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Abstract

In the current context of ongoing and consistent economic reforms in Uzbekistan, the scale of the shadow economy and its adverse impact on the state budget have become issues of considerable significance. In an effort to curb the shadow economy, foster a transparent and competitive business environment, and combat corruption, a range of legal frameworks, policy measures, and governmental decrees are being formulated and implemented. Despite the government's commitment to enhancing economic transparency and promoting digitalization, shadow economic activities continue to persist and, in some sectors, even expand. This phenomenon is particularly evident in agriculture, construction, and the services sector. According to sectoral data on the composition of the informal and shadow economy, agriculture, forestry, and fisheries account for 63.6%, construction for 41.3%, services for 40.1%, and industry for 8.9%.

In particular, informal employment remains prevalent in the construction sector and various service industries, with cases of underreporting wages and making payments in cash continuing to persist. Moreover, in food retail outlets, public catering establishments, and various service points catering to the population, it is still common for payments to be made not through official bank card transactions, but rather in cash or via peer-to-peer card transfers, thereby bypassing formal financial channels. According to data from the Statistics Agency for the year 2024, the gross value added (GVA) generated by the informal economy amounted to 383.6 trillion UZS, representing 26.4% of the country’s Gross Domestic Product (GDP). Additionally, the gross value added of the shadow economy was estimated at 122.0 trillion UZS, accounting for 8.4% of GDP.

This article examines the aforementioned issues and explores the negative impact of the shadow economy on the state budget. A comprehensive study of this issue is of critical importance not only for analyzing its detrimental effects on public finances, but also for developing effective mechanisms aimed at reducing its scale.

In the course of this research, more than 20 enacted laws and presidential decrees, over 10 statistical datasets, as well as observational and analytical findings by the author based on real-life data concerning the shadow economy, have been analyzed. The study is also grounded in a thorough review of academic literature and scholarly investigation, which provides insights into the underlying causes of the shadow economy, preventive measures, and the outcomes achieved thus far.Therefore, conducting academic research on this topic is of strategic importance for ensuring Uzbekistan’s sustainable economic development.