Liberalization of foreign exchange policy has started in Uzbekistan.

Liberalization of foreign exchange policy has started in Uzbekistan.

The President of the Republic of Uzbekistan signed the Decree No. УП-5177 “On Priority Measures on the liberalization of foreign exchange policy” on the 2nd of September, 2017.

The main objective of this document is elimination of excessive administrative interference into foreign exchange regulation, as well as the system of benefits and preferences for individual branches of economy and economic entities in carrying out their foreign economic activities, which to date has predetermined the creation of unequal conditions for conducting business among the entities of entrepreneurship and the emergence of a parallel foreign exchange and exchange rate markets.

Thus the key points set by the Decree include:

  1. Guaranteed free purchase and sale of foreign currency by legal and physical entities in banks for performance of current international transactions.

    Legal entities may freely convert in banks their resources into foreign currency without any restrictions for carrying out current international transactions, including import of goods and commodities, works and services, repatriation of revenues, repayment of loans, payment of travel expenses and such other transfers of non-commercial nature.  

Physical entities may also freely purchase foreign currency at the conversion sections of the banks with the transfer of purchased funds to international payment cards and use them overseas without any restrictions, among them for payment through bank accounts for training, treatment abroad, etc. In addition, a number of measures have been envisaged aimed at simplifying the procedure for buying and selling foreign currency by physical entities.

Individual entrepreneurs engaged in importing consumer commodities may accumulate their current trade foreign currency earnings in compliance with the procedure established for physical entities, i.e. transfer of purchased foreign currency funds to international plastic cards and use them without restrictions abroad, including for the import of goods. Along with this, for the purpose of stimulation the export activities of individual producers-entrepreneurs and farmers, they are awarded the right to freely dispose of their own foreign exchange earnings at their discretion, up to the withdrawal of foreign currency from their bank accounts.

  1. 2.   Mandatory sale of part of the currency proceeds from the export of goods (works, services) for all exporters, irrespective of the form of ownership and exported products has been fully abolished.
  2. The exchange rate of the national currency in relation to foreign currencies established on interbank electronic trading of the currency exchange shall be established solely on the basis of supply and demand.


At the same time, taking into account possible issues and problems arising within the short term prospect due to the liberalization of foreign exchange policy, in order to mitigate the impact of the reforms on vulnerable strata of the population, and minimize the impact of the exchange rate on domestic pricing of goods and services, the Decree provides for a number of preventive measures. Authorized ministries and agencies have been tasked with: 

  1. Elaboration of measures on securing financial stability of the Republic’s banking system, introduction of modern principles and mechanisms of regulation and supervision over the activities of commercial banks;
  2. Elaboration of additional measures on rendering financing support to basic branches of economy, including improvement of their taxation, as well as restructuring the loans of the Fund for reconstruction and development of the Republic of Uzbekistan and the banks;
  3. Introduction of targeted and transparent social benefits and subsidies for the vulnerable strata of population, ensuring their employment on the basis of their broad involvement in outwork, the effective use of household plots, as well as improving the housing and living conditions of low-income families by providing them with preferential micro loans;
  4. Introduction of a new mechanism of social support for the unoccupied population, providing for employment in paid public works, in particular, landscaping, improvement and repair of housing and utilities’ infrastructure, streets, roads, makhallas (neighborhood communities’) territories, social and cultural facilities, irrigation networks, as well as seasonal agricultural work and care for people with disabilities;
  5. Introduction of a temporary order, according to which the financial result of economic entities, obtained as a result of revaluation of funds in foreign currency on their accounts, is not included into the taxable base;
  6. Revision and optimization of the existing customs payment norms and rates;
  7. Ensuring price stability and prompt saturation of the markets with consumer goods. 

Apart from that the Decree sets up a number of norms aimed at consolidation of confidence in the national currency, as well as abolition of conditions when goods (works and services) in the Republic could be purchased for foreign currency, which entailed the need for its acquisition by legal and physical entities. It has been defined in particular that:

  1. It is prohibited to make payments in foreign currency for goods (works and services), with the exception of payments through international payment cards in compliance with the international practices. At the same time, for the purpose of creating favorable conditions for the development of entrepreneurial activities, this Decree authorizes repayment of loans issued in foreign currency in national or foreign currencies, based on the credit policy and on the basis of an agreement reached by the parties.
    1. Prices and tariffs for goods, works and services, as well as minimum requirements to the companies’ Statutory capitals shall be determined only in the national currency;
    2. State duties, fees and such other mandatory payments shall be collected only in the national currency, with the exception of consular fees. 

 On 5 th September, 2017 the Central Bank of the Republic of Uzbekistan devaluated the soum by setting the dollar rate at 8100,00 soums. Previously the dollar rate made up 4210,00 soums.

The rate of the Central Bank shall be set every Monday as an average significance of the rates fixed at the previous currency exchange week auctions and shall be applied for accounting, statistical and such other foreign currency transactions reporting purposes as well as for calculating customs and other mandatory payments on the territory of the Republic of Uzbekistan.

Interbank trade sessions on the purchase and sale of foreign currency will be held daily at the Uzbek Republican Currency Exchange, at which the exchange rate shall be determined on the basis of the current correlation between foreign currency supply and demand, and published on the Stock Exchange website.

 

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