Social Protection

Building social protection floors
and comprehensive social security systems

Uzbekistan

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Situation and Priorities

Social protection situation

Uzbekistan's investment of 7% of GDP in social protection,  is lower than in many neighbouring countries with almost 50% of the population and one-third of the poor having no benefits from social protection. In addition, the sector is characterized by a fragmentation on policy level and delivery mechanisms.

There is a myriad of small-scale programs spread across a large number of different beneficiaries—e.g., the elderly, children, the poor and women. There needs to be a more strategic consolidation and coordination of these programs in order to maximize their impact on poverty and vulnerability. In addition, the IMF recognizes that labor market programmess—both passive and active—have remained relatively small. For example, only 2.5% of the unemployed are registered for unemployment benefits and receive them. In addition, total public spending on unemployment benefits, public works and training, taken together, account for a very small share of GDP. Indeed, unemployment benefits are financed from employer’s contributions and the state/general budget.  Maternity benefit scheme is designed in the same way. This is illustrative of the reforms which have eroded social insurance system to an extent that it is existing only for pensions. All other benefits are financed from very limited employer's liability schemes (unemployment, maternity, sickness) and general budget.

The decision of the Government of Uzbekistan (GoU) to adopt a new National Strategy for Social Protection (NSSP) in July 2022 was a positive step towards the strengthening of the national social protection system as it formulated priorities and objectives towards the SDG-2030 Agenda. However, at the same time it brings a series of financial, legal and institutional challenges that reflect the complexity of the exercise. This implies at least four main preconditions in the Ministry of Economy and Finance (MoEF). First, it is critical to have an accurate estimation of the cost of the Strategy based on its goals and targets and the expected timeline of implementation. Second, the search for additional funding (i.e. fiscal space creation) must be linked to that costing and in line with the technical and political conditions that the country offers in this historical moment. Third, the Ministry should continue pushing forward the Public Financial Management (PFM) agenda to extend certain structural reforms that are required to improve the impact of social protection plans in the population. Finally, the Ministry of Finance that was mandated as the key leader in both strategy formulation and implementation is now merged with economic sector so there is a need to politically empower it to operate in a multi-actor context. 

The National Social Protection Strategy formulated key long term objectives until 2030 aligned with Agenda 2030 and SDG target 1.3.1, as well as mid-term objectives until 2026 and related costed Action Plan for Implementation of mid-term objectives.

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COVID-19 and other crises

In the last few years, Uzbekistan has experienced a series of economic shocks. In 2020, the COVID pandemic spread worldwide, causing Uzbekistan’s trade to decline, the number of migrant workers to fall from 2½ to 1½ million, and COVID restrictions to contribute to a slowdown in domestic activity, particular in hospitality, travel, and transportation. Nonetheless, unlike many other countries Uzbekistan was able to maintain positive GDP growth (2 percent). In 2021, there was a strong recovery in sectors impacted by the pandemic as well as a rebound in trade. Globally, inflation started to rise in the 2nd half of the year. In 2022, advanced economies began raising interest rates, increasing the cost of external borrowing, and the government decided not to issue a sovereign bond.

The Government of Uzbekistan initially responded to the COVID-19 pandemic by announcing a crisis fund of 1 billion USD (2% of GDP) to support the economy and people affected by the crisis. Social protection measures included expanding funding for healthcare, increasing the number of low-income families receiving social benefits, distributing food baskets, and expanding public work programs to support employment.

In response to COVID-19 the government’s 2020 budget allocated more financing for healthcare and social assistance as well as more public investment for general infrastructure projects. For example, the number of households receiving social assistance nearly doubled in 2021 in relation to 2019 (1.3 million versus 0.6 million) to then grow to 1.9-2.2 million in 2022. Nevertheless, government spending on the entire system of Social Protection—namely, Pensions, Social Assistance, Social Care Services and Labor Market Programs—has remained relatively modest, representing 7% of GDP.

Initially, spillovers from the conflict between Russian Federation and Ukraine and sanctions on Russian Federation were expected to have a significant negative impact on Central Asian countries. However, remittances—in large part from Russia—more than doubled, the number of Uzbekistan migrants in Russia increased to more than 2 million, and trade rose almost 20 percent percent. As a result, growth remained strong at 5.7 percent in 2022.

At the domestic level, Uzbekistan observed an important GDP recovery that averaged 6.6% in 2021-2022 after experiencing a low 1.9% growth rate in 2020. The rate in 2022 (5.7%) is practically the same as the one in 2015-2019, this being  an indication that the economy would be back to long-term tendencies. This recovery, however, may be affected by the international conditions described in the previous paragraphs. In this line, the Central Bank is estimating that, given the prevailing global conditions, the GDP may grow between 4.5%-5% in 2023.

Visit the Social Protection COVID-19 Monitor
Government and social partner priorities

The National Social Protection Strategy, designed in participatory manner spells out key Government's and social partners long term priorities until 2030 and short-term objectives until 2026.

Key long-term objectives include:

  • Ratification of Social Security (Minimum Standards) Convention, 1952, No. 102
  • Social insurance coverage with maternity, temporary disability and unemployment benefits;
  • Extension of social protection benefits in case of maternity and unemployment to identified priority groups of workers in informal economy
  • Public work programmes and active labour market measures are adapted to address the specific needs of persons living in poverty, persons with disabilities, women with care obligations and other identified disadvantaged persons

Key mid-term objectives include:

  • Ratification of Maternity Protection Convention, No. 183
  • Adoption of Social Insurance Code
  • Redesign of unemployment scheme and costing
  • Piloting mechanisms to extend coverage with maternity and unemployment benefits to informal workers
  • Identification of fiscal space options for sustainable and equitable social protection system
  • Setting up National Social Protection Observatory

Pension reform, another dimension of future social protection transformations, is subject of consensus as the persistent revenues loss of the scheme due to tax reforms, social insurance reforms, informality and other factors jeopardize the sustainability of the scheme. Parametric reforms may urge some approval and implementation.

Design of strategy supporting transition from informal to formal economy is yet another pending pripority. National Scientific Center for Employment estimates informality at 59.8% of the working age population in 2018. There is an agreement that informality tends to disproportionately affect male workers, rural residents, people with lower levels of education and those working in agriculture, construction, retail and transport and that there is a need to address It from different perspectives. This includes social protection which Is not seen only as an end result of formalisation, but rather as an entry point.

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Results

The ILO has become active in the social protection area in Uzbekistan since 2018. Together with UNICEF and the World Bank, an assessment of the national social protection system was carried out, using the SPIAC-B CODI tools . The ILO also organized workshops for workers' organizations, helping define their social protection priorities within the National Tripartite Commission.

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Funding gaps / Support the ILO

US$ 700,000

Transition from informal to formal economy and extension of coverage with social protection to informal workers

Impact: N° of persons effectively covered (related SDG 1.3.1) - 1,500,000 workers
US$ 1,000,000

Setting up National Social Protection Observatory

Impact: N° of persons with better access to social protection (single registry, online application, one stop-service) - 3,000,000 workers
US$ 3,000,000

Integrated social protection programmes (benefits and services) and employment interventions supporting disadvantaged workers and their families on the local level

Impact: N° of persons effectively covered (related SDG 1.3.1) - 3,000,000
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