World Economy

Uzbek Currency Jumps on Black Market

Uzbek government intends to make the som freely exchangeable.Uzbek government intends to make the som freely exchangeable.

Uzbekistan’s national currency, som, has gained about 9% against the dollar on the Central Asian nation’s black market over the past seven days, as a full-scale exchange rate liberalization appears imminent.

The former Soviet republic this month abolished mandatory sales by exporters of a quarter of their foreign currency revenue, after earlier allowing a limited number of banks and companies to deviate from the official exchange rate in deals, Reuters reported.

Final steps will be allowing full convertibility of the currency, aligning the official and market rates and lifting restrictions that force ordinary Uzbeks to buy foreign currency from the black market rather than from banks.

It is not clear when the authorities plan to formalize the reform, but the black market rate has already started adjusting.

According to websites such as which publish black market quotes, the som has jumped to 7,400-7,500 per dollar on Monday from 8,100-8,200 a week earlier.

Uzbekistan, Central Asia’s most populous nation and second-biggest economy, has until this month required exporters to sell a quarter of their foreign currency revenue at the official rate, about 4,100 soms per dollar.

Importers, at the same time, can only buy foreign currency on a separate bourse where they pay about 8,000-9,000 per dollar, although the rate is not officially reported.

The third, black market rate, is mostly used by individuals for cash transactions. Both foreign businessmen and Uzbek officials have called the currency controls one of the main obstacles in the way of foreign investment.

Meanwhile, Uzbek monetary authorities recently announced an intention to make the som freely exchangeable, eurasianet reported.

 Preliminary plans to make the Uzbek currency convertible were first aired amid the election of President Shavkat Mirzyoyev last December. The president formalized the idea with a decree this past February that called on the government to promote “economic liberalization aimed at further strengthening macroeconomic stability and the maintenance of high economic growth.”

Given Uzbekistan’s past record on reform, it is understandable that the analyst community greeted overhaul intentions with a healthy dose of skepticism. Uzbek political leaders have a long history of announcing plans for economic reform, including price liberalization, privatization and the shift to a convertible currency. Yet over the past two decades, reforms have tended not to move past the drafting stages. 

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