

That gap represents both a challenge and an opportunity. Analysts estimate that current water-use inefficiencies cost the economy US$5 billion, while closing the supply gap will require US$40 billion in infrastructure investment.

Sharing the burden

The government has already committed to deploying water-saving technologies across 4.63 million hectares by 2030, up from the current 2.5 million hectares. The programme covers drip irrigation, sprinkler systems and laser land levelling, though officials acknowledge the rollout must accelerate.

Rami Gandour, chief executive of Mitito Utilities — a water and wastewater treatment company operating in 46 countries — said the private sector was ready to provide solutions but was encountering bureaucratic obstacles. His company signed what he described as the first public-private partnership agreement for wastewater treatment in the post-Soviet region, in the city of Namangan.

One concrete opportunity lies in replacing ageing irrigation pumps. Around 1,800 large pumps, most installed during the Soviet era 40 to 50 years ago, account for 16% of the country's total electricity consumption. Upgrading them would halve their energy use, saving roughly 8% of national electricity output — a project that would pay for itself through energy savings alone.

"The private sector is ready," Gandour said. "There is no shortage of investment appetite."

Beyond agriculture

The water shortage extends well beyond irrigation. Cities across the region are expanding rapidly, adding pressure to supply systems. Joachim Fritz, country director of GIZ, the German development agency, said groundwater management had received insufficient attention.

A digital groundwater monitoring system in Tashkent tracks around 3,000 wells, measuring water quality and extraction volumes. Fritz said similar systems should be deployed across the broader region to establish baseline data and ensure sustainable extraction rates.

Water quality remains a persistent problem. Upstream countries release water to downstream neighbours, but its quality frequently deteriorates in transit. Regional monitoring systems could improve accountability and underpin evidence-based policy, he added.

The coordination problem

Several government agencies — the ministries of agriculture, energy, ecology and geology — oversee aspects of water management but often operate without adequate coordination. The Drought Institute, a regional body headquartered in Budapest, is helping to align those efforts, though officials say deeper institutional integration is needed.

"Governments cannot solve this alone," said Bolash Henrik, ambassador and executive director of the institute. "Academia cannot solve it alone. The private sector cannot solve it alone."

Ahmed Raza, a senior policy officer at the Food and Agriculture Organisation of the United Nations, said water management was inseparable from climate change, biodiversity loss and land degradation. Around 80% of Uzbekistan's territory shows signs of degradation, costing approximately 5% of gross domestic product each year.

The FAO is working with the government to scale regenerative agriculture practices, water-saving technologies and crop diversification. Pilot projects in areas such as Kitab have demonstrated the viability of greenhouse farming for smallholders and conservation tillage methods.

"We need to scale some of these approaches," Raza said.

The price of water

Among the most contentious issues is water tariff reform. Gandour argued that the government should charge consumers the full cost of water delivery and treatment — even if it chooses to subsidise certain groups separately through direct payments.

Subsidising water prices, he said, encourages wasteful consumption by concealing the true scarcity of the resource. "If people do not pay for water, they do not use it in an economically rational way," he said.

Kushnazerov acknowledged the difficulty. Energy costs already represent about 40% of agricultural production expenses. Adding higher water charges on top of that burden could threaten the viability of farming operations. The government is exploring a phased transition to full-cost pricing while supporting the agricultural sector through other means.

Investment appetite

International financial institutions have signalled strong willingness to fund water projects. The Uzbekistan Economic Empowerment Fund, a US$100 million vehicle managed by SEAF (Small Enterprise Assistance Funds), deployed more than 80% of its capital to local financial organisations serving small and medium-sized enterprises in its first year.

The fund is backed by the Saudi Fund for Development, ACWA Power and the Islamic Development Bank — a combination that analysts say reflects Gulf investors' view of water efficiency as both an economic and a strategic priority in Central Asia.

Experts said investor interest would hold if the government maintains policy consistency, streamlines environmental permitting and focuses on projects that deliver tangible results even if they fall short of ideal solutions.

"Let us not get stuck looking for a 100% solution," Gandour said. "Let us focus on moving forward and ensuring the water volumes that are available."

With an Islamic banking law taking effect in June and water infrastructure projects advancing through planning stages, the next 18 months will be critical in determining whether Uzbekistan can take control of its water future or face a deepening shortfall.