March 25, 2020 / 2:35 PM / 13 days ago

UPDATE 1-Uzbekistan central bank says sharp sum depreciation unlikely

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TASHKENT, March 25 (Reuters) - Uzbekistan’s sum currency is unlikely to depreciate sharply, its central bank said on Wednesday, despite steep drops in the value of the rouble and the Kazakh tenge amid a collapse in oil prices.

Uzbekistan does not export oil, but it sells natural gas to Russia and China, and millions of Uzbeks working in Russia send remittances back home to support their families. Neighbouring Kazakhstan is a key market for Uzbek exports including fruit and vegetables.

The rouble and the tenge have both posted double-digit losses against the dollar this month after the collapse of a global producers’ pact sent crude prices tumbling.

Over the same period the sum, which is held in a managed float against the dollar, has lost less than 1%.

It is underpinned by central bank foreign currency sales, in volumes directly linked to the value of gold the bank purchases from domestic producers.

The central bank said it expected only small sum exchange rate adjustments, and that it planned to sell 30% more foreign currency on the domestic market this year compared with 2019 on the back of higher gold prices.

The bank noted higher demand for foreign currency but expected extra supply thanks to government plans to borrow $1.1 billion abroad for an emergency fund set up to prevent the spread and mitigate the economic consequences of the coronavirus outbreak.

The volume of bids in the central bank’s deposit auction this week was the lowest since their launch in February and stood at 30 billion sums ($3.2 million). (Reporting by Mukhammadsharif Mamatkulov; Writing by Olzhas Auyezov; Editing by Andrew Heavens and John Stonestreet)

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