Chapter 6 | PROJECTS
The “Second Inclusive and Resilient Market Economy Development Program” in Uzbekistan is a policy-based loan operation, co-supported by the World Bank and OPEC Fund, designed to help the Central Asian country advance key economic and climate reforms. The OPEC Fund extended a loan of ¤70 million to co-finance the second programmatic development policy operation in Uzbekistan with the World Bank. The purpose of the loan is to support the Government of Uzbekistan in implementing its reform agenda to accelerate the country’s transition to a more inclusive, market-driven and climate-resilient economy.
Situation Analysis of Climate Impacts
irrigation shortfalls and expanding arid zones. Securing water resources through better storage, allocation and regional cooperation is essential. 31
Uzbekistan has an arid continental climate with large temperature swings between summer and winter and low rainfall in most regions. 27 Average annual temperatures have been rising steadily — from 1950 to 2013, temper- atures increased about 0.3°C per decade and summers are extremely hot (with July averages often above 35°C in many areas 28 ). In contrast, precipitation trends show no clear increase; annual rainfall is highly variable and has even slightly declined in recent decades. The country already faces frequent droughts and periodic floods. His- torically, a severe drought hit about once every five years in the late 20th century and droughts have become more frequent and intense in the past two decades. Seasonal flooding and mudflows also occur, especially from heavy spring rains and snowmelt in mountain areas. Compound- ing these hazards is the Aral Sea crisis — the desiccation of the lake in western Uzbekistan has led to widespread dust storms and degraded local climates, exacerbating health and environmental stresses in the region. 29 Climate change poses serious risks across key sectors in Uzbekistan due to its reliance on climate-sensitive resources. Agriculture is particularly vulnerable with major crops like wheat and cotton facing potential yield declines of 25–63 percent by the 2050s, if drought and warming trends continue. Past events such as the 2000– 2001 drought already reduced cereal yields by up to 17 percent and caused livestock losses, highlighting future food security concerns. Strengthening climate-smart ag- riculture and improving irrigation efficiency will be vital. 30 Water scarcity is another pressing issue. Uzbekistan depends on river inflows from upstream neighbors and climate change is expected to reduce these flows through decreased snow and glacier melt and increased evaporation. By mid-century, summer river flows may fall sharply, especially during the growing season, leading to
The energy sector is also strongly impacted. Rising tem- peratures increase electricity demand for cooling, while reduced water availability hampers hydropower produc- tion and cooling for thermal plants. This volatility affects not only domestic supply but also energy trade in Central Asia. Investing in energy efficiency and diversifying with renewables, particularly solar power, offers a pathway to greater climate resilience. 32 Public health is increasingly at risk due to more frequent heatwaves, which raise the incidence of heat-related illnesses, particularly in urban areas. Warmer conditions may also lead to a rise in waterborne diseases and the re-emergence of vector-borne illnesses like malaria. Mal- nutrition, poor water quality and respiratory problems — especially in the drying Aral Sea region — could worsen. Uzbekistan scores in the mid-range on the US ND-GAIN index, reflecting moderate climate vulnerability and readiness, with particular challenges in areas like water and agriculture but also development improvements that enhance resilience. According to the EU INFORM Risk Index, Uzbekistan is among the 20 most at-risk countries in terms of drought and faces above-average risk from riverine flooding.
The OPEC Fund’s contribution to Climate Resilience in Uzbekistan
Purpose of the Loan
This program is the second in a series of reform-focused op- erations developed with World Bank support, building on an earlier phase approved in 2023. It is structured around three broad pillars of reform: (1) creating markets, (2) improving
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