Moody’s has upgraded Uzbekistan’s sovereign rating outlook from “stable” to “positive,” following a similar move by S&P, while maintaining the country’s Ba3 sovereign rating. The agency highlighted that Uzbekistan still trails its peers with similar ratings in areas like voice and accountability, rule of law, and control of corruption.
On June 13, Moody’s announced the affirmation of Uzbekistan’s Ba3 sovereign rating and the shift in outlook to “positive.” Last month, S&P also revised Uzbekistan’s sovereign credit rating outlook from “stable” to “positive” for the first time, The Caspian Post reports citing Kun.uz.
According to Moody’s, the successful implementation of the Uzbek government’s ongoing reforms could enhance the quality of the country’s institutions over time. The agency highlighted that the government’s privatization program, if executed effectively, could boost growth trends. Combined with fiscal prudence, these reforms could strengthen economic stability in the medium term and unlock Uzbekistan’s full growth potential.
The Ba3 rating reflects Uzbekistan’s relatively diversified economy, robust growth prospects driven by favorable demographics, and a moderate debt burden, primarily on concessional terms. However, these strengths are tempered by low per capita income, limited competitiveness, institutional weaknesses (despite improvements), and moderate political risks, according to the agency’s statement.
Reasons for the positive outlook
Moody’s cited several factors for upgrading Uzbekistan’s sovereign rating outlook to “positive”:
- Governance Improvements: As of 2024, the share of independent members on supervisory boards reached 25% in state-owned enterprises and 40% in state-owned banks.
- Anti-Corruption Measures: The “Conflict of Interest” law has been enacted. Laws on asset declaration for public officials and whistleblower protection are expected to be put forward for public discussion. Progress has also been made in transparency and information disclosure.
- Energy Sector Reforms: Reforms in 2024 and 2025, which led to significant price increases, demonstrate the government’s capacity and commitment to implementing complex reforms. These aim to achieve self-sufficiency in electricity and gas supply by 2027-2028.
- Privatization Efforts: Successful privatization of state-owned enterprises could enhance economic efficiency and competitiveness.
Analysts noted, however, that privatization is expected to proceed gradually due to complex external conditions and global uncertainties, such as U.S. trade policies, which may reduce interest from strategic investors. Improving corporate governance and operational efficiency in state-owned enterprises could also delay privatization.
Basis for the Ba3 rating
Moody’s justified the Ba3 rating with Uzbekistan’s positive macroeconomic indicators and relatively low debt burden. Although most public debt is in foreign currency, its largely concessional nature provides significant borrowing capacity.
However, the broader public debt, including non-guaranteed loans by state-owned enterprises and public-private partnership (PPP) obligations, is rising. In recent years, major state-owned enterprises have increased external borrowing to diversify funding sources and assess market valuations ahead of potential privatization. PPP obligations reached 27% of GDP in 2024, mainly tied to energy and infrastructure projects. Moody’s anticipates that broader public debt will continue to grow over the next two to three years, posing risks of contingent liabilities.
The government is refining its system for assessing risks from state-owned enterprises and PPPs. For instance, it recently announced that new PPP commitments in 2025 will not exceed $6.5 billion. Additionally, all state-owned enterprises must now obtain government approval for external financing, helping to moderate the rapid growth of foreign currency obligations. The risk of contingent liabilities is partially mitigated by significant assets in Uzbekistan’s sovereign wealth fund, the Fund for Reconstruction and Development.
The Ba3 rating also reflects low per capita income, limited competitiveness, and institutional weaknesses. High dollarization, restricted interbank market operations, and shallow domestic capital markets constrain the transmission of monetary policy. Despite some improvements, Uzbekistan continues to lag behind peer Ba3-rated countries in voice and accountability, rule of law, and control of corruption.
The rating further accounts for moderate political risks, as more complex reforms, such as large-scale privatization, could entail economic and social costs, potentially slowing progress and increasing business environment uncertainties. Geopolitically, Russia’s invasion of Ukraine and its potential influence in Europe and the CIS have heightened risks, raising the possibility of shifting political alliances in Central Asia and beyond. Despite strong ties with Russia, Uzbekistan has sought to maintain a neutral stance since the conflict began.
Factors that could affect the rating
Moody’s analysts indicated that confidence in Uzbekistan’s reforms leading to improved political effectiveness and institutional quality could result in a rating upgrade. Enhanced economic competitiveness, successful privatization of major state-owned companies and banks, and sustained fiscal stability while avoiding sharp increases in social spending could also support an upgrade.
Given the “positive” outlook, a downgrade in Uzbekistan’s sovereign rating in the near future is highly unlikely. However, significant deviations from economic reforms, possibly due to domestic political or social pressures, could prompt Moody’s to revert the outlook to “stable.” Fiscal challenges arising from state-owned enterprises or PPP obligations could also lead to a downgrade. The nature of potential external risks remains unpredictable.
