Central Bank decision causes fever on Uzbek currency market

Ipoteka Bank's closed exchange office
The Uzbek market has reacted to a Central Bank resolution on discontinuing of the sale of foreign cash by pushing the exchange rate down to 3,500-3,700 sums to the dollar.

From 1 February, the Uzbek Central Bank adopted new rules for selling foreign currency to the population.

Uzbek citizens would now be able to buy foreign currency only for non-cash transfers from their sum-denominated cards to Visa International or MasterCard cards.

Exchange offices at commercial banks will not be servicing Uzbek citizens any more as only foreigners will be able to sell or buy foreign cash in them.

Closed exchange offices sowed a temporary panic on the black currency market.

The new rules were published on 30 January, and it caused fever on the market already the following day. Black market currency dealers increased the exchange rate from 2,700 sums to 2,860 sums to the dollar.

On 1 February, the average rate was 3,100-3,200 sums to the dollar. At some Tashkent markets where black market dealers operate the rate jumped to 3,500-3,700 sums to the dollar.

On 2 February, the black market rate recovered and stood at 2,800-2,850 sums to the dollar. In the following two days the sum appreciated further and changed hands at 2,750 sums for a dollar.

Currency dealers who exchange the world's major currencies at the rates set from on high suggested that after the two-day jump the rate would stabilise and start growing slowly but steadily.

"We do not know how the exchange rate would grow but it was growing by 20-30 sums per week ahead of 1 February," said currency dealer Dilfuza from Tashkent's Fergana (Risovyy) market.

She said the new rules for selling foreign currency had not changed black market dealers' work - every day their "supervisors" set the rate they have to buy and sell foreign currency and provide them with cash.

The dealers do not know who these "supervisors" are and which structures they represent, but they believe that the country's Central Bank manages and provides cash dollars and euros to them.

Dollars could be withdrawn only abroad

An anonymous source at the National Bank for Foreign Economic Activity of the Republic of Uzbekistan (NBU) said that the new rules should bring some ease to Uzbek citizens.

Despite restrictions on the amount of currency purchased - $2,000 per quarter - it would become simpler to buy foreign currency in the country.

People will need to open a separate foreign currency account for exchange operations and obtain a sum-denominated plastic card.

"Money from the exchange foreign currency account on a plastic card could be freely used to pay for purchases and services but only abroad as these cards will not work in Uzbekistan," the source said.

"Money from these cards could be cashed only outside Uzbekistan," the source added.

A limit on the amount of money that could be cashed abroad from plastic cards would be retained.

This limit would be set by each Uzbek bank in coordination with the Visa and MasterCard international systems and may vary from bank to bank.

"Mostly the limit would be set between 200 and 400 conventional units. This means, while abroad, between 200 and 400 of units of the currency could be withdrawn from the card," the source explained.

People scared

Not only did the new rules pushed the exchange rate down on the black market but also gave rise to rumours about a change in rules for receiving money transfers and taking dollars out of the country.

Rumours are spreading that money transfers will not be released in cash but be transferred to currency account, or they would be converted to sums at the bank's exchange rate.

Kapital Bank denied this rumour and said that there had been and would be no change in releasing money transferred from abroad.

The bank's statement was confirmed by a Tashkent resident called Tatyana who received a money transfer from her relatives in Europe today.

"Dollars were released without problems. When I asked whether transfers would be released only in sums at the bank's exchange rate, the cashier issued foreign currency without problems," she said.

Another rumour that raises concern is about people's ability to take foreign currency out of the country. The Central Bank's press service said there had been no change in this sphere either.

"A total of $2,000 in cash could be taken out of the country without problems. Between $2,000 and $5,000 could be taken out with a letter from the Central Bank. Money on foreign currency-denominated plastic cards could be taken out without restrictions," a spokesman for the Central Bank who did not give his name said.