Uzbekistan's currency fell by nearly 50 percent Tuesday after the government scrapped most restrictions on foreign currency operations in an effort to tempt international investors after two decades of isolation. President Shavkat Mirziyoyev, who came to power after Islam Karimov's death last year, has ordered the national currency's rate with the dollar to be determined by the market, although the central bank will still play a role in ensuring its stability.
Uzbekistan's central bank showed on its website on Tuesday the dollar costing 8,100 soms, close to twice its previous official value of 4,210 soms and even more than the black market rate of 7,700 soms. In a statement late on Monday the central bank said the move was "based on the analysis of the dynamics of exchange rate factors for 2003-2017".
The move came as the Central Asian country looks set to open itself up to foreign investors after more than two decades of isolation and protectionism under Karimov. The ex-Soviet country has long had a two-tier system for currency exchange in which black market dealers wielded major influence over the highly regulated economy.
Highly-placed government officials have long been rumoured to pull the strings in the lucrative black market for foreign exchange, the future of which is now under question. The move will be welcomed by companies working with international markets who were forced to sell their foreign reserves at the miserly government rate under the old system.
State carrier Uzbekistan Airways, which previously sold flights in dollars, said on Tuesday that it would now sell tickets using the Uzbek som. "In order to create favorable conditions for passengers from September 5, 2017, Uzbekistan Airways is beginning the sale of air tickets for its flights to all destinations from the Republic of Uzbekistan in the national currency," the company said.
On Sunday, a decree published on the presidential website called for the "exclusive use of market mechanisms in determining the exchange rate of the national currency in relation to foreign currency" and said citizens and companies would be able to purchase "unlimited" amounts of foreign currency.
The same decree acknowledged that old foreign currency regulations in the country had "created an inefficient system of privileges and preferences for individual industries and business entities". While Mirziyoyev has praised the legacy of Karimov, under whom he served as prime minister for 13 years, he has also moved to distance himself from Karimov's authoritarian excesses and tried to tempt investors towards the commodity-rich republic.
In March, the European Bank for Reconstruction and Development announced it was set to resume lending in the country of 32 million after a decade-long standoff sparked by human rights concerns. Human Rights Watch has also been invited back to the country following an enforced absence under Karimov, who ruled Uzbekistan with an iron fist from before independence from Moscow.
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