Publication: Monitor Volume: 6 Issue: 214

According to Uzbekistan’s Department of Statistics, the country’s GDP grew 3.8 percent in the first half of 2000 as agricultural and industrial output rose 7.1 percent and 6.2 percent, respectively. However, both the IMF and the World Bank publicly disagree with the Uzbek government’s statistical methodology because it tends to understate inflation, suggesting that real GDP growth in recent years was substantially lower than officially reported. Uzbekistan’s restrictive foreign exchange and trade regime is still largely in place. The government’s commitment to broad economic liberalization remains questionable, leaving the country’s prospects highly uncertain. In May and July 2000, the Uzbek government took several partial steps towards making the som convertible for current account transactions. However, it is clear that President Islam Karimov’s promise to make the national currency fully convertible by the end of 2000 will not be fulfilled. The Uzbek authorities are now hoping to bring the official and commercial exchange rates gradually closer and to unify the two rates by mid-2001, half a year later than the deadline set by Karimov after his re-election in January 2000 (Reuters, September 29). The government’s recent attempts to dismantle the currency controls have been very cautious due to the fear that a sudden devaluation would trigger a spike in inflation and destabilize the economy. On July 1, 2000, 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 foreign currency cash remains severely restricted for residents of Uzbekistan. Some imports and exports that do not fall under central control have been shifted to the new market rate. The central bank rate is now 307 som to the dollar; the currency trades on the black market at about 800 per dollar (Russian agencies, November 3). The Uzbek government intends to continue its program of import substitution, launched after currency controls were imposed in 1996. Uzbekistan is also seeking foreign financing for structural reforms in agriculture, the energy sector, health care, education, and housing. However, the extent of the proposed reforms is unclear (Reuters, September 29).

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