Uzbekistan lifted remaining currency controls on Tuesday, allowing citizens to purchase foreign cash for the first time as the Central Asian country seeks to attract foreign investment. The country of 32 million people has looked to diversify its economy since the death of its long time leader Islam Karimov in 2016. Central bank chairman Mamarizo Nurmuratov said at a press conference that the bank would be allowing the national som currency's value to be determined "independently in the market", state media reported.
"Now the Central Bank will not set prices for the sale and purchase of foreign currency," Nurmuratov said during the press conference on state television. In a press release the bank said it would "use market mechanisms to mitigate the effects of external shocks and ensure the balance of key macroeconomic indicators".
Pressures on the som linked to global economic trends saw its value against the dollar dip nearly four percent last week. The bank said that commercial banks from Tuesday would begin selling foreign currency in cash form, rather than transferring it onto specialised cards that were introduced after in 2017. The central bank had previously retained some controls on the som despite allowing a sudden 50 percent drop in the currency in 2017 which brought it closer to its black market value. Before 2017 Uzbekistan's currency was subject to strict capital controls, leading to a wide gap between its official exchange rate and the black market rate.
Exporting firms were forced to sell their foreign currencies at the artificially high official rate, discouraging foreign investment. After aligning the official rate with the black market rate, the central bank used "half market measures" to control the currency in the transition to a free float, economic analyst Navruz Melibayev said. "This system was perhaps similar to China's (control of) the yuan currency. Now we have a full free float like Russia or Kazakhstan," Melibayev told AFP by telephone.
Last week President Shavkat Mirziyoyev hailed a surge in investments in the economy which he said constituted over 38 percent of Gross Domestic Product, in the first half of this year, compared to less than a quarter in previous years. The International Monetary Fund has welcomed economic reforms in Uzbekistan but warned last year that import and export data showed signs of an overheating economy. The country was unattractive for investors under Karimov, who took a conservative approach to external debt and favoured a strongly protectionist economic model that led to stagnation. Uzbekistan depends on commodities such as gold and cotton for economic growth but has looked to diversify since Karimov's death in 2016.