Opinion: Is Uzbekistan Importing a Future Crisis?
Once hidden from the view of international investors, Uzbekistan is rapidly rewriting its economic narrative. Over the past eight years, the nation attracted over $113 billion in foreign investment, drawing financial firms and mutual funds eager to seize the momentum of Tashkent’s trade liberalization and its ambition to double GDP by 2030. And rightly so; 40% of the country’s population, which is the largest in Central Asia, is under the age of 25, while its gold production is within the top ten globally.
Uzbekistan is in its breakout moment. With Uzbek bonds receiving a further upgrade to a BB rating from both Fitch and S&P Global, comparisons to Vietnam or Indonesia no longer seem aspirational.
However, the question remains: Is Uzbekistan ready to set foot on the financial global stage, and, more importantly, is it structurally equipped to stay there?
Amidst its sweeping economic transformation, IMF officials have warned the administration to remain vigilant against economic shocks beyond its control: volatile commodity prices, contractions in foreign investor liquidity, and consequently, tighter external financing. These warnings are not theoretical. They come from decades of IMF experience with financial crises in other emerging markets, such as the Latin American debt crises in the 1980s, the “Tequila Crisis” in 1994, and the “Asian Flu” in 1997.
In those historic cases, newly liberalized economies suffered not because they lacked growth, but because they lacked a defense against the liquidity cycle. The economic reality is that global capital flows are often driven by decisions made in New York or London, not Tashkent.
This economic phenomenon is often explained by the “liquidity model,” which argues that changes in exogenous liquidity conditions – driven by the economic situation of investor countries – shape capital flows into emerging markets. Thus, without sufficient financial market depth, emerging capital markets cannot absorb external shocks. And when global liquidity tightens, these flows can abruptly reverse, resulting in prolonged economic instability and loss of monetary sovereignty.
The sequence unfolds as follows: capital inflows surge and balance-sheet vulnerabilities quietly build up; then an external shock – such as a monetary tightening in the creditor economy – causes inflows to slow; the local currency depreciates; and a feedback spiral of declining confidence and weakening balance sheets pushes the economy into crisis. Currency loses trust, struggles to recover, and money flees.
Some initial signs of this pattern can be observed in Uzbekistan’s current boom. The economy is increasingly reliant on foreign borrowing: external debt as a share of GDP rose from 24.7% in 2017 to 61.4% in 2024, reaching $78.5 billion by June 2025. According to CEIC benchmarks, this
level is already comparable to Poland’s 51.8% and Malaysia’s 69.9%, and now exceeds Kazakhstan’s 59.2%, reflecting growing dependence on financing from the World Bank, Eurobond investors, and major East Asian institutions.
High debt levels alone do not necessarily imply instability. They can reflect efforts to accelerate domestic development. The real source of fragility in past crises was not the volume of debt but its denomination. When obligations are in foreign currencies, a country becomes acutely sensitive to the economic conditions of its lenders.
To illustrate, if the Uzbek Som were to depreciate suddenly due to a commodity price shock, such as a drop in gold, the public would likely rush to buy dollars, creating a feedback loop that weakens the currency even further. Simultaneously, the cost of servicing foreign debt would spike, as every dollar of repayment would require more Som. Today, approximately 60% of Uzbekistan’s government debt is denominated in U.S. dollars.
To ensure rapid recovery from inevitable external shocks, Tashkent must shift its strategy from pure growth to structural resilience. This requires building fiscal buffers now to allow for counter-cyclical spending during downturns, rigorously stress-testing the banking sector to prevent systemic credit freezes, and maintaining a flexible exchange rate to act as a natural safety valve against global volatility.
Is Uzbekistan importing a future financial crisis? In practice, no country can be fully immunized against global volatility. Yet, history has proven that the FDI model is indispensable for rapidly improving the standards of living for citizens. The question is not if Uzbekistan should take the money, but how it manages the flow and prepares for the worst-case scenario.
The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of the publication, its affiliates, or any other organizations mentioned.
