In the first week following the government’s decision to make the national currency officially convertible, households and businesses in Uzbekistan bought around $300 million worth of Uzbek sum, a leading financial regulator has said, offering some hint of what has been happening on the black market.  



Timur Ishmetov,  first deputy chairman of the Central Bank, said that citizens exchanged around $200 million in the banks following the September 5 big bang event that saw convertibility introduced and the official rate of the sum dropped from 4,210 to 8,100 against the dollar. Ishmetov said that another $100 million worth of sum were sold to local export companies on the stock market.



"The Central Bank is evaluating demand and supply. When it comes to corporate entities, the demand is in the region of around $100 million. In this situation, when the supply is more than demand, the Central Bank has to take part in trade to prevent sharp fluctuations in the exchange rate,” Ishmetov is quoted as having said by Nuz.uz.



Ishmetov said that level of 8,100 to the dollar, which is where the sum was dropped on the first day of free exchange, was established after several years of study. But as the balance between demand and supply finds its natural level, it will have an effect on the rate, he said.



Although these are basic fundamentals, the notion of an officially recognized free-floating currency is a deeply unusual one for a nation used to closely directed economic policy. Right until the Uzbek sum became readily tradable in the country’s banks, the black market rate was the only one to which households and businesspeople paid any attention. The fact that $300 million was traded on the legal market gives some sense of the massive scale of that dark area of the economy.



But economists are warning against drawing hasty conclusions.



“One week of statistics is not representative. The black market is not going to disappear altogether. But with full liberalization, its size will shrink to an absolute minimum,” Yuliy Yusupov said.



Indeed, the vast volumes are readily explainable by the fact that on September 5, official rates had even leapfrogged black market rates, sending people scrambling to take advantage.



While Uzbeks can now buy sum with abandon, they are still not able to exchange their sum for cash dollars in the banks. Instead, people have been told they can have up to $5,000 deposited onto their bank cards once every quarter.



But Ishmetov did tell reporters this week that the authorities plan to begin selling foreign currencies in the next few months. He said that while that is the goal, the process of getting there will be staggered.



“I cannot name an exact date for the sale of foreign currencies. I think that it will happen in a few months time. When we consider our steps, we act on the principle of ‘measure seven times and cut once.’ First and foremost, we base [our decisions] on the effect they will have on the economy,” he said.