FORMULA-BASED DISTRIBUTION OF INTERGOVERNMENTAL TRANSFERS TO LOCAL BUDGETS IN UZBEKISTAN: A COMPARATIVE SIMULATION ANALYSIS BASED ON 2026 FORECAST INDICATORS
DOI:
https://doi.org/10.5281/zenodo.20706360Keywords:
intergovernmental transfers; fiscal equalisation; local budgets; fiscal decentralisation; formulabased transfers; fiscal capacity; fiscal need; fiscal gap; vertical fiscal imbalance; horizontal fiscal imbalance; transfer dependence; own-revenue capacity; regional budget policy; public finance management; local government finance; budget transparency; equalisation formula.Abstract
This article assesses the prospects for distributing intergovernmental transfers to the local budgets of
Uzbekistan on a formula basis, using the approved 2026 forecast indicators of the State Budget Law (No. LRU-
1105 of 25 December 2025). At present, the Republican budget allocates UZS 19,650 billion (about UZS 19.65
trillion) of regulating transfers to fourteen sub-national budgets, yet the criteria and weights that govern their
inter-regional split are not published in an explicit, normative formula. Two simulation approaches are applied
to the same data. The first is a single-factor (population-only) formula, Tᵢ = B × Nᵢ/N, which yields a uniform percapita
transfer of 0.5234 million UZS per resident but ignores fiscal capacity and expenditure need. The second
is a two-component learning model that splits the pool into a demographic base share and an equalisation
share driven by the gap (GapF) between a fiscal-need index (NeedF) and a fiscal-capacity index (CapF). The
single-factor formula over-allocates to high-capacity jurisdictions - it would raise the shares of Tashkent city
and Tashkent region by UZS 1,334.0 and 1,332.8 billion respectively while cutting Karakalpakstan by UZS
1,436.2 billion. The two-component model instead identifies Surkhandarya (+708.2), Karakalpakstan (+605.3)
and Namangan (+545.9 billion UZS) as the jurisdictions for which an objective case exists to exceed the official
transfer. A Fiscal Profile Index composite ranks Navoi (89.47), Tashkent city (82.62) and Tashkent region (75.20)
highest, and Karakalpakstan (38.17) and Surkhandarya (46.18) lowest. The paper concludes that Uzbekistan
should move, in documented and incremental steps, toward a transparent multi-factor formula that combines
demographic, fiscal-capacity and expenditure-need indicators while preserving incentive-compatibility for local
revenue effort.
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