Moody's Investors Service ("Moody's") has today upgraded the Government of Uzbekistan's long-term issuer and senior unsecured ratings to Ba3 from B1 as well as the senior unsecured MTN program ratings to (P)Ba3 from (P)B1, and changed the outlook to stable from positive.

The upgrade reflects Uzbekistan's demonstrated commitment to a comprehensive reform program in recent years that has been sustained throughout two significant, consecutive crises and which Moody's expects to continue. Despite the coronavirus pandemic and Russia / Ukraine military conflict, real GDP growth, fiscal and external metrics have remained strong, reflecting the economy's resilience and improved policy effectiveness in recent years. As fiscal and monetary tools continue to develop, Moody's expects continued improvements in institutions and governance.

The stable outlook reflects risks of rising debt levels beyond Moody's current expectations and geopolitical risks to growth. However fiscal risks are mitigated by the government's relatively low and affordable debt burden, and substantial assets held in the Uzbekistan Fund for Reconstruction and Development (FRD).

Concurrently, Moody's changed Uzbekistan's local and foreign currency country ceilings to Ba1 and Ba3 from Ba2 and B1, respectively. The two-notch gap between the local currency ceiling and the sovereign rating reflects the government's large footprint in the economy and weak policy predictability, balanced partially by moderate external vulnerability risk that reflects a persistent, though declining, current account deficit and moderate external debt stock that is on largely concessional terms. The two-notch gap between the foreign currency ceiling and the local currency ceiling incorporates Uzbekistan's relatively weak monetary and fiscal policy frameworks, and a restricted capital account that may be prone to further transfer and convertibility restrictions in times of stress.