Uzbekistan Emerges as the Rising Star of CIS Bond Markets
By Odilbek Isakov, CEO and Co-Founder of Infrasia Capital, Managing Director and Co-Founder of Finasia Capital
People like emerging markets because it is interesting. But not always can one manage to attract the broadest possible interest, because people are also selective - they like countries with dynamism, consistent growth story, confident to push tough reforms, and, of course, offering value for the time and effort spent to understand it.
And yes, Uzbekistan is one of them - it has been the talk of the market for some time now. Since its 8-times oversubscribed debut offering in 2019, many things have happened - global pandemic, Russian invasion of Ukraine, war in Caucasus, global inflation, US interest rate hikes, Trump's trade war and many more geopolitical events in Eurasia.
And yet Uzbekistan remains unscathed. Not only has the sovereign continued its capital markets journey with sophisticated ESG and local currency tranches nearly every year since 2019, but it has also encouraged the Uzbek Inc. to come out and shine in full glory.
The result is clear - Uzbekistan has become the pumping heart of CIS bond markets. Its credit is improving (Fitch just upgraded, others changed to positive outlook), while spreads are tightening. At the same time, the issuance volumes are up by a whopping 50%: to USD3.7bn during Jan-Jul 2025 from USD2.5bn issued at the same period last year with debut issuers each year.
Substance is always over form.
Main factor of this success is Uzbekistan's political, economic and social stability with reforms driven agenda from the country's leadership. Also of importance is the country's strong economic growth averaging over 6% in the recent years, which resulted in Uzbek GDP nearly tripling since 2018 to USD125bn this year and is expected to hit USD200bn by 2030. UZS - local currency - has been stable and inflation, which is already in single digits, is expected to reach the 5% target by 2028.
Moreover, many state owned corporates and banks have gone through a successful transformation process resulting in improved financial performance and creditworthiness. With multi-billion dollar investment needs in a rapidly growing economy, global capital markets represent an important source of funding at competitive pricing.
Market capacity for Uzbekistan credit is expanding too which is largely because investors tend to understand Uzbekistan better. There are ever more Uzbeks in large international conferences while more investors are making the trip to Tashkent on a reverse roadshow. Investment banks - from the giants like Citi and JP Morgan to EM-focused MUFG, SocGen and Standard Chartered to even more niche players like ADCB or RBI - are all expanding their respective coverages with strategic long term views.
The real test comes when Uzbek private sector companies come out. Will the investor community embrace them despite no implicit sovereign support? Will this re-price the Uzbek curve which has so far been priced on fundamentals, not just broader EM trends?
I guess we will have to find out.