After decades of relative inactivity in international financial markets, Uzbekistan has emerged as a dynamic albeit small player that has made green finance a central component of its development strategy. Following its inaugural bond issuance on the international market in 2019, three thematic bonds have been issued in short order: a sovereign sustainability bond (labelled “Sustainable Development Goals bond”) in 2021 and two green bonds – one sovereign, one corporate – in 2023. These achievements establish Uzbekistan as a frontrunner in the region of Central Asia, where thematic bonds remain a novel financial instrument.
Uzbekistan’s interest in green bonds stems from the growing gap between investment needs, particularly in sustainable infrastructure, and actual expenditure, currently derived in large part from the state budget. This gap, estimated conservatively at USD 6 billion per year, cannot be filled with public funds alone, and the government therefore seeks to mobilise both domestic and foreign private capital for investment in projects that contribute to its environmental and development objectives. On the environmental front, Uzbekistan faces a considerable challenge in transforming its energy system, which relies almost exclusively on natural gas and is by far the largest emitter of greenhouse gases. The government has committed to reducing greenhouse gas emissions by 35% per unit of gross domestic product compared to 2010 levels by 2030 through accelerated integration of renewable energy sources into the power grid and electrification of transport networks. Uzbekistan has so far succeeded in reducing greenhouse gas emissions per unit of output by approximately 14% but is still off track from meeting its 2030 goal.
Uzbekistan also faces challenges in terms of its financial markets themselves. The economy, including the banking sector, is dominated by a small number of state-owned enterprises and banks that rely on subsidised support from the government budget rather than debt finance. Domestically, Uzbekistan lacks institutional investors active in debt markets, and trading volumes remain low. In terms of financial market infrastructure, transactions are split across two platforms, although ongoing efforts seek to harmonise the two platforms and facilitate trading. The country’s first issuances and focus on thematic bonds to funnel capital towards sustainable projects are important milestones in Uzbekistan’s debt capital market development, but there is still considerable untapped potential in Uzbekistan, which the present publication seeks to explore.
This publication provides a snapshot of Uzbekistan’s capital market development and activity in green bond issuance. After a brief overview chapter (Chapter 1), the publication focuses on identifying barriers to further progress posed by the country’s development strategies and programmes (Chapter 2), capital availability (Chapter 3), institutional set-up and regulatory framework (Chapters 4 and 5). The key messages and recommendations of each chapter are laid out in brief below.