The Republic of Uzbekistan is a low income country which is rich in natural resources (coal, copper, gold, natural gas, oil, silver and uranium). Cotton is its main agricultural product. The country faces serious environmental problems. The heavy use of agro-chemicals and the diversion for irrigation of huge amounts of water from the two rivers that feed the region (Amu Darya and Syr Darya) and poor drainage systems, have led to the drying up of the Aral Sea and the contamination of surrounding land by salt and residual agricultural chemicals. This is now adversely affecting economic activity and the health of the population.

Over 25 percent of the population are unable to meet their basic consumption needs and of these, about two-thirds live in the rural areas. Regional disparities exist. The western Regions of Karakalpakstan and Khorezm in the lower reaches of the irrigated areas, have significantly lower standards of living and suffer from inadequate and unreliable water supply. The Government is committed to fight poverty and has undertaken to formulate its approach in a Poverty Reduction Strategy Paper (PRSP).

External aid is coordinated by the Cabinet of Ministers’ Department for Coordination of External Economic Activity (DCEEA). There has been no meeting of the Consultative Group for Uzbekistan since 1994, but formal and informal donor meetings for coordination and information sharing are frequent in-country. Theme meetings in Tashkent, where each donor coordinates a subject area or sector reflecting its comparative advantage, provide another forum for coordination. The World Bank coordinates groups for the environment and financial sectors, and chairs the UN/UNAIDS Theme Group for HIV/AIDS.

Beside the World Bank, other development partners involved in Uzbekistan are USAID, UNDP, WHO, UNICEF and UNAIDS in the health sector; FAO and US in agriculture; UNDP, EC, OECD and EU-TACIS in natural resources and environment; IMF and USAID in the financial sector; UNDP, KfW and EBRD in infrastructure; USAID and UNDP working on legal issues; EC, EU-TACIS, GTZ and UNDP in the social sectors; and EBRD in the telecommunications sector. AsDB, UNDCCP, UNFPA, UNHCR, Japan (JBIC and JICA), Korea, Kuwait and Switzerland are also donors.

In one project, the European Bank for Reconstruction and Development (EBRD) has agreed to rely on the World Bank for assurance on the acceptability of financial management arrangements, including those on external audit.

Likely areas of harmonization are financial management, procurement and capacity building.