Page 46 - bne_Magazine_October_2017

46 I Eurasia bne October 2017
The IMF mission welcomed the Uzbek authorities' plan to frontload reforms of the foreign exchange system, it said in a statement published follow- ing a visit to Uzbekistan between July 17-24, and relations with the interna- tional fund are also expected to warm as it reengages with the government after decades of minimal contact.
Before the country can proceed, it needs to solve the issue of existing double-digit inflation, which remained hidden behind the dual exchange rate mechanism. Despite official figures reporting annual consumer price
hikes of 5-7%, independent press and economic reports from 2016 suggest the real rate of inflation is running
at between 20% and 30% a year. The danger is that freeing the currency will bring this inflation out into the open.
To curtail unreported double-digit inflation, the Central Bank of Uzbeki- stan dramatically hiked its refinanc- ing rate by 5 percentage points a
few months ago to 14% after barely touching the overnight rate for years.
“Unifying exchange rates and allowing a market-based allocation of foreign exchange resources would allow the Central Bank of Uzbekistan (CBU) to pivot to a stability-oriented monetary policy capable of effectively control- ling inflation,” the IMF noted.
All consumer goods within the coun- try have historically been priced in accordance with the black market rate and, as such, the convergence of the official and black market rates at
tances “make up 13-15% of the country's GDP and a large portion of the popula- tion’s foreign exchange earnings,” Alish- er Taksanov, an exiled economist based in Switzerland told bne IntelliNews last
“The danger is that freeing the currency will bring this inflation out into the open”
UZS8,100 against the greenback is expected to keep Uzbek consumers largely unaffected by the liberalisation.
But Mirziyoyev has, nonetheless, ordered the Uzbek authorities to prepare measures to curb potential rapid inflation. According to the Uzbek president’s decree from September
2, state committees and law enforce- ment authorities “should strengthen measures to prevent and suppress unreasonable growth of prices and tariffs for socially significant goods and services,” state-run UzDaily.uz news agency reported on September 4.
Increased employment options
back home
Last but not least, another positive side effect of abolishing the strict currency regime might be a reduction of Uzbeki- stan’s reliance on remittances from Uzbek migrant workers, mostly in Rus- sia, for foreign currency inflows. Remit-
year. The migrant workers themselves will certainly benefit from the increased employment options within their home country.
“The reform would also promote job creation and growth by increasing exter- nal competitiveness, attracting foreign direct investment (FDI), and improving the allocation of domestic resources,” the IMF mentioned in its statement.
One thing is clear. Foreign companies will be either returning to Uzbekistan or entering it for the first time. Some enti- ties were already back in the fold prior to the reforms, including the European Investment Bank and the European Bank for Reconstruction and Development.
It is now up to Mirziyoyev to see the transformation through, but if he does the whole economic structure of Central Asia could be radically transformed and Tashkent may emerge as the capital of the region.
Military plot to assassinate Uzbek president reportedly foiled
Nizom Khodjayev in Tashkent
Reports that members of the Uzbek state security services (SNB) were conspiring to assassinate reformist President Shavkat Mirziyoyev have surfaced on the opposition People's Movement of Uzbekistan website.
Uzbekistan has been continuously hitting the headlines recently, and the
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reports come amid a flood of positive news from the Central Asian country. In a few days, Mirziyoyev has delivered on his promise to lift strict currency controls from the country’s national currency and made a historic visit to neighbouring Kyrgyzstan, ending the adversarial relationship between the two Central Asian countries forged
during the late Islam Karimov’s regime in Uzbekistan.
Now, however, there are reports of a plot to kill the Uzbek president during his visit to Kyrgyzstan, political analyst Usman Khaknazarov claimed on the People’s Movement of Uzbekistan web- site. Regional media describe Khaknaz-