Government to cut pension spending while increasing energy subsidies

The government plans to reduce budget spending on pensions and social assistance next year, while raising the amount allocated for subsidies, particularly for natural gas. These revisions are outlined in the Fiscal Strategy published by the Ministry of Economy and Finance.

This year, the government is allocating UZS 17.4 trillion from the state budget for pensions, financial assistance, and other social benefits. However, in 2026, this figure is projected to decline by nearly UZS 900 billion, amounting to UZS 16.5 trillion.

These new estimates differ from earlier projections published in the 2024–2026 Budget Statement in November 2023. For instance, it was previously forecast that pension payments, financial assistance, and compensation in 2023 would amount to UZS 19.1 trillion, with UZS 18.63 trillion planned for 2024. The same statement projected that UZS 22.2 trillion would be allocated for these payments in 2025, increasing to UZS 24 trillion in 2026.

Overall, the initial plan for 2024 set aside UZS 10.3 trillion for child benefits to low-income families. The updated estimate has reduced this amount to UZS 7.3 trillion.

According to the Fiscal Strategy, subsidies from the state budget are expected to grow steadily over the current and next three years. Specifically, UZS 28.3 trillion will be allocated for subsidies in 2025, UZS 28.8 trillion in 2026, UZS 29 trillion in 2027, and UZS 30.2 trillion in 2028. The largest portion of these subsidies will go to the energy sector.

The government has long stated that natural gas is sold to the population below production cost, with the resulting losses covered by the state budget. This year, around UZS 7 trillion is expected to be allocated for this purpose. However, the 2024–2026 Budget Statement had previously forecast only UZS 6 trillion in gas subsidies for 2025 – a UZS 1 trillion difference. Similarly, the projection for 2026 has been raised from UZS 5 trillion to UZS 6.5 trillion – an increase of UZS 1.5 trillion.

Earlier, data on budget execution for the first quarter of 2025 was published. Compared to the same period in 2024, salary and equivalent payments for public sector employees were cut by UZS 500 billion. Meanwhile, interest payments on public debt increased by UZS 800 billion year-on-year. Over the three-month period, spending on pensions, financial assistance, and compensation was reduced by nearly UZS 1 trillion.