TOPIC OF THE WEEK: Uzbekistan’s fiscal reset gains traction
I have in the last two weeks combed through the almost 200-page 2027-2029 Fiscal Strategy (in Uzbek only) released by the Uzbek Ministry of Economy and Finance. It has been a laborious, yet worthwhile exercise.
My key takeaway is that Uzbekistan is turning fiscal discipline from a one-off correction into a policy trend. The 2027–2029 fiscal blueprint keeps the headline gap at 3% of GDP, but the underlying fiscal stance is actually tighter. Uzbekistan has now moved to a broader fiscal-deficit concept starting from this year, designed to capture some government financing operations that previously sat outside the headline consolidated-budget balance. This generally gives a more comprehensive picture of the government's fiscal stance. Hence, on a like-for-like basis with the old methodology, the deficit would be closer to 2.2% of GDP in 2026 and around 2.7% thereafter. This marks a clear break with 2021–2023, when pandemic spending and the political cycle repeatedly pushed deficits above plan. Since 2024, tariff subsidy reform, tighter control of discretionary spending and greater restraint on wage and pension giveaways have put the fiscal story on a more credible footing.
The apparent revenue weakness in 2027 is mostly a normalization and not a deterioration story. State-budget revenues are forecast to rise to UZS 439.7trn in this year, 19% above the originally passed 2026 budget, supported by higher-than-anticipated GDP growth and very favorable gold and copper prices. The 2027 forecast deliberately lowers revenues in nominal terms to UZS 422.3trn as commodity assumptions turn more conservative, while keeping the revenue-to-GDP ratio stable at 17.1% until 2029. That creates upside risk if metals prices stay high. At the same time, the government is betting heavily on formalization and digital tax administration, aiming to shrink the unobserved economy and raise cashless payments rather than rely on a higher tax burden.
The genuine consolidation story is happening on the spending side. Expenditures are expected to fall from 20.9% of GDP in 2026 to 18.4% in 2027 and remain around that level through 2029, despite continued nominal growth in spending. The key driver is the unwinding of the expensive energy and low-tariff subsidies, alongside a gradual decline in the wage bill and social spending as a share of GDP. Subsidies are projected to fall from 2.5% of GDP in 2023 to just 0.9% by 2029, while support is increasingly pushed in the direction of vulnerable households and higher-quality social and economic programs. The emphasis is shifting from simply spending less to spending better.
One thing I would flag negatively is that without sovereign amortization figures, the current Fiscal Strategy does not allow investors to calculate 2027–29 gross financing needs, which is a meaningful disclosure gap. Still, I suspect that the reduced level of detail reflects the timing of the document (it was published much earlier this year) and the division of roles between the Fiscal Strategy and the annual Budget Law, rather than a deliberate decision to reduce financing transparency.
For investors, the main medium-term message should be one of lower fiscal risk. Uzbekistan’s fiscal story is increasingly one of normalization without austerity: deficits are being contained, subsidies are being unwound, and spending is being compressed relative to GDP rather than cut outright. As always, the remaining question is not direction, but execution—particularly how consistently the government can preserve discipline when commodity prices, geopolitics or the political cycle turn less favorable.
Now read on...
Register to sample a report