Coverment and economy

Prices; Monetary/Fiscal Policy

• Prices; Monetary/Fiscal Policy
• Since the fall of 1996, Uzbekistan's national currency, the soum, has not been freely convertible. The government sets three level exchange rates, all highly overvalued, but most businesses and individuals are unable to buy dollars legally at these rates, so a widespread black market meets the unmet demand. President Karimov repeatedly pledged to restore convertibility in 2000, but failed to do so. As a result the IMF closed its office in Tashkent in the spring of 2001.
• On November 1, 2001, the government devalued the official exchange rate to a level nearly equal to the so-called "commercial" rate of approximately 693 soum/$ and eliminated the use of this "official rate" for all but accounting purposes.

In March 2002, the government devalued the exchange booth rate from approximately 920 to about 1,300, much closer to the curb market rate. The Staff Monitored Program, signed by the Uzbek Government and the IMF, envisions lowering the gap between the so-called official and commercial rates and the curb rate to no more than 20% by the end of June 2002. Outstanding external debt reached $4.5 billion as of end of 2001, and tax collection rates remain high, due to the use of the banking system by the government as a collection agency. Implementation of the SMP would likely cause tax revenues to fall, however, and the government has few traditional tools to conduct open market operations in the area of monetary policy. In April, a new decree was promulgated which allows for the Central Bank to sell bonds, essential to the conduct of monetary policy. Technical assistance from the World Bank, Office of Technical Assistance at the Treasury Department, and from the UNDP is being provided in reforming the Central Bank and Ministry of Finance into institutions which conduct market-oriented fiscal and monetary policy.

• In March 2002, the government devalued the exchange booth rate from approximately 920 to about 1,300, much closer to the curb market rate. The Staff Monitored Program, signed by the Uzbek Government and the IMF, envisions lowering the gap between the so-called official and commercial rates and the curb rate to no more than 20% by the end of June 2002. Outstanding external debt reached $4.5 billion as of end of 2001, and tax collection rates remain high, due to the use of the banking system by the government as a collection agency. Implementation of the SMP would likely cause tax revenues to fall, however, and the government has few traditional tools to conduct open market operations in the area of monetary policy. In April, a new decree was promulgated which allows for the Central Bank to sell bonds, essential to the conduct of monetary policy. Technical assistance from the World Bank, Office of Technical Assistance at the Treasury Department, and from the UNDP is being provided in reforming the Central Bank and Ministry of Finance into institutions which conduct market-oriented fiscal and monetary policy.