This content is from: Local Insights

Uzbekistan

The government of Uzbekistan has published an action plan renewing a pledge to remove existing restrictions on currency transactions, and setting November as the deadline for their removal. The document is addressed to the attention of the managing director of the International Monetary Fund (IMF), Horst Kohler, and is signed by Uzbek deputy prime minister and minister of the economy, Rustam Azimov, as well as by the chairman of the Central Bank, Fayzullo Mullajanov.

According to the plan, Uzbekistan will introduce full currency convertibility by November 2003, enabling it to ratify Article VIII of the IMF's Articles of Agreement, which require members to guarantee the free convertibility of their currencies.

The IMF withdrew its representative from Uzbekistan in 2001 expressing frustration over the government's reluctance to make progress in economic reforms. Although the IMF returned last year, relations have not yet been fully restored.

The dispute has centered on the Uzbek government's reluctance to enact convertibility of the national currency, the Soum, a practice that has encouraged a black market in currency trading and hampered foreign investment. Over 2001 to 2002 the government set several deadlines for lifting currency restrictions, but failed to meet any of them.

The new action plan outlines step-by-step the removal of all barriers to the introduction of currency convertibility, exchange limits and trade restrictions, lifting requirements for pre-registration of import contracts and currency exchange restrictions on private individuals. It also provides for the removal of a number of other currency restrictions, including exchange quotas and a rule banning trade companies from purchasing hard currency.

The government is expected to introduce a number of implementing amendments to current Uzbek legislation regulating foreign currency operations prior to the end of 2003. By ratifying Article VIII of the Articles of Agreement, the government is clearly hoping to send an encouraging message to foreign investors and businesses.

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