Investing in Uzbekistan: an honest risk assessment

Most writing about Uzbekistan for foreign investors is promotional. That is understandable; the growth is real. But a sophisticated investor does not decide on growth. They decide on the risk they are being paid to take, and on whether it can be managed. This note sets out the principal risks as they appear in the data, how they have been moving, and what investors typically do about them.

We have ordered them roughly by how often they matter in practice, not by how dramatic they sound.

1. Inflation and the currency

Uzbekistan’s inflation history is the first thing to understand. Consumer price inflation averaged 17.5% in 2018 after the exchange-rate liberalisation, 10.0% in 2023, 9.6% in 2024 and 8.8% in 2025. The central bank reported annual headline inflation of 6.2% in August 2026 and core inflation of 5.5%. It has held its policy rate at 14% since March 2025 and says it intends to maintain tight conditions until inflation reaches its 5% target, which it expects by the end of 2027. It also warns that continued liberalisation of regulated prices can generate second-round effects.

Source: World Bank, World Development Indicators.

What it means. The direction is favourable; the level is still well above that of developed markets and above the 3.0% global average for 2025. For a foreign investor the key questions are how revenues are denominated, how costs are indexed, and which currency the funding is in. Dollar-linked revenues against local-currency costs, or the reverse, are the typical sources of unpleasant surprises.

2. A large state footprint

The state remains a major actor. The OECD estimates that about 2,800 state-owned enterprises under direct central government control account for approximately half of GDP, 18% of employment and 20% of exports. In banking, institutions with state participation held about 64.5% of total banking assets at the end of 2025, and a draft revision of the national strategy targets 55% by 2030, with the number of state-owned banks falling from nine to four.

Reform is under way but not fast. State-linked banks still hold about 64.5% of assets, which means non-state banks hold roughly 35%, and analysts have noted that privatisation of banks may take longer than first expected. A privatisation decree in April 2025 instructed the sale of 29 state enterprises in 2025–2026 and public offerings of 12 large ones, and a Hungarian bank bought a 73.7% stake in the fifth-largest lender, Ipoteka Bank, for $324 million in 2022. The IMF’s 2026 assessment concludes that reform needs to clarify the state’s ownership role and reduce its presence in competitive sectors.

What it means. A large state sector means that many counterparties, customers and competitors are state-linked, that credit is allocated partly on non-commercial criteria, and that sector regulation and ownership interact. It can also create opportunity, because privatisation is a pipeline.

3. Energy security

Energy is the risk that investors in manufacturing and data-intensive businesses should examine most carefully. Domestic gas production fell about 15% in the first quarter of 2026, while spending on gas imports rose 2.2-fold to about $360 million; Russian gas deliveries reportedly rose by about 30% in 2025 to more than 7 billion cubic metres, and gas exports fell. The Ministry of Energy reports that forced curtailment of consumption has fallen from about 4 billion kWh in 2013 to roughly 357 million kWh in 2024, which is a real improvement, although winter shortages in 2022 cut around 2 billion kWh.

Against that, solar and wind capacity exceeded 6,300 MW at the end of 2025, with at least 7 GW of solar and 12 GW of wind targeted for 2030.

What it means. Supply of power and gas is the variable that most directly affects the operating assumptions of a plant. Site selection, back-up generation, on-site solar and contracts with explicit supply commitments are standard mitigants, and the sectors that help to relieve the constraint are themselves investable (see our note on ten industries growing quietly).

4. Dependence on remittances and on gold

Two external dependencies are worth noting. Remittances were equivalent to 14.4% of GDP in 2025 (World Bank), supporting household consumption but linking it to labour markets abroad, notably in Russia. On the goods side, gold represented about 44% of exports in January–May 2025 according to national statistics reported in the press, and Russia accounted for 10.8% of exports in the same period. Total exports are only 22% of GDP, so concentration is a feature of a small export base.

What it means. Shocks to commodity prices, to Russian demand or to labour migration policy transmit quickly to the balance of payments and to consumer spending. Investors in consumer-facing businesses should stress-test demand against a slowdown in remittances.

5. Governance and institutions

On Transparency International’s Corruption Perceptions Index, Uzbekistan scored 31 out of 100 in 2025, down from 32 in 2024 and a peak of 33 in 2023, having risen every year from 17 in 2013. Its rank in 2025 was around 124th out of roughly 180 countries; sources differ slightly on the exact figures. The long improvement reflects real steps, including an anti-corruption agency and legislative changes, but the recent flattening is a reminder that progress is not automatic.

On legal protection, the picture is mixed. Uzbekistan has acceded to the New York Convention and ICSID and has signed bilateral investment treaties, and the investment law guarantees the free transfer of funds. But the statutory dispute process for investment disputes can require the exhaustion of local remedies, and international arbitration against a state generally depends on a treaty or a specific agreement.

What it means. Institutional risk is mitigated by structure and contract, not by hope. See our guide to setting up in Uzbekistan for the treaty and holding-company points.

6. Regulatory and tax change

Rules change often, and incentives can be revised. The clearest recent example is the free economic zones. For years residents were promised corporate income tax exemptions of several years, but according to EY, from 1 April 2026 accelerated depreciation replaced the exemption for special-zone residents. The same package limited incentives by presidential decision to accelerated depreciation, raised the corporate rate for e-commerce businesses from 10% to 15% and introduced an AI-based risk rating of VAT invoices.

What it means. Treat incentives as terms to be documented, not as facts about the country. Obtain written confirmation of the regime that applies to your project, seek stabilisation provisions where available, and build downside scenarios without the incentive.

7. Geography and the cost of connection

Uzbekistan is one of only two doubly landlocked countries, which raises logistics costs and exposes trade to transit decisions in neighbouring countries. Major infrastructure projects such as the China–Kyrgyzstan–Uzbekistan railway are intended to change that, but they are years from completion.

What the risk premium looks like in the ratings

Fitch affirmed Uzbekistan at BB in June 2026 and raised the outlook to positive, noting low government debt of around 32% of GDP, against about 54% for BB-rated peers. A BB rating is below investment grade, which implies a risk premium; the positive outlook implies the direction is favourable. Ratings are a view of the sovereign, not of any project, but they offer a useful sense of how an external analyst weighs the factors above.

How experienced investors manage these risks

• Structure. Hold the investment through a company in a jurisdiction that has investment and tax treaties with Uzbekistan, so that dispute-resolution and withholding outcomes are better defined.
• Contracts. Include clear governing-law and arbitration clauses, stabilisation provisions where possible, and supply commitments for power and gas.
• Pricing and funding. Match the currency of revenues, costs and funding, and index prices where legal.
• Staging. Commit capital in stages tied to milestones, permits and regulatory confirmations.
• Counterparties. Run enhanced due diligence on state-linked partners and on beneficial ownership.
• Local advice. Retain local legal and tax counsel and monitor changes continuously.

A balanced conclusion

None of these risks is a reason to stay away, and none should be dismissed. The sensible reading is that Uzbekistan offers a rare combination of scale, growth and reform momentum, and that it also has the vulnerabilities of a market in transition. That combination is what a risk premium is for. The investors who do well are usually the ones who understood precisely which risks they were being paid to bear.

This article is for general information and does not constitute investment, legal or tax advice. Ratings, rankings and statistics are as reported by the cited sources on the dates shown and may change.