Uzbekistan liberalized its foreign currency policy
5 September 2017
Uzbekistan is on the brink of floating its currency, in a move that will likely boosting economic development, foreign trade and inward investments. Central Bank takes on a new approach to monetary policy and lifted most forex restrictions.
A decree issued by President Shavkat Mirziyoyev ‘On priority measures for the liberalization of foreign currency policy’ specifies that from September 5, individuals and companies in Uzbekistan will be able to buy and sell foreign currency without restrictions at a market rate. The decree also cancels a rule that forces exporters to sell foreign currency to the government at the official rate.
The document also instructs the Central bank to run a tight monetary policy to ensure the sum’s stability. It states that the sum’s exchange rate must only be determined by market factors.
Sale of foreign currency to individuals will be carried out in the conversion departments of commercial banks with crediting of funds to international payment cards for use abroad, including payment through bank accounts for training, medical treatment, etc. All available restrictions on the use of an international payment card abroad are withdrawn. The amount of commissions for the sale of foreign currency through the conversion departments will be reduced ‘to the minimum level.’ The exchange rate of the national currency in relation to foreign currencies will be established on inter-bank electronic exchanges ‘solely on the basis of supply and demand. In order to create market conditions for the formation of the exchange rate, the participation of the Central Bank in interbank trading will be minimized.
It should be noted that as an initial stage of state support, funds in the amount of $655 million have already been injected into the authorized capital of state-owned banks. A mechanism has been introduced to provide refinancing loans to banks to maintain liquidity.
The Central Bank of Uzbekistan almost twice devalued the official exchange rate of the national currency. As of September 4, the official exchange rate was 4210.35 soums per US dollar. Since September 5, the rate rises to 8100 soums per dollar. The regulator noted that in the future the official rate will be set every Monday on the basis of the average rate fixed during the trades in the previous week.
In order to minimize the influence of exchange rate liberalization on the domestic pricing of goods and services, especially consumer goods, it is entrusted to radically revise the current norms and rates of customs payments. In addition, special commissions for monitoring and controlling prices for basic types of socially important food products are charged with ensuring price stability and prompt saturation of the markets with consumer goods.
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