Uzbekistan's has followed an astute strategy of purchasing gold during periods of low prices and selling gold during pricing peaks and it is yielding significant returns, according to an assessment by RFE/RL.

There are, however, lingering apprehensions over the Central Asia nation's economic reliance on the precious metal.

Data from the World Gold Council (WGC) shows that Uzbekistan was the world’s top gold-selling country in March, offloading 11 tonnes, surpassing Thailand’s 10 tonnes. While many central banks are hoarding gold right now, Uzbekistan has opted to capitalise on its previous accumulation.

"We have a trade deficit, a budget deficit. Other exports are not perhaps performing as well as hoped. With [gold] prices high on the back of geopolitical instability, there are worse times to sell gold," independent economist Yuliy Yusupov told RFE/RL.

As the second-largest gold producer in the former Soviet Union after Russia, and with state control over the industry, Uzbekistan, historically, has seen gold become crucial to its economy. Under President Shavkat Mirziyoyev, the share of the international reserves kept in gold has increased from under 50% in 2016 to nearly two-thirds today.

"Is the price rising, or has it reached its peak and is coming down? This is the moment we are looking for. If the price is rising, we are better off waiting with sales," Behzod Hamraev, Uzbekistan’s central bank chairman said in a November 2022 interview with Bloomberg.

Gold prices have surged this year, with spot prices increasing by over 13% since January 1. Despite selling 10.9 tonnes in March, the value of the central bank's gold reserves rose by more than 6%, though the total volume fell to 357.7 tonnes— a near two-year low. As of May 1, Uzbekistan's international reserves stood at $34.2bn, with $26.5bn in gold.

The high prices have mitigated the impact of a $1bn debt repayment on a 2019 eurobond, marking Uzbekistan's exit from financial isolation. However, former Uzbek official Smail Ospanov criticised the government’s reliance on gold sales for budgetary support.

"The very fact that the government is trying to replenish its empty treasury by selling gold shows the dire state of the country's economy. If you look now, Uzbekistan exports mainly gold. The government has failed to diversify its economy in the past decade. Gold is something that should be kept in reserve," Smail Ospanov told RFE/RL.

Uzbekistan's trade deficit in 2023 hit a record $13.7bn. While exports rose 24%, much of this growth was due to record gold sales, which accounted for more than $8bn, or one-third, of total goods exported.

In the early years of Mirziyoyev’s rule, major economic reforms and a political thaw took place. The liberalisation of currency regulations and a drive for foreign investment led to increased external debt, now at over one-third of GDP, a sharp rise from the 10-15% range seen during the late president Islam Karimov’s tenure.

In February, Fitch reaffirmed Uzbekistan’s BB- "stable" rating but highlighted concerns about "high commodity dependence" and structural weaknesses such as low GDP per capita and a large state presence in the economy.

Gold purchases from local mining operations, bought in Uzbek som and sold internationally for dollars, have eased pressure on the national currency. The som has depreciated nearly 15% since the start of Russia’s invasion of Ukraine.

Geopolitical tensions and global conflicts are expected to keep gold prices high. Yet, the main issue remains the lack of alternative revenue sources to cover growing public spending, exacerbated by systemic corruption.

Uzbekistan's consolidated budget shows an annual deficit of $5bn, over 5.5% of GDP, driving inflation for a largely poor population. An IMF mission projected consumer price inflation at 11.5% for this year, up from 8.8% last year, with growth expected around 5.4% for 2024.

Tourism, once a promising sector, has not yet met expectations, partly due to the pandemic. Official data for 2023 recorded 6.6mn foreign tourists, slightly below the 2019 peak of 6.75mn but a 26% increase from 2022.