This week, Central Asian media outlets reported on several critical trade and diplomatic stories, such as Pakistan and Afghanistan finalising a preferential trade agreement, the Mongolian President’s visits to Kyrgyzstan and Tajikistan, and the EU and Tajikistan initialing an Enhanced Partnership and Cooperation Agreement. They also covered crucial energy stories, such as Azerbaijan’s SOCAR agreeing to start oil exploration in Uzbekistan’s Ustyurt region, Uzbekistan becoming a net electricity exporter despite domestic shortages, and natural gas production falling. Several outlets noted multiple important financial stories, such as Kazakhstan’s Halyk Bank acquiring a 49% share in the Uzbekistani fintech firm Click and growing calls for Kazakhstan’s National Bank to intervene and stabilize the Tenge.
The EU and Tajikistan Initial Enhanced Partnership and Cooperation Agreement. Source: EEAS
Trade:
Afghanistan and Pakistan have concluded a preferential trade agreement to reduce tariffs on specific items (Daryo). Afghanistan’s Interim Deputy Minister of Industry and Commerce, Mullah Ahmadullah Zahid, and Pakistan’s Deputy Commerce Minister, Jawad Paul, signed the agreement. The deal aims to boost trade and economic cooperation between the two countries by lowering tariffs on eight agricultural products, including Afghan grapes, pomegranates, apples, and tomatoes, and Pakistani mangoes, kinnows, bananas, and potatoes. The agreement will reduce tariffs on these goods from 60% to 27%. The agreement will come into effect on August 1 for one year, with the possibility of extending or expanding the deal in the future. In the last fiscal year, trade between the countries rose by 25% from $1.6 billion to $1.9 billion.
Finance:
Kazakhstan’s Halyk Bank acquired a 49% stake in the Uzbekistani fintech company Click for $176.4 million (Kursiv). Meanwhile, Click will buy a 49% share in Halyk’s Uzbekistani subsidiary, Tenge Bank, for $60.76 million. The new strategic partnership agreement between the two entities will aid them in expanding their footprint in Uzbekistan’s burgeoning digital finance sector while remaining operationally and legally independent. Halyk possesses $37.5 billion in assets, making it the region’s largest bank. On the other hand, Click has over 20 million users. Last year, its revenues rose 35.3% while net profits increased 37.5%. Overall, this partnership will increase competition and choice across a range of industries, including retail and corporate banking.
The Association of Financiers of Kazakhstan has called for the National Bank to intervene and stabilize the Tenge exchange rate (Kursiv). On July 23, the rate increased significantly to 538.64 tenge to the U.S. dollar. Additionally, the trading volume peaked at an unusually high $270.9 million. They attributed the surge to currency speculation, believing no economic reasoning exists behind the increase. They also noted that this will push the cost of imports, increasing inflationary pressure in the economy and compelling the National Bank to maintain a higher base interest rate, potentially curtailing future economic growth. While the National Bank regularly states it does not carry out currency interventions, it conducted multiple currency interventions valued at $307.6 million in December 2024 to stabilize the Tenge. The Tenge’s overall volatility is also attributable to Kazakhstan’s exposure to the global commodity market, the government’s increasing reliance on the National Fund to finance domestic projects, and persistently high inflation.
Industrial Production:
Steel production in Kazakhstan plummeted 12.2% year-on-year in June 2025 (Daryo). Production also fell 1.4% compared to May. Additionally, flat steel output nosedived 53.2% to 225,460 tons compared to June 2024, while it decreased 1.4% compared to May. Despite the sharp decline in June, steel production rose 2.3% to 2.14 million tons in the first half of the year, while rolled metal output in the first six months grew by 10% year-on-year to 1.43 million tons. In 2024, total steel production rose 9.5% to 4.17 million tons, and flat steel production increased by 18.2% to 2.9 million tons. In addition, one of Kazakhstan’s most significant metallurgical enterprises, Qarmet, outstripped its targets by 15% for pig iron and steel, 18% for coke, 12% for sinter, and 17% for bar rolling operations in 2024. The company’s steel output surged 30% in the first quarter, with shipments rising 23%. The company expects to produce 3.7 million tons this year. They plan to invest $161 million in collaboration with China's Xinxing Ductile Iron Pipes to construct a cast iron pipe factory with an annual capacity of 200000 tons. Moreover, they recently signed a $1 billion investment agreement with China Metallurgical Group, a substantial boost to Kazakhstan’s metallurgical industry.
Diplomatic Events:
On July 18, the EU and Tajikistan initialed an Enhanced Partnership and Cooperation Agreement (Asia Plus). The agreement replaces the previous Partnership and Cooperation Agreement (PCA) concluded in 2010, strengthening bilateral relations and cooperation. It provides an updated framework for collaboration aligned with Tajikistan’s reform efforts and the EU’s 2019 EU-Central Asia Strategy. Specifically, it outlines collaboration in various areas, such as governance, trade, sustainable development, energy and the green transition, education, digitalization, transport infrastructure in the framework of the EU’s Global Gateway Initiative, and security. The initialling follows negotiations that began in 2023 and paves the way for the signing of the agreement.
The EU and Tajikistan Initial Enhanced Partnership and Cooperation Agreement. Source: EEAS
Mongolia's President Ukhnaagiin Khürelsükh arrived in Kyrgyzstan on July 20 for a state visit (24.kg). Upon arrival, he met his Kyrgyzstani counterpart Sadyr Japarov, and explored key areas of bilateral cooperation, including trade, digitalization, transport, mining, tourism, and agriculture (24.kg). After their discussions, they signed several agreements, including a joint declaration establishing a comprehensive partnership between the two countries, an extradition treaty, an agreement to recognise drivers’ licenses, a cooperation program between their ministries of foreign affairs for 2026-2027, a memorandum of cooperation between their ministries of agriculture on wool processing, an MoU on cooperation between their respective ministries of culture, an MoU between their ministries of digital development, a memorandum of cooperation between the Kyrgyzstani National Institute for Strategic Initiatives and the Mongolian National Institute for Security Studies, a memorandum of cooperation between the Kyrgyzstani Zhusup Balasagyn National University and the Mongolian State University, a memorandum of cooperation between the Office of the Plenipotentiary Representative of the President in the Naryn region and the Administration of Darkhan-Uul Aimag of Mongolia, an MoU between the Kabar and Montsame news agencies, an agreement on scientific cooperation between their national academies of science, an agreement on cooperation between Kyrgyzstan’s B. Dzhamgerchinov Institute of History, Archaeology and Ethnology of the National Academy of Sciences and Mongolia’s Institute of Archaeology, and an MoU between Kyrgyzstan’s National Television and Radio Broadcasting Corporation and Mongolia’s National Television (24.kg). The two presidents attended the Meikin Asia International Music Festival on the shores of Issyk-Kul (24.kg). They also visited the Rukh Ordo cultural center in Cholpon-Ata (24.kg). On the sidelines of the state visit, a Kyrgyzstani-Mongolian Business Forum occurred (24.kg). Kyrgyzaltyn OJSC and the Central Bank of Mongolia agreed to process and sell alloys containing gold, such as Dore alloy. Both countries’ chambers of commerce signed an MoU and an agreement creating a Kyrgyzstani-Mongolian Business Council. Both sides also announced that the first meeting of the council will occur in September (24.kg). Lastly, Ozon and KhushKhan also finalized a memorandum of intent.
State Visit of Mongolia's President Khurelsukh Ukhnaa to the Kyrgyz Republic. Source: President.mn
President Khürelsükh continued his regional tour, arriving in Tajikistan on July 23 (Asia Plus). After the official welcoming ceremony, the Mongolian President held talks with his Tajikistani counterpart Emomali Rahmon in Dushanbe. They explored bilateral trade, agriculture, tourism, mining, sustainable development, cultural, and regional cooperation. In the first five months of 2025, trade between the two countries amounted to a meagre $172000, all of which was imports from Mongolia (Asia Plus). They welcomed the establishment of a Joint Inter-Parliamentary Friendship and Cooperation Group and praised the work of the Intergovernmental Commission for Trade and Economic Cooperation. They agreed to outline a cooperation program covering various sectors to boost trade. Concluding their talks, both delegations signed several MoUs regarding cooperation between their ministries of foreign affairs, energy, agriculture, Tajikistan’s Committee for Tourism Development and Mongolia’s Ministry of Culture, Sports, Tourism, and Youth, Tajikistan’s Agency for Innovation and Digital Technologies and Mongolia’s Ministry of Digital Development, Innovation, and Communications, their respective emergencies agencies, their academies of science, Tajikistan’s Joint-Stock Company “Centers for Certification, State Services, and Development of Digital Applications” and Mongolia’s State Enterprise “E-Mongolia Academy,” Tajikistan’s Centre for Strategic Studies and Mongolia's National Institute for Security Studies, and their national museums (Asia Plus).
Investment:
According to Uzbekistan’s National Statistics Committee, the country experienced a surge in investment activity in the first half of 2025 (Daryo). Investments in fixed assets skyrocketed to $21.4 billion, an increase of 5.5% or $2.4 billion compared to the same period last year. However, investments in social and economic projects have tripled in the previous five years. While year-on-year growth during the first six months of the year declined from a high of 45% in 2024, the investment trend line remains positive. Funds from the central government accounted for $2.1 billion or 9.7% of all investment. The manufacturing sector received the largest share, securing $5.8 billion or 27.2% of all investment. During the same period, foreign investments amounted to $20.6 billion. Regarding infrastructure development, Uzbekistan added 7.18 million square meters of new housing, an increase of 7.1%, and 124.9 kilometers of new water pipelines between January and June (UZ Daily). However, foreign direct investment activity has shown signs of a slowdown across the region in 2025, especially in Kazakhstan.
China’s LinkWise Data Intelligence plans to construct two 300 MW data centers in Uzbekistan (Kun). Uzbekistani Energy Minister Jurabek Mirzamakhmudov met company representatives on July 24 before signing a memorandum of understanding (MoU). They plan to build two data centers in the Bukhara and Surkhandarya regions. The announcement reflects the significant expansion of Uzbekistan’s digital infrastructure. In June, the Saudi company DataVolt announced it would invest $6.8 billion in the country by 2030 and would construct Central Asia’s largest green data center. Uzbekistan will launch a national cloud technology platform in 2026 and expects to build twenty data centers with a capacity of 500 MW in the coming years. The First Deputy Minister of Digital Technologies, Oleg Pekos, also revealed that the centers would only use renewable energy. However, these announcements come as Uzbekistan has experienced rolling power outages during a series of heatwaves this summer, undermining the country’s ability to complete such projects.
Energy:
Uzbekistan’s Energy Ministry, Azerbaijan’s state oil company SOCAR, and Uzbekneftegaz have signed a production sharing agreement concerning geological exploration and hydrocarbon extraction in the Ustyurt region (Kursiv). They will conduct 3D seismic surveys of approximately 1000 square kilometers before beginning exploratory drilling, followed by full-scale production if they find commercially viable reserves. This agreement comes amid the rapid development of energy ties between Uzbekistan and Azerbaijan and follows President Mirziyoyev’s recent state visit to Azerbaijan. Earlier, we reported that Kazakhstan, Uzbekistan, and Azerbaijan agreed to develop the Caspian Green Energy Corridor to facilitate the export of renewable energy from Central Asia to Europe.
Last week, Uzbekistan’s National Statistics Committee reported that Uzbekistan had become a net electricity exporter, exporting $100 million of electricity, while importing $60 million during the first half of 2025 (Kun). Electricity exports skyrocketed 52.4% in the year until June, in contrast to the $66 million exported during the same period in 2024, while imports declined from $78.8 million to $65.3 million. The growth in electricity exports resulted in a surplus $35.3 million in electricity, compared to the $12.8 million deficit recorded last year. The government has attributed the increase to the addition of new capacity. Uzbekistan generated 43.5 billion kilowatt-hours of electricity between January and June, a 6.6% increase from 40.8 billion kilowatt-hours produced in 2024. However, large-scale production, 80-85% of which is generated from gas, fell from 36.9 billion kilowatt-hours in 2024 to 31.2 billion kilowatt-hours in 2025. Nevertheless, small-scale production, mostly renewable, tripled from 3.9 billion to 12.3 billion kilowatt-hours. This increase in electricity exports comes as power outages remain common across the country. Officials have underlined that extreme heat in recent days caused persistent outages in Tashkent (UZ Daily). Uzbekistan recorded its highest electricity consumption during the heatwave, with demand exceeding winter seasonal highs (Kun). While the government announced $1.14 billion to modernize Tashkent’s grid network and substations, the city and several other regions continue to experience frequent shortages (Kun). Energy Minister Jurabek Mirzamakhmudov also recently outlined plans to construct new power plants, digitalize energy grid management, build energy storage systems, and reduce losses from 14% to 8-9% by 2030 and by 10-15% by 2035. Last week, we covered a World Bank report that estimated heat-related deaths and damage to infrastructure would increase across Central Asia in the coming decades.
Additionally, “Wind and Solarshine for Electricity Distribution Panels Manufacturing” and “China Energy International Group” signed three agreements in Tashkent to upgrade Uzbekistan’s energy infrastructure (Kun). One agreement concerns consultancy services related to the development of a 100 MW energy storage project in Tashkent. They also finalized a consultancy agreement and an EPC contract regarding engineering, procurement, and construction for a 500 MW wind power plant in the Peshku district of the Bukhara region.
The "Wind and Solarshine for Electricity Distribution Panels Manufacturing" and "China Energy International Group" signed three cooperation agreements following their meeting in Tashkent. Source: Kun.uz
During a government meeting on July 21, President Mirziyoyev reviewed cooperation with foreign investors in the oil and gas sector and winter energy sector preparations (Kun). To guarantee energy supplies during the coming winter, the government will commission two new combined-cycle gas turbines with a capacity of 1065 MW at the Talimarjan thermal power plant and a 1573 MW thermal power plant in the Syrdarya region. These facilities will generate approximately 20 billion kilowatt-hours of electricity per year. They will also inaugurate several hydropower plants with a total capacity of 162 MW in the Tashkent, Namangan, Kashkadarya, and Surkhandarya regions, generating 648 million kilowatt-hours. President Mirziyoyev also instructed officials to raise production at the country’s oil and gas fields (Kun). The Uzbekistani government also approved a new roadmap for cooperation with Gazprom concerning geological exploration, digitalization, and specialist training. President Mirziyoyev recently met with the Chairman of Gazprom Neft, Alexander Dyukov, on May 13 and July 8 to explore future plans for cooperation.
Between January and June, natural gas output in Uzbekistan dropped by 3.1% to 21.786 billion cubic meters compared to the first six months of 2024 (The Caspian Post). Meanwhile, oil production decreased by 11.2% to 323800 tons. Gas condensate production fell 8.1% to 574,700 tons. However, diesel output expanded 10.4% to 557,500 tons. In 2024, natural gas also declined 4.5% to 44.597 billion cubic meters, and oil plummeted 8.5% to 713,400 tons during the year. Uzbekistan has pledged to cease all natural gas exports in the coming years.
Kazakhstan’s government approved a long-term development plan for the country’s oil refining industry (The Astana Times). The oil refining industry development concept for 2025-2040 seeks to double Kazakhstan’s refining capacity from 18 million tons to 39 million tons annually. Under the plan, they will upgrade existing refineries and construct a new petrochemical plant. The government recently completed the modernization of the Pavlodar, Shymkent, and Atyrau refineries, increasing the country’s refining capacity to 17 million tons. This level of production can cover 90-95% of the current domestic fuel demand. However, the sector requires further expansion as fuel demand will grow by 2-3% across Asia until 2030, and 1.5-2% growth in the domestic market. The government also aims to increase the refining depth to 94% from 89% and export 30% of total output by 2040. The government hopes to attract $5 billion in investments to boost polymer and fertilizer production. The strategy will endeavor to increase investment in the oil sector, which has lagged in recent years as several significant expansion projects have neared completion.
Transport:
Uzbekistani Minister of Transport Ilkhom Makhkamov recently met with the Georgian Economy and Sustainable Development Minister Mariam Kvrivishvili (UZ Daily). They considered growing bilateral transport cooperation, specifically, developing multimodal transport corridors from Central Asia through Georgia. The two ministers also discussed the China-Kyrgyzstan-Uzbekistan railway. The Uzbekistani side invited Georgia to participate in the project, integrating the new railway into the broader Middle Corridor. Lastly, they explored increasing the number of flights between their countries.
According to China’s Xinhua News Agency, rail freight between China and Central Asia grew by 25% in the first six months of 2025 (The Astana Times). In total, 7349 trains transported freight between Central Asia and China. This figure includes freight trains transiting through Central Asia on the China-Europe route. China’s total rail cargo volume expanded by 3% to 1.98 billion at the same time. Additionally, investment in the railway sector increased 5.5% to $49.6 billion.
Economic Growth and Inflation:
Uzbekistan witnessed GDP growth of 7.2% in the first half of 2025 (Kun). In 2024, GDP expanded by 6.6% during the same period. While inflation fell from 5.2% to 4.2%, growth in household incomes dropped from 11.9% to 9.5%. In addition, industrial production growth slowed from 7.8% to 6.6% while the construction sector expanded by 10.7% compared to 10.1% in the first half of 2024. Moreover, foreign trade increased by 16.1%, with export growth rising from 6.2% to 29.2% primarily due to gold sales and service sector growth. At the same time, the increase in imports slowed to 7% in the first half of the year. Earlier, we noted that inflation plateaued throughout June. Nevertheless, Uzbekistan’s Central Bank underlined that the prices of six essential items have risen 30% during the past year (Kun). According to their statistics, cottonseed oil rose 43.5%, cabbage and potatoes jumped 37%, lamb increased 32%, beef surged 30%, and methane skyrocketed 36.2%. Overall, most countries in the region continue to experience relatively high inflation because of a myriad of reasons, including price liberalization, rising prices for global commodities, and increasing obstacles to international trade. Nevertheless, Tajikistan recorded inflation significantly lower than its neighbors at 1.8% between January and June 2025 (Asia Plus). Meanwhile, inflation in Kyrgyzstan remained high at 8% in June (Trading Economics).
Mining:
On July 22, Kazakhstan’s Deputy Minister of Industry and Construction, Olzhas Saparbekov, announced that the country aims to double copper ore extraction by 2030 (Kazinform). They will double output to 300 million tons by exploiting three new deposits: Aidarly, Koksai and Benkala. Moreover, they will expand iron ore extraction by 40% to 52 million tons annually. Qarmet will also increase local processing of the ore. Its new facilities will grow copper production from 500000 to 1.2 million tons, hot briquetted iron output to 5 million tons, and steel output from 4.1 million to 13 million tons. Meanwhile, production of processed copper will rise to 91,000 tons, aluminum 163,000 tons, and lead 81,000 tons. This year alone cooper processing will increase twofold, aluminum 1.5 times, lead 2.3 times, and zinc 11%.
