a.       General context 

Since 2017, Uzbekistan has embarked in a program of deep economic, social and political reforms. Uzbekistan is a lower-middle income economy and the most populous country in Central Asia. Per capita income averaged $1,670 in 2020 or about US$ 7,350 in PPP terms (World Bank, 2021a) – making it roughly comparable to Morocco. In 2017, the Government of Uzbekistan (GoU) embarked on a wave of reforms to enact a transition from a closed, state-directed economy to an open, market-based economy. Key reforms over the last five years have notably included (i) the liberalization of prices, trade tariffs and the exchange rate, (ii) the opening of the economy to private initiative and privatization of state-owned enterprises (SOE), (iii) the extension of social safety nets to cushion vulnerable households against short-term impacts of reforms and (iv) the overhaul of public financial management– notably the reduction of off-budget expenditure and adoption of a public finance management reform strategy. The GoU has also undertaken efforts to address sectoral challenges and bottlenecks, taking steps to increase the energy supply, remove internal price distortions and remove onerous regulations that previously sustained SOEs at the cost of private sector growth. Public capital expenditures have risen from $3.5 billion in 2016 to $16.6 billion in 2019 (IMF, 2021a). Most of these resources were allocated to the renovation and modernization of infrastructure in the energy, water and transportation sectors.

Some steps have been taken by the Government to advance the green economy agenda, but the green growth would require involvement of economy-wide changes. The Government made first steps towards the sustainable green growth when the 2019-2030 Strategy for the Transition to a Green Economy^[1] and the Climate Change Strategy were approved. The Green Transition Strategy sets out targets to improve energy efficiency in core economic sectors; diversify energy supply toward renewable energy sources; adapting to the consequences of climate change; increase efficient use of natural resources, and to develop financing mechanisms.

The Government is currently in the process of updating the 2019-2030 Strategy for the Transition to a Green Economy, extending it to 2050, and many of the actions are yet to be formulated. The priority areas of the strategy, which are being discussed cover the following, inter alia: (i) improvement of energy efficiency in the basic sectors of the economy; (ii) diversification of energy consumption and development of the use of renewable energy sources; (iii) adaptation and mitigation of the effects of climate change, increase in the efficiency of natural resources and preservation of natural ecosystems; (iv) development of financial and non-financial support mechanisms for the green economy.

An Inter-Agency Council led by the Minister of Economy and Finance is the overarching body responsible for the implementation of the 2019-2030 Green Economy Transition Strategy, Green Growth Program and their Action Plan^[2].

The Nationally Determined Contribution (NDC) submitted by the Uzbekistan’s Government in October 2021 commits to an ambitious target to cut GHG emissions per unit of GDP by 35 percent by 2030 (base year 2010). This more than tripled the previous target foreseen in the Presidential Resolution. The NDC follows the Government’s plans to increase the share of renewable energy sources to 25 percent of total power generation, double the energy-efficiency indicator relative to the level of 2018, halve the energy intensity of GDP, and decrease industrial consumption of natural resources.

These developments recognize the country’s large renewable energy potential for diversifying the energy mix and emphasizing the need for clean energy transition. Several indicators to monitor the progress of these targets are included in the country’s National Development Goals, the Green Economy Strategy, the Climate Change Strategy, the National Biodiversity Strategy, and the Concept for the Development of the Electric Power Industry. These broad aims, however, still need to be evaluated in terms of the costs involved, priorities between options, how financing will be mobilized and how any social impacts will be addressed.

Notwithstanding quality of the NDC documentation prepared for the COP26, the monitoring of the progress towards the full realisation of the NDC’s objectives using the appropriate tools and best methodologies - the Monitoring Reporting and Verification (MRV) – (standard and dynamic package from the UNFCCC secretariat), has shown a significant room for improvement of the MRV process in Uzbekistan, in terms of efficiency and accuracy, to be part of the Programme.

The Green Growth Strategic Framework (GGSF) was prepared in 2022 by the GoU, and an ad hoc working group involving the donors’ community, coordinated by AFD, the World Bank and UNDP was set up. The GGSF document was endorsed by the working group. Subsequently the Ministry of Economy and Finance, the First Deputy Minister, I. Norkulov with the Green Economy Department coordinated with other ministries and the President Administration for the preparation the Presidential decree n°436 “Measures to improve the effectiveness of reforms aimed at the transition of the Republic of Uzbekistan to a "green" economy until 2030”, issued on December 02, 2022. This decree includes most of the key actions listed in the GGSF. This Decree stipulates to set-up a Technical Secretariat for the coordination of the Green Growth policy among the executive bodies. The Secretariat in due to be set up withing the Ministry of Economy and Finance, in the Department of Green Economy Development (resulting from the administrative reform).

a.       Specific context of the Green Economy Public Policy Loan Program and of Green Economy Technical Assistance Program (GETAP)

To support the efforts mentioned above, a wider green economy public policy loan program designed and financed by the AFD. This five-year program (2022-26) consists in: (i) an in-depth policy dialogue on the formulation, implementation and evaluation of the GGSF, (ii) a series of three concessional budget support loans disbursed upon completion of pre-agreed reform targets and (iii) a technical cooperation project funded by dedicated grants.