To understand the foreign exchange market in Uzbekistan, it is very important to understand the legal framework in this country. The Central Bank of Uzbekistan regulates the interbank money market with short-term money transactions. These operations ensure that interest rates in the interbank money market remain within the range of the Central Bank’s policy interest rates. The Central Bank of Uzbekistan monitors the general liquidity level of the economy every day and sets short-term forecasts.
The Central Bank of Uzbekistan has not announced any official currency intervention. However, it is clear that the demand for selling the ruble is greater than the buying demand. In fact, the soum has decreased by 45% over the past year, and the ruble has decreased by more than a quarter. Although this is a positive situation, it should be noted that the Central Bank of Uzbekistan does not intend to intervene in the foreign exchange market.
In addition, Uzbekistan’s banking system limits the role of financial intermediaries, and the country is limited by the influence of Russian banks that have been sanctioned. As a result, problem loans may increase, and the currency risks of the country may remain high. However, in the long term, the government is planning a large-scale banking reform program that aims for a 60% share of the banking industry by 2025.
The central bank has a relatively strong sovereign balance sheet. As of January, the Samruk-Kazina sovereign wealth fund reported that it has 65 billion dollars, and the National Oil Fund has 60 billion dollars. Although the numbers are unclear, Bank of New York Mellon is rumored to hold tens of billions of dollars. Nevertheless, the monetary policy of the central bank reduced the uncertainty in the market.
A blogger dealing with the foreign exchange market in Uzbekistan should be careful with his activities, as this may eventually attract the attention of law enforcement officials. Uzbek authorities see criticism as problematic and punish excessively. For example, in March 2021, a blogger who called for the decriminalization of gay sex in the country was attacked by unknown assailants. While many saw the attack as an innocent byproduct of his speech, others saw it as an incident related to the blog’s content.
The development of the foreign stock market in Uzbekistan brings a large amount of foreign exchange funds, which creates a new source of tax revenues. In addition, it allows citizens of Uzbekistan to earn money without leaving their homeland. The establishment of investment banks increases investment profitability among pensioners and gives strength to the younger generation. It also helps to attract foreign investors and attract new investments to the country.
