Progress Limited

25.09.2017

The Uzbek authorities have liberalized currency policy, which was one of the main obstacles to foreign investment. The official exchange rate of Uzbek som in the long term, according to experts, will allow to get rid of the black market currency exchange. The main risk lies in the social consequences of this step: the growth rate of the economy will increase, but the inevitable increase in the price of imported goods can have a negative impact on the standard of living in the country, forcing the authorities of the Republic to take measures on social protection of the population.

The currency decree

2 September 2017, the President of Uzbekistan Shavkat Mirziyoev signed an order № up-5177 "On priority measures to liberalize the foreign exchange policy", which released national currency in the "free floating". The rate of Uzbekistani som will now be determined by the Central Bank on the results of trading on the foreign exchange market, as is the case in most other countries of the world. For a country where a quarter of century after the collapse of the USSR official exchange rate of the national currency significantly differed from the real exchange rate, this event was truly revolutionary.

Until recently in Uzbekistan has existed for three exchange rate: official, established by the Central Bank in administrative proceedings, exchange used for import-export goods, and real established by the money changers on the black market.

The official rate in recent time were used mostly for state statistics, in connection with which Uzbekistan consistently showed some of the highest in the CIS, the growth rate of the economy.

But because to buy foreign currency at the official exchange rate was disadvantageous, individuals prefer to buy it from the money changers on the black market.

Former monetary policy has created a number of restrictions on the activities of foreign investors and the development of export potential of the country. Exporters were obliged to sell foreign exchange earnings to the state, and companies with foreign participation sometimes months can transfer their funds abroad. The liberalization of the monetary policy was promised in the "Strategies for action on five priority directions of development of the Republic of Uzbekistan in 2017-2021." approved by the new President Mirzaeva in February of this year. But in the course of implementation of this reform, the Uzbek authorities showed great caution.

Free sum

The decree about liberalization of foreign exchange policy includes five main points that determine new rules of the Forex market:

1) legal persons is permitted without restriction to purchase foreign currency and expend it for their needs;

2) individuals can freely sell the currency in exchange offices buy it at conversion departments of banks, to transfer international payment card;

3) private entrepreneurs without formation of legal entities can acquire foreign currency as individuals through Bank accounts;

4) for exporters abolished mandatory sale of currency proceeds;

5) private entrepreneurs and farmers that have income in foreign currency, can withdraw it from their Bank accounts.

While in Uzbekistan the use of foreign currencies is prohibited. Payments for goods, works and services shall be made only in national currency.

The exception is made only for payments via international payment cards "in accordance with international practice". Prices within the country, as well as Charter capitals of joint stock companies must be listed only in Uzbek soums. They also must be paid the state duty, fees and other obligatory payments (except visa fee). Still, some prices were quoted in foreign currency. Thus, the tariffs for mobile communications stated in us dollars and were converted to scrip at the exchange rate of the Central Bank on the day of payment.

Partly restrictions on the foreign exchange market persist. Buy citizens of Uzbekistan while you can only $5 thousand in the quarter, which will be credited to a special international cards. But earlier in the quarter you could buy only $2 thousand With the amount of foreign currency that can be sold to banks without a passport, 6 September increased 5 times – from $1800 to $9360.

In addition, to exchange sums of Russian rubles still can, because in the international payment system CLS, which is controlled by the USA, the ruble is not freely convertible.

Cash scrip can be bought only dollars, euros, British pounds, Swiss francs and Japanese yen.

Economic impact of the liberalization of monetary policy in Uzbekistan are certainly positive. The possibility of free conversion of scrip in the underlying currencies will increase the investment attractiveness and export potential of the Republic, which will increase the growth rate of its economy.