Central Bank of Uzbekistan does not see inflationary risks from sugar import quota

The Central Bank of Uzbekistan has adjusted its inflation forecast for 2026, raising it from 6.5% to 7%. The main reason for this revision is the expected increase in the cost of heating and hot water.

This was announced on November 4th at a press conference by Samigjon Inogamov, Director of the Monetary Policy Department of the Central Bank. During the event, journalist Vaqt.uz asked whether the regulator takes into account the planned 30% increase in heating tariffs and how this will affect public expectations regarding inflation.

Nodirbek Achilov, Deputy Chairman of the Central Bank, confirmed that all announced changes in regulated prices, including heat supply tariffs, are already factored into the calculations. He explained that, similar to the case with liquefied gas, the one-time impact of the heating tariff increase has been accounted for in the current forecast, and all changes announced so far are included in next year's forecasts, which led to the 7% inflation forecast.

Samigjon Inogamov added that the increase in hot water and heating tariffs was initially factored into the original inflation forecast at 6.5%, but the actual declared parameters turned out to be higher than initial expectations, requiring an update of the end-of-year inflation estimate to 7%.

According to him, the tariff change became one of the key factors influencing the Central Bank board's decision to maintain tight monetary conditions and keep the key rate at 14%.

In response to press representatives' questions, Nodirbek Achilov specified that the Central Bank board did not consider raising the key rate on November 4th due to the rise in regulated tariffs. The Deputy Head of the Central Bank noted that, according to their calculations, the initial impact of the tariff changes would be short-term and insignificant, so the issue of raising the rate was not discussed.

Two scenarios were considered at the meeting: either maintaining the rate at 14% or lowering it to 13.5%. Achilov emphasized that when making the decision, the regulator analyzed not only the direct increase in the cost of individual services but also the potential risk of this growth spreading to other goods and services.

The regulator deems it necessary to continue tight monetary policy to curb secondary effects of the tariff changes. The Deputy Head of the Central Bank stressed that the direct impact of tariff adjustments is assessed as predominantly one-off, and maintaining tight conditions should limit their influence on stable components of inflation and inflation expectations.

Furthermore, Achilov mentioned that the government has prepared social support measures for the population, which are expected to help mitigate the impact of tariff increases on household purchasing power and income.

It should be recalled that previously, the Ministry of Construction and Housing and Communal Services presented a draft government decree for discussion, which provided for an increase in tariffs for centralized heating and hot water supply. In Tashkent, the company Veolia Energy Tashkent proposed increasing the cost of heating by approximately 30%: from 241.44 to 314 soms per square meter of heated area per day.

It was also planned to raise the hot water tariff with a meter by 30%, increasing it from 8928.67 to 11,607 soms per cubic meter. According to the draft, the fee for hot water without a meter could decrease from 52,303 to 45,330 soms per person monthly due to changes in the calculation methodology.

The draft proposed introducing new tariffs starting November 1st, but they have not yet received official approval. Previously, the Central Bank forecasted inflation for the end of 2026 at 6.5%; in September, annual inflation was 6.4%, which was higher than the August figure of 6.2%. The Central Bank's goal is to achieve a stable reduction in inflation to 5% in the second half of 2027 and maintain this level in subsequent years.

The Central Bank of Uzbekistan decided to keep the key interest rate at 14% per annum. This decision was made against the backdrop of sustained domestic demand and persistent concerns about price growth.

However, the regulator adjusted its forecasts: expected economic growth by the end of 2026 has been increased to 8%, and the inflation forecast—to 7%.

Overview of the Current Economic Situation

Explanations from the Central Bank indicate that despite some decrease in inflation expectations, price pressure in the economy remains significant. In September, annual inflation stood at 6.4%, which is higher than the 6.2% recorded in August. The acceleration of inflation is attributed to the rising cost of fuel, fruits and vegetables, and certain types of services. Inflation in the services sector reached 7%, while core inflation remained at 5.5%.

Inflation expectations among the population for the next year decreased to 8.7%, and among entrepreneurs—to 9.2%. Nevertheless, the regulator warns of risks to the domestic market related to the high volatility of global prices for energy resources and food, as well as potential increases in regulated tariffs.

Revision of Macroeconomic Forecasts

The Central Bank also revised its economic forecasts. In the first nine months of 2026, Uzbekistan's GDP showed growth of 8.3%. Thanks to active investment activity, development of the construction industry, industry, and the service sector, overall economic growth by the end of the year is now projected at around 8%.

The inflation forecast for the end of the year was raised from an initial 6.5% to 7%. Despite this increase, the Central Bank plans to reach the target inflation rate of 5% by the end of 2027. To control price growth, the regulator intends to maintain a tight monetary policy. The next meeting regarding the key rate is scheduled for December 16.

It was previously noted that in September, consumer prices in Uzbekistan increased by 0.7%, with the largest growth recorded for specific vegetables, fuel, and education services.

According to a report by Spot, referencing Cabinet of Ministers Resolution No. 417 dated July 31, 2026, Uzbekistan intends to establish an annual quota for white sugar imports of 300,000 tons, as well as provide tax incentives to local sugar producers.

This resolution has not yet been published in the national legislative database Lex.uz. The quota is planned to be distributed equally among beverage producers, confectionery manufacturers, and other food product producers, with each group allocated 100,000 tons.

The Cabinet of Ministers will approve the quota for the next year in November, based on proposals from the Ministry of Economy and Finance, the Committee for Competition Promotion and Consumer Rights Protection, and the National Statistical Committee. Furthermore, the quota may be reviewed every six months, taking into account domestic consumption, the degree of utilization of production capacities, as well as domestic and import prices.

Quota distribution will be carried out through electronic online auctions. The launch of this system is scheduled for December 1, 2026, and it will be integrated with the Customs Committee's Single Window system. Auction results will be available for public review.

The Ministry of Economy and Finance has been instructed to prepare amendments to the Tax Code within one month. According to the proposal, local sugar producers will be exempt from corporate income tax until January 1, 2031, and the property tax rate will be set at 50% of the standard rate. These companies will be obliged to use the savings obtained exclusively for debt repayment.

The repayment period for sugar producers' debts to Uzpromstroybank will be extended to five years, including a grace period of up to two years. Payment schedules and interest rates will be adjusted in accordance with the bank's current tariffs. Producers must also fully restore their accounts receivable by the end of 2026. The resolution provides for attracting direct foreign investment of 50 million US dollars to support these companies.

From August 1, 2026, to August 1, 2031, the Entrepreneurship Development Company will compensate 50% of the interest expenses on foreign currency loans used for raw material procurement, with a limit of five percentage points. This measure applies to loans taken by local sugar producers, regardless of their credit ratings or classifications, including loans with overdue payments.

Starting January 1, 2027, state organizations and state enterprises will be required to prioritize the purchase of white sugar from local producers. All sugar produced in local factories will be sold through the commodity exchange, with exports permitted without restrictions. Producers will be able to obtain free certificates confirming the local origin of their products and be included in the Register of Local Products and Producers.

The resolution also strengthens financial supervision over sugar producers. Companies are advised to appoint financial directors from bank representatives, empowering them to block decisions that could worsen the borrower's financial situation. Available funds must be directed towards early debt repayment, and dividend payments will be prohibited until all obligations to the bank are settled.

Under certain circumstances, including launching projects outside the business plan, increasing debt burden, payment delays, or failure to ensure revenue deposit into Uzpromstroybank, collateral may be transferred to the bank's balance sheet.

The Customs Committee will publish quarterly data on the import of socially significant foodstuffs by the 10th day of the month following each quarter. This data will include import volumes, value, and average customs value per ton, broken down by supplying country and importer.

Sugar producers are also advised to engage foreign consultants to develop strategies, conduct audits, and prepare financial recovery measures. They are encouraged to digitize production, implement a GMS management system, and adopt international inventory accounting standards.

Additionally, the measures include protection of sugar plants by the Internal Affairs Ministry's security department and 24-hour video surveillance of production facilities.