Climate change poses serious risks across key sectors in Uzbekistan. Agriculture is particularly vulnerable with major crops like wheat and cotton facing potential yield declines of 25–63% by the 2050s.
fiscal risk management and public procurement, and (3) supporting social inclusion and climate change action. Through these pillars the loan backs a wide range of policy measures aimed at opening up the economy, strengthening institutions and bolstering climate resilience. For example, Pillar 1 promotes a better business and in- vestment environment by reducing state dominance in key sectors (such as energy, agriculture and transport) and encouraging private sector competition. Pillar 2 improves fiscal governance by enhancing oversight of state-owned enterprises (SOEs) and public-private partnership (PPP) obligations, while modernizing public procurement to be more transparent and efficient. Pillar 3 focuses on social and environmental resilience — it supports reforms to ex- pand social protection and inclusion (including gender equality initiatives) and to implement Uzbekistan’s climate change commitments on mitigation and adaptation In essence, the loan’s purpose is to finance and incentivize critical reforms that will make Uzbekistan’s economy more competitive, inclusive and sustainable. It aligns closely with the World Bank’s Country Climate and Development Report recommendations and Uzbekistan’s own develop- ment strategy. By tying disbursements to the completion of policy actions (e.g. new laws, regulations and institution- al reforms) the program ensures government commitment to these changes. World Bank and OPEC Fund support is not for a specific infrastructure project, but rather for the government’s reform program — providing budget financ- ing in return for policy progress. Ultimately, the operation helps Uzbekistan create the conditions for a robust market economy (encouraging private investment and job crea- tion), while also embedding climate resilience and social inclusion into the country’s growth model.
The loan serves as a catalyst for reforms such as energy tariff adjustments, strengthening of regulators, climate-smart agriculture policies and social protection enhancements, supporting Uzbekistan’s long-term development goals.
Expected Outcomes
Uzbekistan’s “Second Inclusive and Resilient Market Econ- omy Development Program” is expected to deliver a wide range of economic, environmental and social benefits. The reforms supported under the program aim to strengthen government effectiveness, stimulate private sector growth, enhance climate resilience and improve social well-being. In the energy sector, tariff reforms are expected to sig- nificantly improve financial sustainability, with gas and electricity tariffs reaching approximately 89 percent cost recovery by 2025 and full recovery by 2026. These changes will reduce fiscal pressure while protecting low- income households through a social lifeline tariff. A new electricity law and the establishment of an independent regulator are set to promote competition, improve service delivery and encourage investment in renewable energy, ultimately reducing greenhouse gas emissions intensity. Broader economic reforms will reduce state dominance in key sectors such as agriculture, transport and chem- icals, supporting privatization and the creation of more competitive markets. For instance, Uzbekistan Railways, the national rail carrier, is undergoing restructuring to improve performance, while state-owned enterprises in other industries are being corporatized or privatized. These measures are expected to attract private invest- ment, foster innovation and generate employment, con- tributing to economic diversification.
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