EurasiaNet Business & Economics - Uzbekistan: Cash Shortage Tosses Monkey Wrench into Debit-Card Program

BUSINESS & ECONOMICS

UZBEKISTAN: CASH SHORTAGE TOSSES MONKEY WRENCH INTO DEBIT-CARD PROGRAM
10/05/09

Convenience is becoming a dirty word these days in Uzbekistan. The Uzbek government is paying a growing number of public-sector employees electronically, with salaries automatically deposited in state-run accounts and accessed via debit cards. In theory, it is a practice that has benefits for employees. But in practice, it has caused financial havoc for thousands upon thousands of Uzbeks.

The chief problem with the electronic payment system is a cash shortage that leaves multitudes of Uzbeks unable to access paper money from ATMs in order to pay for daily necessities. The inability of debit cards to produce cash upon demand is becoming a source of fast-spreading vexation.

"The situation with plastic cards is getting worse. By the end of the year there will supposedly be another 50,000 to 100,000 ATMs installed across the country. But there is no money in the ATMs. And in the bazaars, where most people buy their food and clothes, there are no ATMs," said Dmitry Alyaev, a Moscow-based political analyst who tracks Uzbek affairs.

Alayev, who is the editor of Oazis, a news website specializing in Central Asian developments, said contacts inside Uzbekistan had told him that supermarkets that accepted debit cards for purchases were charging exorbitant prices - upwards of three times what the same goods cost at the bazaar. "This is the situation in Tashkent," Alayev said. "I can’t even imagine what is happening in the periphery and remote areas of Uzbekistan." [For additional information click here].

Veritas, an Uzbek-based human rights organization that specializes in youth-related issues, recently completed a study of economic trends in the Bukhara Region. Data compiled by the group indicated that groceries bought in supermarkets there can cost between 10-50 percent more than the same goods in a bazaar.

Beyond the inability to access cash, some Uzbeks report that the debit-card system is being manipulated by the state to preemptively withhold taxes. In some areas money is centrally deducted from workers’ salaries for "municipal payments."

"Recently the school director got all of us together and told us that from now on, based on ’our personal approval,’ 30 percent of our monthly salary would be automatically kept for covering municipal payments. He also stressed that anyone who didn’t agree with this could voluntarily quit their jobs. Everybody kept quiet and swallowed this," a teacher in Khorezm told Veritas.

In the Ferghana Valley city of Kokand, some banks are reportedly charging predatory fees -- running as high as 20 percent -- to customers seeking to use debit cards to obtain cash from a teller, Veritas representatives claimed.

"The introduction of plastic cards is not achieving its original purpose -- goals such as a more civilized, comfortable, safe and modern accounting system," the Veritas report stated. "Conversely, the wholesale forced introduction of [debit] cards leads to the growth of a primitive, almost a barter economy in Uzbekistan, and sharpens peoples’ feelings of protest."

Alyaev said he was hearing stories of people going to extreme lengths to obtain cash. "On the date they [staff] get paid, they go to their company’s accountant who will then call the bank to ask where they can get some money," Alayev explained. "If there is a normal and reasonable employee sitting in the bank, he or she will tell them where there is an ATM machine with cash. After all that, the accountant collects all the cards and goes to that particular ATM to get money for the staff," he explained.

The cash crunch plays into the hands of Islamic radicals inside and outside of Uzbekistan who are working to overthrow President Islam Karimov’s administration, Alayev added.

The administration’s hardline political and social policies, together with indifference on the economic front, are helping to "bring about the Islamization of the society," Alayev contended.

"Radical Islam doesn’t come from nowhere; it appears because of social and economic conditions," Alayev continued. "People need choices, if they don’t have one it will bring about a socio-economic explosion. It will bring about very serious tensions."