Tashkent is reportedly restricting access to dollars for the business community, in the latest development to suggest that Uzbekistan’s government is facing a liquidity crisis.
The National Bank of Uzbekistan has “halted all convertibility operations for an unspecified period,” the Tashkent-based Uzmetronom.com website reported May 20, citing “information from reliable sources.” There was no confirmation on the website of the central bank, which EurasiaNet.org could not reach for comment.
These are the operations through which foreign and domestic companies convert their revenues earned in Uzbekistani sums into dollars, to repatriate earnings and pay for imports.
“Thus foreign investors and local entrepreneurs who depend on supplies from abroad (raw materials, parts, equipment and so on), who could still recently count on at least minimal levels of profit conversion within the limits of the quotas set for them, are now deprived of this opportunity,” remarked Uzmetronom.com (an unusually outspoken website which is believed to be close to Uzbekistan’s security services).
Investors regularly cite convertibility of sums into foreign currency and repatriation of revenues as the main barriers to doing business in Uzbekistan. Privately, businessmen report delays stretching into months to obtain permission from the central bank to convert sums to dollars, during which time they cannot access the funds since they are held in zero-interest accounts at the National Bank.
If confirmed, the suspension of currency conversion would be the latest indication that Tashkent is suffering from a shortage of dollar liquidity as it struggles under exchange rate pressures, caused in part by the depreciation of the Russian ruble (which has hit currencies across the region).
The black market rate for the sum is hitting new lows, suggesting high demand for dollars outside the banking system (where public access to greenbacks is restricted by tight regulations).
The sum is now reportedly trading on the black market at around 4,600-4,650 to the dollar, a depreciation of some 12 percent since late March.
The sum has traditionally traded around a third lower on the black market, which is believed to be controlled by powerful vested interests.
However, the gap has widened exponentially in recent weeks to around 80 percent (up from around 66 percent in late March). The National Bank rate stands at 2,569 sum to the dollar.
Uzbekistan’s banks are also reportedly suffering a sum liquidity shortage: Last month, Ulugbek Mustafayev, a deputy chairman of the National Bank, reportedly wrote to President Islam Karimov complaining that banks were suffering a shortfall of 1.5 trillion sums ($602 million) to pay salaries to staff from state-run companies, according to a May 18 RFE/RL report.