Under centralized Soviet economic planning, Uzbekistan's economic growth was fueled by expanded agricultural production, as extensive stretches of land were brought under irrigation particularly for cultivation of cotton. While highly critical of the former Soviet's government emphasis on promoting cotton monoculture in the republic, the country's new government has found that the country's economic fortunes are closely tied to cotton production, which has fallen steadily since the Soviet era.
Since independence the government has aimed at facilitating a greater market orientation in the economy, though the steps taken toward this goal have been smaller and slower-paced than in other parts of the former USSR. A series of basic laws and new policies have been adopted regarding property ownership, land, privatization, foreign investment, price controls, trade, taxes, and banking. In 1995 the government announced a mass privatization program with the objective of increasing the private sector's share of GDP form 40% to 60%. Although nearly 60,000 small businesses (96% of the total) and 14,000 farms (accounting for 11% of arable land) had been privatized by 1997, only 20% of Uzbekistan's medium and large-sized enterprises were in private hands. The new policy would transform 3,000 state enterprises into corporate entities with 51% controlling interest sold to the public and 30% to private investment funds.
For the immediate future, developing the country's oil and natural gas fields, bolstering cotton exports through productivity enhancement, and sustaining gold exports are likely to be key strategies for procuring some of the necessary financing to support economic development. In 1992, Uzbekistan signed an agreement with Russia transferring its share of the former Soviet Union's debt to the latter in exchange for relinquishing all claims on Soviet assets. One area of serious concern for the government is the increasing threat to public health and economic productivity posed by the environmental damage resulting from past development strategies. Addressing growing water shortages, severe river and lake pollution caused the heavy use of chemical inputs in agriculture, the desiccation of the Aral Sea due to massive irrigation, and high levels of both air and water pollution in the country's industrial centers are among the country's most pressing environmental management problems.
In January 2002 the government and the Central Bank embarked on an IMF staff monitored program (SMP) primarily designed to convince the IMF to approve a financial program by the fourth quarter of 2002. The SMP was aimed at accelerating the transition to a market economy and achieving macroeconomic stability. The main policies pursued were reducing the role of the state through progressive lifting of restrictions on private activity, as well as accelerated privatization state enterprises, plus tight monetary and fiscal policies to bring down inflation and reduce debt. As of April 2003, the government had not convinced the IMF to reinstate Uzbekistan as eligible for financial assistance. A review was scheduled for May 2003.