This week, the media across Central Asia covered several critical economic stories, such as Kazakhstan’s lower house adopting a new tax code, Kazakhstan recording its first net outflow of U.S. investment, and the IMF’s latest GDP projections for the region. However, several outlets noted the continued acceleration of inflation in the region, particularly in Uzbekistan and Kazakhstan. The media reported on diplomatic events like the CIS Regions Forum and Economic Council meetings in Tashkent. They also noted the commencement of construction work on a 12-kilometer tunnel for the China-Kyrgyzstan-Uzbekistan railway. Lastly, they covered Russia and Uzbekistan signing a new migration protocol and Russia extending the deadline for migrants to legalize their status.
Kyrgyzstan and the IsDB signed several agreements on the sidelines of the World Bank and IMF Spring meetings last week. Source: Daryo
Economic Forecasts and Statistics:
The International Monetary Fund (IMF) anticipates Uzbekistan will experience 6% GDP growth in 2025 (Daryo). Following its 2025 Article IV Mission to Uzbekistan, the IMF's Staff Concluding Statement outlined that robust domestic consumption, strong remittance flows, increasing investment, rising exports, and structural reforms support its growth forecast. They noted that while annualized inflation reached 10.3% in March, they expect it to gradually decline to 8% by the end of 2025, aided by a tight monetary policy. They underlined the government’s success in reducing the deficit to 3% of GDP and urged them to maintain the $5.5 billion borrowing ceiling. The IMF has projected that Kazakhstan’s economy will grow by 5% in 2025 and 3.9% in 2026. They also expect inflation of 7.2% this year, declining to 6.2% in 2026. Meanwhile, they have forecasted 7% growth in Kyrgyzstan this year. However, they expect the country’s GDP growth to stabilize around 5.25% in the following years. While they project inflation will remain within the Central Bank’s target 5-7% range, they expressed concern regarding the country’s current account deficit, which has ballooned due to several large infrastructure projects, such as the Kambarata-1 hydroelectric power plant (HPP). According to the IMF projections, GDP growth in Tajikistan will come in around 6.7%. They expect inflation of 6%, within the Central Bank’s target range. The current account deficit also remains stable at 2.5% of GDP. Overall, they urged regional governments to continue pursuing a tight monetary and fiscal policy while enacting necessary budgetary and financial sector reforms, such as privatizing state commercial banks. Earlier, we reported on the projections of the World Bank and the Asian Development Bank.
During the first quarter of 2025, Uzbekistan experienced GDP growth of 6.8%, according to the country’s National Statistics Agency (Kun). Initial reports indicate the country’s quarterly GDP reached $25.8 billion. The industrial sector saw growth of 6.5%, while agriculture grew by 3.5%, construction by 10.7%, and services by 7%. However, oil and gas production fell by 9.8% and finished metal products by 20.9%. Investments in fixed capital also rose by 7.9%. Uzbekistan’s National Statistics Agency also reported that inflation fell to 0.7% in April, compared to 0.9% in March (Daryo). Meanwhile, annualized inflation declined to 10.1%, 2% higher than at the same point last year. However, cumulative inflation since the start of 2025 stands at 2.9%, compared to 2.6% over the same period in 2024. The services sector experienced the highest inflation of 1% in April and an annualized rate of 26.1% due to tariff increases earlier this year.
According to the Bureau of National Statistics, annual inflation rose to 10.7% in Kazakhstan in April, compared to 10% in March (Kursiv). While consumer price growth slowed during the month from 1.3% to 1.2%, prices for services rose by 15.7%. Meanwhile, prices for food and non-food items increased by 8.5% and 8.9%. The rise in inflation comes after the National Bank increased its base interest rate by 1.25% to 16.5%.
Investment:
Kyrgyzstan and the Islamic Development Bank (IsDB) have signed several agreements worth $129 million to support three energy, agriculture, and education projects (Daryo). The President of the IsDB, Dr. Muhammad Al Jasser, and the Kyrgyzstani Minister of Finance, Almaz Baketaev, signed the agreements. The three projects include funding for agricultural mechanization, constructing electricity transmission lines and substations in Tamga and Karakol in the Issyk-Kul Region, and a $15 million Global Partnership for Education grant to improve access to education. The Kyrgyzstani delegation also discussed future avenues for cooperation with the representatives of the IsDB.
Kyrgyzstan and the IsDB signed several agreements on the sidelines of the World Bank and IMF Spring meetings last week. Source: Daryo
Kazakhstan has experienced its first net outflow of U.S. FDI (Kursiv). In 2023, foreign direct investment (FDI) from the U.S. plummeted 80%. However, the situation worsened in 2024, with a net outflow of $830 million in U.S. investment. This outflow is the first since the National Bank began recording investment flows in 2005. Data from the National Bank indicates the U.S. has been the third largest investor in Kazakhstan ($10.3 billion) over the last five years, with the Netherlands in first place ($30.3 billion) and Russia in second ($11.7 billion). Dutch and U.S. investments are heavily concentrated in the energy sector, with major companies, such as Royal Dutch Shell, Chevron, and ExxonMobil, involved in developing the Tengiz, Kashagan, and Karachaganak fields. At the same time, Russian investments doubled year-on-year to $4 billion. Of the roughly $17 billion in FDI last year, the mining sector received $6.4 billion, while the vehicle repair, telecommunications, manufacturing and financial services sectors also received substantial sums. Nevertheless, Kazakhstan’s economy relies on FDI in the commodities sector, exposing it to external instability. In 2023, inflows fell by 16.9% to $23.4 billion, and net inflows halved from $6.5 billion to $3.2 billion. However, foreign investors have returned to Kazakhstan’s bond markets after a drop in activity in 2022. Investments in government bonds grew 2.5 times to $2.3 billion, as yields reached 16.7%. While foreign participation in the bond market reached 4%, it has surged from 4.4% to 29.8% between 2021 and 2023, primarily due to capital outflow from Russia.
During the Iran Expo 2025, the Tajikistani Minister of Industry and New Technologies of Tajikistan, Sherali Kabir, met the First Vice President of Iran, Ali Najafi Khoshroudi (Asia Plus). They discussed the importance of developing industrial cooperation and explored establishing an industrial park in Tajikistan with the help of Iranian investments. The Tajikistani delegation visited Iran’s Innovation and Technology Centre and highlighted the significance of the Innovation and Digitalization Center in Dushanbe. The delegation also met with the CEO of the Mobarakeh Steel Company, Saeed Zarandi, to explore potential cooperation in developing Tajikistan’s steel industry. Last week, Kyrgyzstan’s Economy Minister, Bakyt Sydykov, held several meetings in Iran to enhance economic ties (24.kg). He met with First Vice President Mohammad Reza Aref to discuss increasing trade turnover, several joint projects, and possibly exporting Kyrgyzstani goods to the MENA region through Iran. He also held talks with the President of the National Development Fund of Iran, Mahdi Ghazanfari. Following their deliberations, they signed a MoU to establish a joint investment committee. The MoU also provides €50 million in credit from the Iranian National Development Fund.
Tajikistani delegation attends the Iran Expo 2025 in Tehran. Source: Khovar.tj
Following the establishment of Uzbekistan’s National Development Fund in August 2024, the Uzbekistani government has confirmed that Franklin Templeton Asset Management has begun managing the fund (Daryo). The fund currently possesses $1.68 billion in assets and controls minority stakes in 18 state-owned enterprises. The fund plans to list itself on the Tashkent stock exchange and several other leading stock exchanges to boost transparency and investor confidence. The fund aims to prepare state-owned enterprises for public offerings and attract institutional investors, boosting Uzbekistan’s economy.
Kazakhstan has launched a golden visa program to attract foreign investors (The Astana Times). Under the program, foreign nationals who invest over $300000 in Kazakhstani companies or locally traded securities can receive an investor visa. They can also obtain a residence permit for up to ten years. Similar programs have been enacted worldwide to attract investment.
Energy:
Kazakhstan intends to extend its ban on liquefied gas exports (Daryo). The government first introduced the measure to prevent the export of liquefied gas and subsequent price fluctuations and shortages on the domestic market, as liquefied gas prices are significantly lower in Kazakhstan compared to neighboring countries. The Interdepartmental Commission on Foreign Trade Policy and Participation in International Economic Organizations and the Minister of National Economy Serik Zhumangarin made the decision. The ban will be in effect for six months (Tengri News). In October 2024, former Energy Minister Almasadam Satkaliyev noted that some regions had shortages of liquefied gas. In 2023, he also urged people not to convert their vehicles to run on auto-gas, emphasizing that consumption had exceeded the planned volume for the year.
Kazakhstan’s Minister of National Economy Serik Zhumangarin held a meeting with officials to extend the ban on liquefied gas exports. Source: Daryo
Masdar and Total Eren are slated to construct two 1 GW wind power plants in the Zhambyl region of Kazakhstan (The Astana Times). Masdar will build its plant in the Sarysu and Talas districts at a cost of $1.4 billion. They will begin construction in 2026 and expect to finish in 2029. Meanwhile, Total Eren anticipates spending $1.9 billion on its plant in the Moiynkum district. They aim to complete their project by 2028. In 2024, the region commissioned a 100 MW wind power plant and expanded the capacity of the AEC ASA solar power plant by 20 MW.
KazMunayGas and China National Offshore Oil Corporation (CNOOC) recently concluded a strategic partnership agreement (Kazinform). First Deputy Chairman of KazMunayGas Kurmangazy Iskaziyev and CNOOC General Manager for Projects in Russia and Central Asia Liu Bo signed the agreement on the terms for implementing the Zhylyoi offshore energy project in the northeastern Caspian Sea. Both entities will have a 50% stake in the project. According to the project’s program, they will conduct 3D seismological exploration, drill one 2000m deep supra-salt exploratory well, and drill a 4500m deep pre-salt exploratory well, depending on the seismological data. KazMunayGas and CNOOC signed an agreement on joint geological exploration in August 2024. CNOOC is one of the world’s leading companies in the oil and gas industry, with projects in over 20 countries.
KazMunayGaz and CNOOC signed an agreement concerning the Zhylyoi offshore energy project. Source: Kaz Inform
Environment:
Experts from Kazakhstan and France have begun drafting a master plan for the conservation of Lake Balkhash (The Times of Central Asia). This week, Kazakhstan’s Ministry of Water Resources and Irrigation held a two-day seminar in Almaty, where they presented a roadmap for the plan. This roadmap included an analysis of the water resources in the Ile-Balkhash basin, a study of groundwater reserves, plans for creating a digital platform to monitor water levels, and the automation of hydraulic engineering facilities. Experts from the French Development Agency (AFD) and the French Geological and Mining Research Bureau are key partners on the project and attended the seminar. Last December, Kazakhstan’s Ministry of Water Resources and Irrigation signed a $1.35 million agreement with the aforementioned agencies at the One Water Summit to study the basin and develop a master plan for the sustainable management of the lake. Water levels in the lake have recently improved as Kazakhstan has diverted 3.8 billion cubic meters of water from the Kapchagai reservoir to the basin. The development of the sustainability master plan is also urgent as Kazakhstan plans to build its first nuclear power plant on the shores of Lake Balkhash near the village of Ulken.
Kazakhstan’s Ministry of Water Resources and Irrigation reported that Kyrgyzstan will supply Kazakhstan with 600 billion cubic meters of water during the irrigation season in 2025 (KazTAG). They also noted that Kyrgyzstan has provided 45 billion cubic meters since early April. They expect Kyrgyzstan to supply another 400 billion via the Talas River and 180 billion via the Shu River. They plan to use the water to irrigate farmland in the Zhambyl region.
Kazakhstani prosecutors have fined the Chinese construction company XINXING for environmental damage (Orda.kz). The company allegedly built an asphalt concrete plant and a crushing plant without the required permits. The verdict was upheld upon appeal.
Diplomatic Events:
The first CIS Regions Forum took place in Tashkent on April 29 (UZ Daily). In his opening address, Uzbekistan's Deputy Prime Minister Jamshid Khodjaev noted the importance of expanding interregional political and economic cooperation to develop CIS member states' economies. In recent years, CIS member states have established 130 special economic and cross-border trade zones. They have also concluded 6000 interregional agreements. During the forum, participants discussed digitizing customs procedures, fully implementing the free trade agreement, and eliminating trade barriers. At the conclusion of the forum, they signed ten agreements concerning trade, scientific, industrial, and cultural cooperation. The 105th meeting of the CIS Economic Council also occurred in conjunction with the Regions Forum (UZ Daily). The council meeting brought together officials from across CIS member states to discuss expanding economic cooperation. For instance, they approved an initiative to grow mutual investment within the CIS through 2030 and draft concepts on standardizing air traffic control systems, healthcare, light industry, and engineering. In addition, they explored antitrust regulations, the electronic exchange of tax information, and the CIS interregional and cross-border cooperation roadmap through 2030.
Representatives of CIS member states participated in the first CIS Regions Forum and the 105th Economic Council meeting in Tashkent. Source: Gov.Kz
Infrastructure:
Kyrgyzstan’s Minister of Water Resources, Agriculture and Processing Industry, Bakyt Torobaev, officially launched the construction of a 12km tunnel for the China-Kyrgyzstan-Uzbekistan railway at a ceremony in Jalal-Abad region attended by officials from all three countries (Daryo). The railway will be 523km in length and cost $4.7 billion. It will significantly improve regional connectivity and create 20000 jobs, bolstering the economies of countries in the region. The project involves the construction of 27 tunnels and 46 bridges, accounting for 40% of the route. Kyrgyzstani President Sadyr Japarov, Chinese President Xi Jinping, and Uzbekistani President Shavkat Mirziyoyev attended the virtual official groundbreaking ceremony on December 27 last year (UZ Daily).
Migration:
The Uzbekistan-Russia interdepartmental working group on labor migration recently held their first meeting in Moscow (Kun). During the meeting, the Prosecutor Generals of both countries agreed to strengthen the protection of the rights of Russian and Uzbekistani citizens in their respective countries. They discussed various migration issues, such as the legalization of migrants’ status. This agreement follows Russian President Vladimir Putin’s announcement that Russia will extend the deadline for foreign nationals to legalize their status in Russia until September 10 (Asia Plus). The original deadline was April 30. The deadline applies to all persons on the controlled persons register introduced in February to document all those with no legal right to be in Russia. According to Russian Interior Minister Vladimir Kolokoltsev, 685000 people are on the register. Currently, those on the register can have no legal or social rights and are subject to deportation.
Tax:
The lower house of Kazakhstan’s parliament, the Mazhilis, has passed the country’s new tax code in its second reading (Kursiv). Berik Beisengaliyev MP delivered a report on the tax code before MPs voted. While the government initially intended to set the value-added tax (VAT) rate at 20%, it lowered it to 16%. They also set the threshold for VAT registration to 40 million tenge or $78227. However, VAT on medicines and medical services will be reduced to 5% in 2026 and 10% in 2027, respectively. They will exclude guaranteed medical support, medical insurance, treatment of rare diseases and socially significant illnesses from VAT. They will also exempt staple foods and locally printed books and publishing services. To lower the tax burden on farmers, the government will increase the VAT they can credit from 70% to 80% and will continue to benefit from a 3% corporate income tax rate. The government intends to raise the corporate income tax on companies operating in the social sphere from 5% in 2026 to 10% in 2027. They also revealed that the tax credit for disabled people will be 5000 times the minimum calculation index (MRP). Meanwhile, they will raise corporate income tax for banks and gambling enterprises to 25%, while the income banks make from lending will be taxed at 20%. The new tax code also introduces a progressive income tax. The government will tax income below 8500 MRP (around $65515) at 10%, while it will tax all income greater than that amount by 15%. Investors will pay 5% in income tax on dividends from securities up to 230,000 MRP (about $1.9 million) and 15% on all earnings above that amount. They will also increase excise taxes on energy drinks, tobacco, and alcohol. To promote the efficient use of agricultural land, they will raise rates 100 times for wasteful land use. The government has also committed to removing 128 (worth $2.5 billion) out of 453 existing tax benefits (worth $6.5 billion) (The Astana Times). They also expect to establish a clearer set of tax incentives for companies. They have proposed 100% tax deductions on expenses related to construction, equipment and software purchases. They also plan to exempt energy and mining companies from the mineral extraction tax for up to 5 years to enable the development of low-margin fields. They have also advanced an alternative subsoil use tax for mature fields. However, any savings from these incentives must be reinvested and cannot be paid as dividends. The government will reduce the number of special tax regimes to three, including one for the self-employed, another for peasant and small farming households, and a new simplified tax declaration combining the retail sales tax and the simplified form of tax declaration into a special tax regime with a rate of 4%. Maslikhats, local legislatures, can adjust this rate by 50%. The income limit for the latter will be set at 600000 MRP or $4.6 million and will apply to businesses that sell directly to consumers. The new tax code will be sent to the Senate for approval.
