New Uzbekistan’s Fragile Modernisation: Debt-Driven Growth, Infrastructural Strain, and Uneven Gains
How Rapid Reform Risks Outpacing Uzbekistan’s Capacity to Sustain It
After assuming leadership in 2017 following the death of longtime Soviet-era ruler Islam Karimov, President Mirziyoyev unveiled an ambitious reform program under the banner of a “New Uzbekistan,” drawing significant international attention. Adopted in 2023, the new development strategy promises not only upper-middle class income status, modernisation of social services and improvement of environmental conditions but also a just and modern state. Compared to Karimov's rule, the incumbent government has significantly liberalised its economy, opening itself to foreign investment. It has taken significant steps to streamline governance and restructured its regional diplomatic posture. There is no doubt that much has changed since then. Even the government's critics do not dismiss it outright. For others, the change has been impressive. The wide avenues of Tashkent, now lined with modern plazas and bustling restaurants, Western-style cafes, and shopping malls, vividly reflect this transformation. However, even in Tashkent, the capital city, which obviously has taken the lion's share of the economic growth, nine in ten taxi drivers would complain about the rising prices. Karimov is said to have kept the prices under tight control.
Behind this impressive momentum lies a quieter, more complex reality. Uzbekistan’s modernisation is moving faster than the institutions, infrastructure, and fiscal systems designed to anchor it. Economic transformation is undeniably taking place, but it rests on foundations that remain uneven, overstretched, and, in some areas, underdeveloped. What is emerging is a case of what can be described as fragile modernisation: a condition in which rapid growth, reform, and global integration are achieved through short-term instruments that outpace the long-term systems needed to sustain them. This fragility shows up in three connected problems: the government is borrowing faster than it can strengthen its finances, infrastructure isn’t being built or upgraded quickly enough to match the pace of economic growth, and the benefits of reform are not being shared fairly across society. If these issues aren’t addressed, they could weaken both the progress Uzbekistan has made and the public trust needed to keep it going.
One of the clearest expressions of this fragility lies in the country’s public finance strategy. Since 2017, Uzbekistan has leaned heavily on foreign borrowing to underwrite its transformation. Public debt has surged from under $9 billion to over $40 billion in just a few years, roughly 35% of GDP as of 2024. The majority of this debt is external, sourced from development banks, bilateral lenders, and international markets. In the early phase of reform, this influx of capital made many initiatives possible and helped manage transition risks. It financed road construction, power grid upgrades, healthcare facilities, school expansions, and digital infrastructure. It also helped absorb the shocks of liberalisation by temporarily protecting the budget during politically sensitive subsidy reforms.
Yet as borrowing grows and fiscal pressure tightens, this strategy becomes increasingly vulnerable, especially without parallel investment in domestic revenue systems and public financial management. Debt servicing now consumes a rising share of Uzbekistan’s public budget, reducing the space for future social and developmental spending. The country’s revenue base remains modest, with tax-to-GDP ratios lower than those seen in structurally similar economies. Without more robust fiscal institutions—capable of efficiently collecting, allocating, and reinvesting domestic revenues—Uzbekistan risks entering a low-efficiency debt cycle: borrowing to grow, but not growing in a way that builds fiscal resilience. This reflects what development institutions often describe as limited absorptive capacity: the volume of capital entering a system exceeds its institutional ability to deploy that capital effectively, transparently, and productively.
At the same time, Uzbekistan’s economic growth has begun to outrun the infrastructure that supports it. With annual GDP growth consistently above 6%, demand on roads, energy systems, transport, water, housing, and digital networks has surged. But supply has lagged. Blackouts during the winter months have reportedly become commonplace, with cities and industries grappling with intermittent energy availability. While urban centres are developing fast, rural areas are still slow to benefit from this growth, suffering from unreliable access to clean water and modern sanitation. Though the government and government-supported programmes addressing these shortages are currently being implemented. On the other hand, housing development has not kept pace with population growth, contributing to rising real estate prices and informal sprawl on the outskirts of major cities.
While growth figures remain strong, much of this expansion is driven by capital inflows and construction, which can mask deeper structural bottlenecks, particularly in infrastructure and service delivery. This is not just an economic inefficiency; it is a political and social risk. As expectations rise with reform—expectations of better services, more mobility, reliable electricity—the cost of failure to deliver becomes reputational and redistributive. When reforms are accompanied by declining reliability in public services, the perception arises that modernisation is leaving parts of society behind. In Uzbekistan’s case, this mismatch is particularly dangerous because much of the infrastructure development has also been financed through external borrowing. When infrastructure fails to deliver fast or broadly enough, the expected economic and social returns on that borrowing decline, further tightening the fiscal bind and compounding popular frustration.
This brings us to a third and increasingly central dimension of Uzbekistan’s fragile modernisation: the uneven distribution of reform benefits across regions and social classes. While Tashkent and a few major cities have seen sustained growth, inflows of investment, and infrastructure upgrades, many other areas remain disconnected from the core engines of change. In rural regions and smaller urban centres, jobs are fewer, inflation bites harder, and service delivery is less reliable. Liberalisation of fuel and energy prices—though necessary—has increased living costs for large segments of the population, particularly among lower-income households. Wage growth in the informal and public sectors has not kept pace, and youth unemployment remains persistently high.
This has created a situation in which economic progress is widely visible, but not widely felt. The gap between macroeconomic performance and micro-level experience risks feeding social discontent, particularly among groups that feel excluded from the reform dividend. The perception that modernisation is benefiting a narrow segment of the population—investors, elites, and urban professionals—while burdening others with the costs of transition, can erode the legitimacy of reform itself. In development terms, this is a common outcome of two-speed economies, where dynamic, capital-intensive sectors drive growth in a narrow geographic or social band, while large portions of the population remain economically and politically marginal.
Taken together, these trends—debt-fueled reform without sufficient fiscal depth, economic growth outpacing infrastructure development, and uneven access to the benefits of modernisation—create a picture of systemic imbalance. They are not signs of failure, but they are warning signals. Uzbekistan is not in crisis, but its reform outcomes—however commendable—are becoming increasingly vulnerable to the pressures that arise when momentum outpaces institutional consolidation. This is what makes the country’s transformation fragile: it is real, ambitious, and in many ways effective, but it is not yet stable.
The path forward is not to reverse course or slow down reform, but to match the speed of change with deeper systems of redistribution, accountability, and inclusion. Uzbekistan must now recalibrate: to consolidate what has been achieved and invest more seriously in the systems that will ensure its sustainability. That means linking external borrowing to high-return investments in productivity and public goods, rather than short-term fiscal gaps. It means improving tax collection and broadening the revenue base to reduce dependence on external finance. It also means prioritising infrastructure planning and delivery not just as economic support, but as a foundation of social equity and political trust.
Equally important is the need to ensure that reform is experienced more evenly across the country. Social protection systems, rural development programs, and targeted support for small businesses are all necessary to close the gap between high-growth regions and lagging peripheries. Reform, to remain legitimate, must be inclusive—not just in rhetoric, but in results.
Uzbekistan’s modernisation is a story still being written. The early chapters have been impressive. But what determines its ultimate success will be whether the country can build the foundations that allow reform to survive pressure, resist fatigue, and deliver not just growth, but stability, inclusion, and resilience. The state has shown that it can move boldly. Now it must show that it can hold the ground beneath that movement.
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