Uzbekistan Draws Up Roadmap for Capital Liberalisation
Economy
Uzbekistan is preparing for broader liberalisation of capital account transactions as it continues reforms of its foreign exchange market and monetary policy framework. The Central Bank has already drafted a roadmap for the next phase of reforms, which is currently undergoing interagency coordination.
Central Bank Chairman Timur Ishmetov outlined the plans in an interview with the Financial Times. He said Uzbekistan began a broad programme of economic liberalisation around a decade ago. One of its key components was reforming the foreign exchange market, including the removal of restrictions on current account transactions and the introduction of full currency convertibility.
Capital account transactions, however, remain subject to more conservative regulation. According to Ishmetov, the next stage of reform will involve broader liberalisation of capital movements.
Authorities nevertheless plan to proceed gradually, taking into account potential risks to financial and macroeconomic stability.
The Central Bank is consulting the International Monetary Fund and the World Bank on the sequencing of future reforms. Once interagency approval is completed, the roadmap is expected to be published, providing investors with greater clarity about the government's next steps.
Ishmetov said institutions must first be strengthened, safeguards established and risk-management mechanisms improved before the capital account can be opened further.
He warned that liberalisation without adequate safeguards could lead to unwanted market volatility, additional financial risks and pressure on the exchange rate.
Uzbekistan is simultaneously continuing reforms of its exchange rate regime and monetary policy framework. According to Ishmetov, the IMF reclassified the country's exchange rate regime as freely floating this year.
The Central Bank is targeting inflation of 5% next year, compared with the current rate of 6.5%. Ishmetov said the sharp rise in inflation during the early stages of reform was linked to the transition from administratively controlled prices to market-based pricing.
The country is also increasing the share of borrowing in its national currency in an effort to reduce foreign exchange risks associated with external financing. Uzbekistan has been developing its market for som-denominated financial instruments, with government institutions, banks and companies increasingly using the national currency for new issues.
Ishmetov also reaffirmed Uzbekistan's commitment to a floating exchange rate, saying the country has learned from its previous experience with attempts to manage the currency administratively.
In its investment policy, Uzbekistan is pursuing diversification and does not intend to concentrate on a single region or partner. While China remains a major trade and investment partner, the country is also expanding economic ties with Europe, the United States and other markets.
The Central Bank chief highlighted the importance of long-term foreign direct investment and argued that Central Asia could benefit from developing as a more open and integrated market, with regional countries coordinating their efforts to attract international capital.
The roadmap for capital account liberalisation therefore forms part of Uzbekistan's broader economic agenda, which includes strengthening financial infrastructure, expanding the role of the national currency and increasing transparency for international investors.
Capital account transactions, however, remain subject to more conservative regulation. According to Ishmetov, the next stage of reform will involve broader liberalisation of capital movements.
Authorities nevertheless plan to proceed gradually, taking into account potential risks to financial and macroeconomic stability.
The Central Bank is consulting the International Monetary Fund and the World Bank on the sequencing of future reforms. Once interagency approval is completed, the roadmap is expected to be published, providing investors with greater clarity about the government's next steps.
Ishmetov said institutions must first be strengthened, safeguards established and risk-management mechanisms improved before the capital account can be opened further.
He warned that liberalisation without adequate safeguards could lead to unwanted market volatility, additional financial risks and pressure on the exchange rate.
Uzbekistan is simultaneously continuing reforms of its exchange rate regime and monetary policy framework. According to Ishmetov, the IMF reclassified the country's exchange rate regime as freely floating this year.
The Central Bank is targeting inflation of 5% next year, compared with the current rate of 6.5%. Ishmetov said the sharp rise in inflation during the early stages of reform was linked to the transition from administratively controlled prices to market-based pricing.
The country is also increasing the share of borrowing in its national currency in an effort to reduce foreign exchange risks associated with external financing. Uzbekistan has been developing its market for som-denominated financial instruments, with government institutions, banks and companies increasingly using the national currency for new issues.
Ishmetov also reaffirmed Uzbekistan's commitment to a floating exchange rate, saying the country has learned from its previous experience with attempts to manage the currency administratively.
In its investment policy, Uzbekistan is pursuing diversification and does not intend to concentrate on a single region or partner. While China remains a major trade and investment partner, the country is also expanding economic ties with Europe, the United States and other markets.
The Central Bank chief highlighted the importance of long-term foreign direct investment and argued that Central Asia could benefit from developing as a more open and integrated market, with regional countries coordinating their efforts to attract international capital.
The roadmap for capital account liberalisation therefore forms part of Uzbekistan's broader economic agenda, which includes strengthening financial infrastructure, expanding the role of the national currency and increasing transparency for international investors.
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