ALMATY (Reuters) - Uzbekistan plans to allow its citizens to buy and sell foreign currency at banks and exchange bureaus from early September, two banking sources told Reuters on Thursday.
The measure would be a potentially decisive step on the path towards full convertibility of the country’s sum currency, helping open up Central Asia’s second-biggest economy to badly needed foreign investment.
Foreign companies have largely stayed out of the resource-rich nation of 32 million because decades-old regulations there force most businesses to sell foreign currency at a knockdown official rate while buying it at a much more costly one.
But in a nod to a more reform-minded economic agenda flagged by President Shavkat Mirziyoyev, who took office in December, the former Soviet republic this month abolished a rule obliging exporters to sell a quarter of their hard currency revenue to the state.
It had earlier allowed a small number of banks and companies to deviate from the official exchange rate in currency deals.
Two Uzbek bankers told Reuters that banks were now preparing to start retail foreign exchange operations in early September. Both sources were involved in the preparation process.
But instead of selling foreign currency as cash, the banks would deposit it in special cards issued to customers, they said.
A central bank spokesman said on Thursday a decision on cash convertibility had not yet been made.
Mirziyoyev has made economic reforms a priority for his presidency, and the way his government handles this one will be closely watched abroad.
The International Monetary Fund said last month that foreign exchange reform would need to be backed up by restructuring of state-owned firms, streamlining red tape and “removing other bottlenecks to international trade”.
Allowing full convertibility of the sum, aligning the official and market rates and lifting restrictions that force ordinary Uzbeks to buy hard currency from the black market would be the final steps in the foreign exchange reform.
One of the sources said banks would quote the dollar slightly above the black market rate, currently about 7,700 sums per dollar. The official rate is 4,210. The second source provided no figures.
The central bank this week issued a regulation under which it plans to provide sums in cash to banks and exchange bureaus so they can buy foreign currency from individuals. But the document does not mention sales of foreign currency or provide any timeline and exchange rate guidance.
With individuals in Uzbekistan, a major exporter of cotton and gold, having been effectively barred from holding cash foreign currency, a black market for it has thrived.
Its economy having remained closed, the mostly Muslim nation has struggled to create jobs for its quickly growing population, and millions of Uzbeks have become migrant labourers, most of them working in Russia.
The restrictive foreign exchange regime is a legacy of Mirziyoyev’s autocratic predecessor, Islam Karimov, who ran the country for 27 years until his death last September, first as a Soviet communist boss and then as president.
Mirziyoyev has also taken other steps towards liberalising the tightly controlled nation, easing restrictions on foreign travel and removing large numbers of people, including dissidents, from a security black list.
Reporting by Olzhas Auyezov; Editing by John Stonestreet