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The Investor Uzbekistan 2023  I  Finance  I  Analysis



The impacts of the COVID-19 pandemic, climate change, the war in Ukraine, and shifts in global production patterns have changed how multinational corporations think about their global investment strategies. In this context, the Government of Uzbekistan is working with international partners such as the World Bank on preparing its strategic vision and specific objectives for attracting FDI, identifies sectors with high growth potential for FDI attraction, and implement an ambitious reform program to help maximize the contribution of FDI to the country’s overall economic development goals. The goal is to reach U$100 billion in GDP within five years. This is expected to cut the poverty rate in half and increase GDP per capita to U$2,800.


The new strategy will leverage the government’s past successful reform programs aimed at improving Uzbekistan’s investment climate and focus on priority areas for future reforms, as: modernizing investment legislation; streamlining investment incentives; enhancing the investment climate in priority sectors; strengthening investment promotion, including related institutions and processes; and leveraging the full potential of SOEs privatization and public-private partnerships (PPPs) for FDI attraction.


Uzbekistan’s banking sector accounted for 60.6% of the country’s GDP in 2021. Currently, the banking sector of Uzbekistan is represented by 33 commercial banks, being 12 state-owned banks (4 purely state-owned and 8 partly state-owned banks), and 21 others (10 joint-stock commercial banks, 6 banks with foreign ownership, and 5 private banks). Uzbekistan has the largest number of operating banks among other Central Asia countries, for instance, Azerbaijan – 26, Kyrgyzstan – 23, Kazakhstan – 22, Tajikistan – 14, and Turkmenistan – 11 banks. However, Uzbekistan takes only 3rd place among the CIS or post-Soviet countries after Russia – 330 and Ukraine – 69 banks. So, given the population size of 35.4 million, there are very few banks in Uzbekistan.


Uzbekistan’s state-owned banks support the government’s economic priorities mostly through subsidized loans offered to specific sectors and investment purposes. They are mainly controlled by the Ministry of Finance (MoF) and the Uzbekistan Find for Reconstruction and Development (UFRD). The sector is highly concentrated, with 12 of 33 banks in government hands.


Uzbekistan’s banking sector reform has been ongoing since 2017. In the past few years, the government removed currency controls, allowing the national currency to float freely. Furthermore, by the end of 2019, the Law “On Banks and Banking Activities” was amended; the Law redefined and updated the power of the Central Bank of Uzbekistan with an emphasis on price stability and oversight and allowing foreign investors to own up to 5% of the domestic banks. Also, rules on anti-money laundering, currency transactions, settlements, and improving the availability of banking services were adopted.

In addition to this, the government authorities have launched an ambitious banking sector reform strategy 2020-2025 (Resolution of the President dated May 15, 2020, №UP-5998) to reduce the state’s role and increase the share of assets held by private banks (currently, it is 18%) up to 60% end of 2025. This should be achieved by attracting strategic investors to some state-owned banks and divesting others. In addition, the state-owned banks’ governance is being improved with the appointment of independent, professional supervisory board members.


In addition to the steps taken, a Resolution of the President dated March 18, 2022, №PP-168 was signed to expedite the ongoing privatization process. MoF is to be set to continue the transformation and privatization of state-controlled banks and ensure the IPO of Qishloq Qurilish Bank till October 1, 2022; Sanoatqurilishbank and Asaka Bank are subject to being offered for auction with the involvement of the IFC, EBRD, and ADB by the end of 2022. Xalq Bank, Microcreditbank, Aloqa Bank, and the National Bank of Uzbekistan should be placed for the IPO on the stock exchange by July 1, 2023. State-owned bank reform remains crucial for creating a healthy and competitive banking system that can efficiently facilitate financial intermediation and finance growth. The reforms are expected to strengthen the system’s competitiveness and profitability.

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