TASHKENT, Uzbekistan, March 27. Moody’s forecasts that Uzbekistan’s state-owned companies will increasingly turn to international capital markets for financing as part of the country’s ongoing banking sector reforms, Trend reports.
According to the agency, this move will lead to a surge in eurobond issuance, a shift driven by the reduction of government-backed loans and a growing focus on attracting private investments.
The government plans to reduce state enterprise lending by 40 percent by 2026, redirecting 30 trillion soums ($2.3 billion) to the private sector. In addition, Moody’s projects that state-owned enterprises will raise $5.2 billion through eurobond issuance in 2025. The government’s strategy, outlined in its “Uzbekistan 2030” plan, aims to double the country’s GDP and requires substantial investments in sectors such as energy, transport, agriculture, infrastructure, and telecommunications.
The shift towards market-based financing is expected to enhance the profitability of state-owned banks, as the reduction of subsidized lending will increase their margins. However, Moody’s notes that this transition also introduces new risks. Private sector clients, particularly SMEs and retail borrowers, tend to have higher default rates, especially in an environment of inflation and rising debt burdens.
In line with these reforms, the private banking sector is under increasing pressure. Moody’s observes that state banks may redirect over 30 trillion soums ($2.3 billion), which is 18 percent of the private banks' credit portfolio by the end of 2024 to the private sector by 2026, intensifying competition and potentially leading to lower interest rates, which could hurt the profitability of private banks. Additionally, the emergence of neobanks, which have rapidly expanded their credit and deposit portfolios, further heightens competition.
Moody’s estimates that in 2024, 10 small but fast-growing neobanks increased their credit and deposit portfolios by 90 percent, raising their share in the overall credit portfolio of private banks to 14 percent (up from 9 percent in 2023) and their share of deposits to 14 percent (up from 10 percent the previous year).
"Eurobond issuance will play a key role in financing large-scale projects without relying on state banks. Companies like Uzbekneftegaz and Uzavtosanoat have already announced plans for eurobond placements in 2025, while Navoi Mining and Metallurgical Combine issued its first $1 billion bond in October 2024, with plans for an additional $500 million issuance in 2025," Moody’s highlighted.
While the move to international capital markets provides Uzbek companies with the opportunity to diversify their funding sources and align with global corporate governance standards, it also carries significant risks. These include weak liquidity management, failure to meet investor requirements, and insufficient transparency, which could undermine market confidence. Furthermore, companies issuing eurobonds become more vulnerable to global volatility and currency fluctuations.
In summary, the reform of the banking sector and the development of the capital markets create new opportunities for Uzbek companies, but these efforts will require significant investments in IT systems, financial transparency, and risk management to successfully navigate the evolving financial landscape.