In the mid-20th century the Soviet rulers of Uzbekistan intentionally developed the region as a supplier of raw materials for industrial processing elsewhere in the USSR and for export. It was during this time that Soviet planners implemented the disastrous shift to cotton production. That legacy is felt today. Uzbekistan’s economy is dependent upon cotton exports and therefore rises and falls as world prices fluctuate. Industries such as textile mills that could process the country’s raw materials are still underdeveloped. Uzbekistan must import food, despite potentially very fertile farmland.
Uzbekistan is among the world's leading cotton producers. The country also produces and exports a large volume of natural gas. Known for its orchards and vineyards, Uzbekistan is also an important region for raising Karakul sheep and silkworms. Uzbekistan's mineral and oil and gas reserves are substantial.
Uzbekistan is a dry, landlocked country of which 10% consists of intensely cultivated, irrigated river valleys. More than 60% of its population lives in densely populated rural communities. Uzbekistan is now the world's third largest cotton exporter, a large producer of gold and oil, and a regionally significant producer of chemicals and machinery. Following independence in December 1991, the government sought to prop up its Soviet-style command economy with subsidies and tight controls on production and prices. Faced with high rates of inflation, however, the government began to reform in mid-1994, by introducing tighter monetary policies, expanding privatization, slightly reducing the role of the state in the economy, and improving the environment for foreign investors. The state continues to be a dominating influence in the economy and has so far failed to bring about much-needed structural changes. The IMF suspended Uzbekistan's $185 million standby arrangement in late 1996 because of governmental steps that made impossible fulfillment of Fund conditions. Uzbekistan has responded to the negative external conditions generated by the Asian and Russian financial crises by tightening export and currency controls within its already largely closed economy. Economic policies that have repelled foreign investment are a major factor in the economy's stagnation. A growing debt burden, persistent inflation, and a poor business climate led to stagnant growth in 2000, with little improvement predicted for 2001.
