Case study: private sector development in Uzbekistan
16/06/2025
On 30 July 2024, the Record Emerging Market Sustainable Finance (“EMSF”) strategy was the sole investor in an Uzbek soum-denominated bond issued by the International Finance Corporation (“IFC”). The bond’s size was UZS 250 billion, equivalent to USD 20 million, with a tenor of six years and an amortising structure.
Background
Uzbekistan is a landlocked country in Central Asia with a population of 36.4 million. Following the country’s independence from the Soviet Union in 1991, the country remained insular and repressive. Its economy was characterised by state dominance, minimal foreign investment, and endemic corruption.
However, beginning in 2017 under President Shavkat Mirziyoyev, the country has embarked on an ambitious path of economic modernisation and liberalisation. It aims to halve the poverty rate by 2026 and reach upper-middle-income status by 2030. Recent developments include the privatisation of numerous state-owned enterprises, establishment of an independent energy regulator, and removal of various price controls. Significant progress has also been made on issues such as child labour, educational enrolment, and access to clean drinking water. However, private sector participation remains highly limited in Uzbekistan. Empowering the private sector is a top development priority for both the government and multilateral development institutions, who remain committed to working with local authorities and supporting the country’s agenda for economic, social and regulatory reform.
Within Record EMSF strategy’s portfolio of bond issuers, the largest lenders to Uzbekistan are the Asian Development Bank, the European Bank for Reconstruction and Development, and the World Bank Group (which includes IFC). Together, our issuers have over USD 13.2 billion in outstanding loans to Uzbekistan. Technical and financial engagement has markedly increased since 2017, and IFC’s portfolio of investment commitments in Uzbekistan is approx. USD 500 million.
Our Investment
The investment in an Uzbek Soum-denominated bond enables IFC to lend to Uzbek borrowers in their local currency, removing their currency risk. In the absence of local currency lending, Uzbek borrowers would be exposed to potential devaluation shocks that could make debt more risky, more costly, and unsustainable. This issuance also marks IFC’s longest-dated UZS- denominated bond to date, and it contributes to funding a senior A loan valued at up to USD 100 million to the end borrower.
The bond proceeds will finance a leading domestic beverage company’s development of a greenfield bottling plant, renewable energy installations, and green buildings. Anticipated results include reduced water and energy usage as well as meaningful job creation throughout the supply chain. IFC will also support the company in raising female representation among new hires and management. Moreover, to encourage the company to achieve its sustainability targets, the IFC loan is specially structured as a sustainability-linked loan.