IMF says Uzbekistan’s economy remains robust, urges restraint in fiscal spending

According to the mission, real GDP expanded by 7.6 percent year-on-year during the first nine months of 2025, supported by strong investment activity and household consumption. Despite robust demand, both headline and core inflation eased to 7.8 percent and 6.6 percent, respectively, by the end of October, as last year’s administrative energy price adjustments faded, the UZS strengthened, and monetary policy remained tight.

The IMF also highlighted strong household lending, which grew 23 percent year-on-year in September, while corporate credit expanded more modestly. The external current account deficit narrowed significantly in the first half of the year, supported by high global gold prices, growth in non-gold exports, and strong remittance inflows. As of end-October, international reserves stood at the equivalent of 12 months of prospective imports.

Balanced outlook, with risks tied to spending and external conditions

The Fund described the economic outlook as “broadly positive”, projecting GDP growth above 7 percent this year and around 6 percent in 2026, driven by continued investment and consumption. Inflation is expected to gradually converge to the Central Bank of Uzbekistan’s 5 percent target by the end of 2027.

However, the IMF warned that risks remain. Higher-than-expected revenues, particularly from gold, have increased pressure for additional government spending and for expanding directed or preferential lending. Such moves, the Fund cautioned, could lead to overheating in a high-demand environment. External risks include uncertainties in the global economy, geopolitical tensions, and commodity price volatility. Meanwhile, accelerated reforms, stronger capital inflows, and higher gold prices could strengthen the outlook.

IMF calls for spending discipline and broader tax reforms

The mission emphasized the need for fiscal restraint, urging the government to avoid increasing expenditures in response to higher-than-budgeted revenues. While revenue overperformance in 2025 allowed for additional spending, the IMF warned that continued expansion could amplify inflationary pressures, cause an unwarranted appreciation of the real exchange rate, and expose the economy to vulnerabilities if gold prices decline.

The authorities maintain their commitment to keeping the consolidated fiscal deficit at 3 percent of GDP in both 2025 and 2026. The IMF recommended using revenue windfalls to build fiscal buffers and reduce macroeconomic volatility.

To strengthen public finances over the medium term, the Fund underscored the need to broaden Uzbekistan’s tax base and raise the tax-to-GDP ratio. It welcomed plans to implement a medium-term revenue strategy and adopt reforms at the Tax Committee, alongside a national strategy to combat the shadow economy. The IMF advised limiting tax incentives, introducing a methodology to quantify and publish tax expenditures, and enhancing the tax administration’s enforcement capacity while safeguarding taxpayer rights.

Tight monetary policy and stronger financial sector oversight needed 

The IMF commended the Central Bank of Uzbekistan for maintaining a restrictive monetary stance, holding the policy rate at 14 percent since March despite declining inflation and inflation expectations. This approach, it said, remains appropriate until inflation is firmly on track toward the target. The mission also supported the move toward greater exchange rate flexibility since April 2025, noting that it helps strengthen resilience to external shocks and supports the inflation-targeting framework.

The IMF urged authorities to accelerate financial sector reforms, including the gradual reduction of directed and preferential lending. Following recommendations from the 2025 Financial Sector Assessment Program, the IMF called for a comprehensive roadmap involving all regulators to ensure proper sequencing of reforms and facilitate technical assistance.

Structural reforms and WTO accession efforts gain IMF praise

The mission stressed that sustained structural reforms remain vital for long-term growth. It called for continued privatization and restructuring of major state-owned enterprises, stronger competition policy, and improvements to corporate governance and the business environment. Such reforms, the IMF said, would boost productivity, reduce the state’s role in the economy, and ease inflationary pressures by strengthening the supply side.

The IMF also commended Uzbekistan’s progress toward accession to the World Trade Organization, which authorities aim to finalize by March 2026. Ongoing governance and anti-corruption reforms were described as positive developments, including the implementation of the conflict-of-interest law and parliamentary discussions on whistleblower protection and asset declaration legislation.