On September 2, 2017 the President of Uzbekistan signed a decree on Priority Measures for the Liberalization of Monetary Policy.
The following key goals were defined in the decree:
Giving freedom to purchase and sell foreign currency for legal entities and individuals
Currency rate defined by the market
Improving business environment and investment climate
Improving monetary and fiscal policies
With giving freedom to buy /sell foreign currency, the decree prohibits to denominate any price for goods and services in foreign currency.
What was before?
Before the decree there were several exchange rates (official, market, stock exchange) and the differences between them were significant. At the same time, there were certain limitations for purchasing foreign currencies, which were critical hurdle for foreign investors to invest in Uzbekistan.
Moreover, many services and goods were denominated in USD – such as communication services (mobile and internet), avia tickets, automobiles.
What are perspectives?
As the Government lifted the most of constraints in regards to foreign currency transactions, we expect the following results:
unification of exchange rates, which will be defined by the market principles
increase of interest from foreign investors, who were previously didn’t take a risk due to high exchange rate regulations
increase of foreign trade transactions
as the decree doesn’t permit to increase prices which were previously denominated in foreign currencies, it can partially lift inflationary pressure
We believe that Uzbekistan took an important step not only towards the liberalization of the currency, but also towards opening economy for investments and trade, which can positively effect in the country’s mid-term and long-term perspectives as foreign currency operations was one of the key barriers.