Publication: Monitor Volume: 6 Issue: 185

Uzbek Finance Minister Rustam Azimov said on September 28 that the government of Uzbekistan plans to launch sweeping economic reforms, including full convertibility of its currency, next year. The Uzbek authorities are hoping to bring the official and commercial exchange rates gradually closer to one another and to unify the two rates by mid-2001, half a year later than the deadline set by President Karimov after his re-election in January 2000. Currency convertibility is a vital issue for Uzbekistan, which has seen investment levels drop, debt levels rise and economic growth slow after exchange controls were imposed in 1996. Uzbekistan has run down its hard currency reserves, reduced imports and borrowed heavily to ease pressure on the balance of payments in recent years. The country, however, still has enough hard currency reserves to cover five months of imports, according to Azimov. The central bank exchange rate is now 299 som to the dollar while the currency trades on the black market at about 800. The Uzbek government has made only partial attempts to dismantle the currency controls, fearing that a sudden devaluation would trigger a spike in inflation (Reuters, September 29, 2000). On July 1, the government allowed exchange bureaus operated by four state-owned banks to trade foreign exchange at a new exchange rate, which was set close to the black market rate. However, access to cash foreign exchange remains severely restricted for residents of Uzbekistan. A few noncentralized imports and exports have also been shifted to the new market rate, which is effectively established by the central bank (IMF, September 2000).

Uzbekistan intends to seek standby support from the IMF to cushion the effects of the planned liberalization. IMF Vice President Johannes Linn is expected to visit Uzbekistan at the end of October. The IMF has said international lenders could put a package of up to US$700 million together for Uzbekistan if the government adopts a credible blueprint for reforms. Uzbekistan is also in talks with the World Bank on a three-year cooperation program to reform the financial sector and privatize the country’s five leading state-owned banks. In the near future, the Uzbek government is planning to obtain additional investment credits to modernize production and finance import substitution. Uzbekistan is also seeking funds for structural reforms in agriculture, energy, medicine, education and housing. Azimov said that Uzbekistan would end 2000 with a foreign debt of US$4.15 billion, which would drop to US$3.90 billion by the end of 2001 (Reuters, September 29).

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