Uzbekistan to free over-the-counter rate of soom from July 1 - Cabinet

/IRBIS, June 25, 01/ - REUTERS informs, with the reference to the resolution of the Cabinet of Ministers of Uzbekistan "On further liberalization of currency market", that from July 1, 2001 Uzbekistan will introduce free exchange rate on its over-the-counter foreign exchange market for a number of transactions. Due to limited access to foreign currency, a system of multiple exchange rates has settled in Uzbekistan now and all transactions are made using the exchange rate set by the Central Bank ($1-370.02 soom for this week), is said. Exporters are said to sell part of their earnings at the Exchange mandatory, and the state is said to buy the currency for its centralized imports and state debt servicing needs, while official rate is used to customs calculations, was added. The government resolution moves the mandatory currency sales to the over- the-counter market from July 1, where the exchange rate settles based on demand and supply proportions. Following transactions are to be made at free exchange rate: mandatory sales of 50% of the currency earnings by the exporters; imports of equipment, spare parts, raw materials, and services; servicing of new foreign credits; repatriation of profits, dividends and other incomes of foreign companies; travel allowances. It is said that up until now legal entities were buying the currency at 675 sooms per dollar, which was set from July of last year, and selling at 690 sooms per dollar. Exchange rate for cash currency is about 850 sooms per dollar, and "gray market" exchange rate is about 915 sooms per dollar. The government creates Consolidated Stabilization Fund based on its resolution, which is aimed at developing a stable over-the-counter currency market, is said. However, there is no information on the functions of the Fund, though there is only information on its creation. Thus, part of excessive currencies of the clients, part of 50% mandatory currency sales that remain at the banks, income of the Central Bank from managing currency assets are said to be sent to the Fund. The Fund will also accumulate the currency earnings from sales of highly liquid products to foreign companies, that exceeds forecasted exports. From July 1 foreign company will be able to buy "highly liquid" products exclusively for foreign currency, and the proceeds will be sold at free exchange rate of the over-the-counter market, is said. There is no information on the list of so-called highly liquid products and the administration are to create a list of such items in two weeks to be sold till the end of this year. It is planned to attract such international financial institutions as the IMF, World Bank, ADB, EBRD and others to develop the currency market liberalization methods. There is also a need to develop a program for 2002-2005 on currency inflow increase, creation of favorable investment climate and develop exports. From 1998 the government of Uzbekistan is trying to make the soom completely convertible on current payment balance transactions, though the terms has been postponed several times, was added. It is said that last spring and summer the government made an attempt to unify exchange rates and expand the companies' access to the currency, though IMF stated that no complete liberalization had been achieved. Due to a weak progress in market reforms and pertaining currency limitations on the national currency, Uzbekistan has been criticized several times by international financial institutions and this year IMF is not sending its representative to this country, is said.