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Uzbekistan to launch large-scale liberalization of the monetary policy in 2017

29 November 2016 12:32 (UTC+04:00)
Uzbekistan to launch large-scale liberalization of the monetary policy in 2017

By Gunay Hasanova

Following the draft Decree of the President of Uzbekistan developed by the Central Bank and promulgated for discussion on a single portal of interactive public services (EPIGU), Uzbekistan plans to begin a large-scale liberalization of the monetary policy in 2017.

"The establishment of the national currency som (UZS) against foreign currencies solely for the use of market mechanisms” is proclaimed as one of the main directions of the new monetary policy.

It is supposed to abolish the practice of granting privileges and preferences to individual companies or industries during their foreign exchange operations and create equal conditions for all participants of foreign economic activity of the country.

It is planned to develop a simplified procedure for the purchase and sale of foreign currency by economic agents in the domestic foreign exchange market, providing the foreign currency to commercial banks for making payments on current international transactions.

The export of foreign currency outside the country without restrictions is allowed up to an amount equivalent to $10,000, including canceling the declaration of foreign currency in the amount of $2,000 during imports and exports, which is currently obligatory for citizens of the Republic and non-residents.

In addition, it is proposed to ban payments in foreign currency for goods and services in the country.

Based on the analysis of the impact of proposed changes in the first half of 2017 a new draft law "On Currency Regulation" will be developed. The bill will, in particular, specify a definition of the Cabinet currency regulation authority, along with the Central Bank with a clear definition of their powers.

Discussion of the document will finalized on December 14, 2016.

There are restrictions on access to foreign currency of legal entities and individuals in Uzbekistan

The country continues to use two exchange rates - the official rate and the "black" market, which today is higher by more than twice.

The problem of currency conversion is one of the main obstacles for foreign investors in Uzbekistan.

Last year, the International Monetary Fund urged Uzbekistan to "gradually move towards the liberalization of the currency system and the elimination of foreign exchange restrictions."

They stressed the importance of a greater exchange rate flexibility to reduce the pressure on the current transaction operations.

The official exchange rate of Uzbek currency as of November 29 is 3176.16 UZS per $1.

Uzbekistan, with the goal of becoming an industrialized, upper-middle-income country by 2030, is continuing to make transition steps towards a more market-oriented economy.

The Uzbek economy experienced a mild deceleration in the year to September compared to the same period of 2015 but still grew at a healthy pace, according to official data. Growth was propelled primarily by construction works, retail sales, and services, while industrial and agricultural production lagged somewhat behind.

The Government of Uzbekistan reported GDP growth at 7.8 percent in the first half of 2016, down from the 8.1 percent recorded in the same period of 2015, reflecting a weaker external environment and slower growth in the industry.

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Gunay Hasanova is AzerNews’ staff journalist, follow her on Twitter: @gunhasanova

Follow us on Twitter @AzerNewsAz

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