Uzbekistan Business & Economy - The Times Of Central Asia

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Transit Trade

Pakistan and Uzbekistan Turn to China for Transit Trade Amid Regional Security Risks

Pakistan and Uzbekistan have agreed in principle to reroute some of their bilateral transit trade through China. The move follows worsening security that closed traditional routes through Afghanistan and disrupted alternatives through Iran, according to Pakistan Today. The two governments are expected to formalize the decision by signing amendments to the Pakistan-Uzbekistan Transit Trade Agreement during the visit of Uzbekistan’s deputy prime minister to Pakistan on July 21. Under the revised agreement, the China corridor will become an official transit route, allowing cargo to travel through Pakistan’s Sost Dry Port, cross western China, and continue into Central Asia. “The protocol is aimed at expanding transit options and ensuring uninterrupted movement of goods between the two countries despite evolving regional security challenges,” a Pakistani official familiar with the negotiations told Pakistan Today on condition of anonymity. The arrangement will provide Pakistan with an additional route to Central Asian markets while allowing Uzbekistan to maintain access to Pakistani seaports despite growing instability across the region. The decision marks a significant shift in regional trade planning. For years, the shortest and most commercially attractive route between Pakistan and Uzbekistan passed through Afghanistan. That corridor was also expected to become part of the planned Uzbekistan-Afghanistan-Pakistan railway linking Central Asia with ports on the Arabian Sea. Those plans have largely stalled following the sharp deterioration in relations between Islamabad and Kabul. Pakistan closed its main border crossings, including Torkham and Chaman, after cross-border clashes in October 2025. Trade through the crossings has remained suspended amid continuing security tensions and disagreements over militant groups operating from Afghan territory. The disruption has affected not only transit cargo but also Pakistan’s direct exports to Afghanistan, traditionally an important market because of its limited domestic manufacturing base. Pakistani companies supply cooking oil, cement, soap, pharmaceuticals, aluminum cans, food products, and other consumer and construction goods to Afghanistan. Business groups cited by Pakistan Today estimated earlier this year that the prolonged border closure was costing Pakistani exporters around $177 million every month, while warning that customers in Afghanistan and Central Asia could permanently shift to suppliers using other regional transport routes. Pakistan initially sought to compensate by expanding transport links through Iran. In April, Islamabad operationalized new transit corridors through both Iran and China, including an Iranian route connecting Pakistani ports with Central Asian markets while bypassing Afghanistan. However, renewed military confrontation between Iran and the United States has raised fresh concerns about that option. Continuing attacks on infrastructure and commercial shipping around the Strait of Hormuz have increased freight costs, insurance premiums, and energy-related risks, reducing the corridor’s reliability. Routing trade through China would allow both countries to bypass security problems affecting routes through Afghanistan and Iran. It would also advance Pakistan’s long-term plan to extend the China-Pakistan Economic Corridor toward Central Asia. The new route, however, is expected to come with trade-offs. Transporting goods through China will involve longer distances, additional border procedures, higher handling costs, and extended transit times. As a result, the corridor is expected to...

Allied Biofuels

Allied Biofuels Details Export Routes for Planned $6.1 Billion Uzbekistan SAF Project

Allied Biofuels has disclosed planned export routes that would carry sustainable aviation fuel from its proposed facility in Uzbekistan to customers in Europe and the United Arab Emirates via rail and sea corridors crossing Kazakhstan, the Caspian Sea, the Black Sea, and the Suez Canal. The routes are set out in a logistics agreement with Latvia-based Pro Logistic Services that was signed during the 5th Tashkent International Investment Forum in June and announced on July 20. It covers the future transport of sustainable aviation fuel (SAF) and electro-synthetic sustainable aviation fuel (e-SAF), rather than immediate exports. The production facility has not yet been built, and Allied Biofuels has said commercial fuel supplies are expected to begin in 2030. Under the agreement, Pro Logistic Services will design and implement a multimodal transport network covering dedicated rail tank cars, port handling, freight forwarding, and marine shipping. The company would coordinate delivery from the project site in Uzbekistan to customers in Europe, the UAE, and other markets. The logistics partnership forms part of Allied Biofuels’ planned $6.08 billion renewable energy and sustainable fuel project in Uzbekistan’s Khorezm region. The development is backed by a project implementation agreement with the regional authorities and has received special economic zone status under a presidential decree. The planned complex would combine biomass processing, refining, green hydrogen, and power-to-liquid technologies. Allied Biofuels says it would produce about 160,400 tonnes of SAF, 257,000 tonnes of e-SAF, and 5,040 tonnes of green diesel annually. A proposed 4.45-gigawatt renewable energy system, supported by battery storage and hydrogen infrastructure, would supply the project. In June, Allied Biofuels signed an engineering agreement with Sinopec Engineering Group covering front-end and detailed design, systems integration, and cost development. The logistics program is expected to proceed alongside engineering, production planning, financing, and negotiations with potential fuel buyers. Uzbekistan Airports and Allied Biofuels also signed a memorandum of understanding in May on future SAF and e-SAF supplies. The May announcement said cooperation would begin in 2030. Allied Biofuels’ latest statement describes the memorandum as binding and says it covers annual purchases of 117,000 tonnes. For shipments to the UAE, fuel would travel by rail from Miskin Station through the Trans-Caspian International Transport Route. The proposed journey would cross Kazakhstan and the Caspian Sea before reaching the Georgian Black Sea ports of Poti or Batumi. The cargo would then be transferred to tankers and shipped through the Black Sea, the Mediterranean, and the Suez Canal to Fujairah and other UAE ports. European exports would use a separate corridor. Fuel would travel by rail from Miskin Station to the Port of Riga in Latvia, before continuing by sea to Hamburg and other European ports. The plan reflects Uzbekistan’s wider effort to improve rail links and secure more reliable access to distant seaports. Pro Logistic Services says it has direct forwarding agreements with the national railway operators of Uzbekistan, Kazakhstan, Latvia, Turkmenistan, and Lithuania. Headquartered in Riga, the company operates more than 4,000 freight wagons and maintains a presence in...

Economic Growth

Uzbekistan Raises 2026 Growth Forecast to 8.1%

Uzbekistan has raised its 2026 economic growth forecast from 6.6% to 8.1%, after stronger-than-expected performance last year and in the first quarter of 2026. The Ministry of Economy and Finance’s updated Fiscal Strategy for 2027-2029 projects nominal GDP of 2.183 quadrillion soums this year (about $180 billion). The revision follows growth of 7.7% in 2025, above the original 6.6% forecast, and an 8.7% expansion in the first quarter of 2026. The ministry expects market services to grow by 16.6% in 2026, industrial production by 8%, construction by 12.4%, and agriculture by 5%. Inflation is forecast to slow to 6.5%, while unemployment falls from 4.8% in 2025 to 4.5%. The stronger projection rests partly on domestic demand. The strategy expects non-gold exports to rise by 20%, capital investment by 12.9%, and remittance growth to remain around 10%. Separate Central Bank figures show that remittances rose 13% to $3.8 billion in the first quarter, helping to support household spending even as Russia’s share of transfers declined. Growth is forecast to slow to 6.9% in 2027, before rising to 7.1% in 2028 and 7.4% in 2029. Inflation is projected at 5-6% in 2027 and 5% in 2028 and 2029. The government also intends to keep the fiscal deficit within its rules and public debt below 40% of GDP. The Ministry of Economy and Finance says meeting these targets will require stronger tax administration, fewer ineffective exemptions, tighter oversight of public-private partnerships, and further action against the shadow economy. It also plans more transparent medium-term budgeting and closer scrutiny of fiscal risks. The success of those reforms will determine whether rapid growth can be sustained without weakening public finances. The fiscal strategy uses the IMF’s April global outlook as part of its external assumptions. The government’s estimate is considerably more optimistic than the IMF’s 6.8% forecast. In its June assessment, the Fund said Uzbekistan’s outlook remained favorable but warned that the economy could be running above its potential. It identified weaker global conditions and domestic overheating as the principal risks. The revised figures also strengthen the government’s claim that the Uzbekistan-2030 Strategy target of an economy worth more than $240 billion remains achievable. The plan relies on private investment, export growth, higher productivity, and continued macroeconomic reforms. Economist Otabek Bakirov said the 8.1% projection would mark the strongest growth in Uzbekistan’s recent history. “According to the Fiscal Strategy forecasts, economic growth will accelerate to 8.1% in 2026. If this happens, it will become a new record for the country’s recent history,” he wrote in an analysis of the forecast. In a separate calculation, Bakirov put nominal GDP above $205 billion in 2027, $228 billion in 2028, and $257 billion in 2029. On that path, the $240 billion target would be surpassed a year early. However, he cautioned that the scenario depends on maintaining strong growth, low inflation, and exchange-rate stability, without a major domestic or external crisis. A weaker soum would reduce the dollar value of GDP even if output continued to rise quickly...

External Debt

The Central Asia Debt Divide: Why the Region’s Borrowing Risks Are Not the Same

Central Asia’s biggest debtor is not necessarily its most vulnerable. Kazakhstan accounts for roughly two-thirds of the region’s external liabilities, but much of that debt sits on corporate balance sheets rather than the government’s. Tajikistan owes a fraction of the amount, yet remains at high risk of debt distress. The contrast highlights the Central Asia debt divide. Kyrgyzstan and Tajikistan rely more heavily on sovereign and concessional borrowing, while Uzbekistan’s external liabilities are now split almost evenly between the public and corporate sectors. Based on the latest available figures from national authorities and international financial institutions, the combined external debt of Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan approached $275 billion in early 2026. Turkmenistan has not been included in the estimate because the country does not publish comprehensive official external debt statistics that can be directly compared with those of its regional neighbors. The total is an approximate calculation compiled from national statistics rather than a regional aggregate published by a single institution. The countries also release their debt data for different reporting dates and use different classifications, requiring caution when making direct comparisons. Total external debt includes obligations owed to non-residents by governments, central banks, commercial banks, private companies, and, in some countries, local subsidiaries of foreign corporations. Government external debt is a narrower measure covering liabilities that are directly serviced or guaranteed by the state. China remains an important bilateral creditor, particularly in Kyrgyzstan and Tajikistan, while multilateral institutions provide much of the region’s infrastructure and public-sector financing. Kyrgyzstan: Rising Debt, but a Broader Creditor Base Kyrgyzstan’s public debt has risen alongside increased infrastructure spending and domestic borrowing, although its creditor base has become more diversified. A smaller share is now owed to a single bilateral lender, while multilateral financing and the domestic securities market have grown in importance. According to the Kyrgyz Ministry of Finance’s public debt data, the country’s total public debt stood at approximately $8.94 billion as of May 31, 2026, including around $6.1 billion in external obligations. The debt debate has also become part of President Sadyr Japarov’s broader economic narrative. In an interview with the Kabar national news agency published on October 8, 2025, Japarov said his government was continuing to borrow but argued that new loans were being directed toward commercial projects expected to repay their own financing rather than place an additional burden on the state budget. He also said Kyrgyzstan intended to repay its older debts by 2035. The International Monetary Fund said in its 2026 Article IV consultation that Kyrgyzstan had recorded strong economic growth for a fourth consecutive year, giving the authorities an opportunity to strengthen fiscal buffers and accelerate structural reforms. It also warned that the outlook remained exposed to significant downside risks. Kazakhstan: A Large External Debt, but a Different Risk Profile Kazakhstan accounts for the largest share of Central Asia’s external debt, but its headline figure can be misleading. Unlike several of its neighbors, the country’s external liabilities are dominated by corporate and intercompany borrowing rather...

Transport Infrastructure

Can Uzbekistan Challenge Kazakhstan as Leading Central Asia Logistics Hub?

Recent developments suggest that Uzbekistan is seeking to strengthen its position in regional logistics, potentially challenging Kazakhstan’s role as Central Asia’s principal transit hub. As geopolitical tensions increase, alternative transport routes are becoming increasingly important, and Central Asia stands out as a relatively stable region. Both Kazakhstan and Uzbekistan are investing heavily in expanding their transport infrastructure. The key question, however, is how practical and commercially viable these new projects will prove to be. Which country will ultimately be able to offer faster, cheaper, and more reliable transport corridors? Uzbekistan’s Plans In early July, Uzbekistan presented proposals for expanding its transport and logistics infrastructure, as officials sought to make greater use of what they described as the country’s underdeveloped transit potential. Officials noted that Uzbekistan occupies a strategic position connecting East and West. The country hosts approximately 4,000 kilometers (2,485 miles) of international transit corridors and has a railway network stretching 4,700 kilometers (2,920 miles). Modern logistics centers and “dry ports” are being developed in Tashkent, Navoi, and Namangan. Navoi Airport already serves as an important cargo hub on Eurasian air routes. Authorities believe that construction of the China-Kyrgyzstan-Uzbekistan railway, together with the proposed Trans-Afghan Railway, could further strengthen Uzbekistan’s position within both regional and international transport networks. Project planners argue that, once completed, these corridors will make Uzbekistan a key segment of the shortest overland route between the Pacific Ocean and Europe. They estimate that cargo transit times could be reduced to eight days, roughly three times faster than many traditional routes. That said, the statement provided no methodology or precise endpoints for the estimate; existing China-Europe rail services generally take considerably longer. Officials also say access to Pakistan’s ports of Karachi and Gwadar would provide Uzbekistan with a gateway to the Indian Ocean and a shorter route to South Asian markets with a combined population of around 2 billion people. Gwadar is not yet connected to Pakistan’s main railway network, however, meaning that substantial additional infrastructure would be required. Significant Shortcomings Uzbek officials estimate that annual trade between China and Europe amounts to approximately $800 billion, while cargo volumes total between 120 million and 150 million metric tons each year. The government estimates that attracting an additional 15-20 million tons of international transit cargo annually could generate $400-600 million in revenue, draw around $3 billion into logistics facilities, and create approximately 50,000 permanent jobs. The presidential administration also said this could add 1.5-2 percentage points to annual economic growth, given that Uzbekistan currently captures only 1-2% of China-Europe freight – it did not explain how either figure was calculated. Although transit cargo volumes reached 15.3 million tons in 2025, an increase of 54% compared with 2021, officials believe the country’s existing infrastructure could support significantly higher volumes. At present, however, many border crossings lack sufficient capacity to process international freight efficiently. Uzbekistan currently operates 27 logistics centers that meet international standards, with a combined handling capacity of 27.2 million tons. Yet only one of them qualifies as a...

Energy Security

Central Asia’s Fuel Squeeze Becomes a Winter Energy Security Problem

Central Asia’s fuel squeeze is moving from filling stations into winter planning. Governments are now tracking gasoline and diesel, gas pipelines, coal deliveries, power imports, jet fuel, and emergency repair crews. Seasonal fuel and power stress is familiar across the region, but the current pressure - tied to Russia, the main supplier for several regional fuel flows - has arrived early. Russia’s own fuel crisis has sharpened the risk. Ukrainian drone attacks and repair work have cut refinery output, while export limits have pushed more Russian supplies back into the domestic market. Reuters reported queues, regional restrictions, and gasoline above 100 roubles a liter at some independent stations. President Vladimir Putin acknowledged the strain on June 28. “You are well aware that problems for drivers and for businesses persist,” he said, adding that “the harvest depends on” keeping seasonal fuel schedules for farms. For Central Asia, Russian shortages travel through contracts, rail slots, import prices, and public nerves. Kyrgyzstan is among the most exposed. The country consumes about two million tons of fuels and lubricants each year, and almost 95% comes from Russia, according to Deputy Energy Minister Nasipbek Kerimov. “Due to the lack of adequate oil and gas production, we remain a country dependent on imports,” Kerimov said. Bishkek has asked Russia, Kazakhstan, Belarus, Azerbaijan, Uzbekistan, and Turkmenistan for help securing supplies. That dependence is now impacting households, farmers, and small transport firms. The cabinet has capped pump prices and set a subsidy mechanism through September 30. Kerimov said importers were seeing offers at several prices, but promised that “there should be no shortage on the domestic market.” Oil traders put AI-92 stocks at 30 to 45 days, while diesel remained available for harvest work. Kyrgyzstan is trying to buy time through domestic refining. The modernized Junda refinery in the Chuy Region has been pressed to raise gasoline output to 24,000 tons a month soon, then 50,000 tons a month by the end of 2026, with finished products directed to the domestic market. Those gains would help, but Russian supply still sets the pace. Uzbekistan has the Bukhara and Fergana oil refineries, the Altyaryk unit of the Fergana refinery, and the Uzbekistan GTL complex, but demand has still moved faster than domestic supply. In January-April 2026, gasoline imports reached 568,700 tons, worth $327.1 million, more than double the same period in 2025. Local refineries produced 417,500 tons over those four months. A shift away from AI-80 gasoline has also pushed drivers toward AI-92 and AI-95. The pressure reached the exchange in late June. AI-92 gasoline climbed to a record 13.919 million soums per ton on June 29, about $1,160, after an 11.8% rise since the start of the month. Jet fuel has become an issue, too. Uzbekistan Airways reduced some Russia flight frequencies in June, citing aviation fuel shortages and higher costs. Tashkent is now preparing for winter in concrete volumes. On July 6, President Shavkat Mirziyoyev reviewed measures for the 2026-2027 autumn-winter season. The plan includes replacing 53.7...