Harnessing Uzbekistan’s Potential of Urbanization

Normal Guidance Note. Harnessing urbanization can attract countercyclical investments in urban development, 
including construction of urban infrastructure and housing, thereby creating additional value, jobs, and welfare 
opportunities at a time of global economic downturn and uncertainty due to the COVID-19 pandemic.
Part I: State of the Urban Sector
Since Uzbekistan’s independence, urbanization in the country has lagged behind, leading to significant 
regional imbalances. Currently at just above 50%, the rate of urbanization has been inflated by the past 
administrative reclassification of rural settlements. National mobility constraints caused a significant level of 
out-migration, and low urban housing affordability further stifled rural to urban movement. More than half of 
the urban population is concentrated in 7.5% of the national territory, in the easternmost regions. Tashkent 
dominates the urban hierarchy and hosts much stronger urban economic activities and quality of urban 
infrastructure than all other cities. The national economy is still dominated by state-owned enterprises, with the 
private sector in its infancy. The informal economy, coupled with remittances, still provides more than half of 
household earnings. 
Urban governance is highly centralized and municipalities have uncertain mandates and resources. 
Governance in Uzbekistan is partially deconcentrated, with appointed regional governors and mayors. Line 
ministries and related agencies are responsible for the design and implementation of urban investment programs 
and for the centralized management of urban services. With the exception of the capital city, municipalities 
are subject to the jurisdiction of regional governors in the allocation of mandates and resources. Subnational 
governments are responsible for 70% of public expenditure, only a fraction of which is devoted to urban systems 

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Executive Summary 
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and quality of life, and for the collection of 30% of fiscal revenues. Budget transfers are neither formula-based nor 
responsive to performance which discourages efficient and transparent public financial management. 
Housing and urban infrastructure and services have declined and do not provide for sufficient livability. 
Uzbekistan’s housing stock is old and ill-maintained. Housing units, including traditional individual low-rise 
houses and Soviet Union-period apartment blocks, were privatized after independence and are properly 
recorded in the cadastral system. Yearly supply of new housing is well below the demand levels and urban housing 
affordability is very low. Urban planning is antiquated and does not provide for integrated frameworks or for 
strategic, local economic development. Water supply, sanitation, solid waste management, district heating, and 
energy and gas systems have suffered from a lack of capital investment and systematic maintenance, and from 
non-market pricing of services. Urban road networks are incomplete and public spaces underequipped. Urban 
transit systems have been mostly abandoned in favor of individual motorization. Overall, urban livability is low 
across Uzbekistan’s cities.
Environmental degradation, urban natural hazards, and climate change risks are increasing. Water scarcity is 
significant and expected to increase by 45% by 2030—affecting urban supply if unattended—due to increased 
transboundary usage and climate change. The quality of urban environment and public health is affected by the 
unsanitary disposal of solid waste and wastewater, including municipal and industrial effluent causing severe 
water pollution. Air pollution is also considerable, resulting from industrial emissions, suspended dusts, toxic 
chemicals, and particulates from indoor stoves. Uzbek cities are exposed to a high level of seismic and flooding 
risks due to glacial lake outburst, deforestation, and landslides. Climate change is altering precipitations and 
ambient temperatures, making heat waves more frequent and intense.