INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 05,2025
Journal:
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page 933
THE PROCESS OF LIBERALIZING THE FOREIGN EXCHANGE MARKET IN
UZBEKISTAN — SUCCESSES, RISKS AND LESSONS
Gafarova D.T.
Asian International University
Annotation.
The article analyzes the process of liberalization of the Uzbek foreign exchange
market, which began in 2017 and continued in 2023-2024. Key achievements such as a
decrease in the share of the dollar in foreign trade calculations, an increase in foreign
currency inflows and an improvement in macroeconomic stability are considered. At the
same time, risks have been identified, including exchange rate volatility, declining gold and
foreign exchange reserves, and limited liquidity in the banking system. Based on the analysis,
recommendations are proposed for further improvement of monetary policy.
Keywords
. Liberalization of the foreign exchange market, Uzbekistan, exchange rate, gold
and foreign exchange reserves, inflation, currency risks, macroeconomic stability, monetary
policy.
The foreign exchange market is an important part of the economy of any country, including
Uzbekistan, where its development is directly linked to successful integration into the global
economy, attracting foreign investment and the stability of the national currency. In recent
years, Uzbekistan has been actively pursuing reforms aimed at liberalizing the foreign
exchange market. These reforms create new challenges and opportunities for the functioning
of the monetary system. Understanding the theory of the foreign exchange market in
Uzbekistan requires consideration of its main aspects, such as the exchange rate, supply and
demand for foreign currency, as well as the influence of external economic factors.
The foreign exchange market is a system of market relations that arise in the process of
exchanging one currency for another at a set exchange rate. It plays a key role in determining
prices for international goods and services, as well as in maintaining domestic economic
stability. The country's foreign economic activity (import, export, financial transactions)
directly affects the foreign exchange market by regulating supply and demand for foreign
currency. There are two main types of transactions in the foreign exchange market: spot
transactions (short-term transactions) and forward transactions (long-term contracts). Spot
transactions are concluded on the terms of immediate currency exchange at the current
exchange rate, while forward transactions involve currency exchange at a future date at an
agreed exchange rate.
The process of liberalizing the foreign exchange market in Uzbekistan began in 2017 with the
introduction of a new exchange rate, when the National Bank of Uzbekistan abandoned the
fixed sum rate and switched to a market-based exchange regime. Prior to that, the exchange
rate of the national currency was strictly controlled, which limited opportunities for foreign
trade and attracted significant currency risks for businesses and citizens. The liberalization of
the foreign exchange market has led to the creation of several new conditions, including:
1. Free currency exchange: since 2017, currency exchange has become possible at the market
rate. This has increased transparency and reduced market distortions related to currency
scarcity and its artificial high cost.
INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 05,2025
Journal:
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page 934
2. Diversification of foreign exchange reserves: the country began to actively increase its
gold and foreign exchange reserves, which increased the confidence of foreign investors and
stabilized the exchange rate of the national currency.
3. Attracting foreign investment: the liberalization of the foreign exchange market has
become one of the factors contributing to the improvement of the investment climate in the
country. Uzbekistan has become more accessible to foreign investors, who can now freely
exchange and export profits in foreign currency.
The main achievements of Uzbekistan in this field are as follows:
1. Reducing the dollar's share in foreign trade calculations Since 2019, the share of the US
dollar in payments for imported goods has decreased from 83% to 79.5% in 2023. The
dollar's share in exports decreased from 99.1% to 93.2% over the same period. At the same
time, the share of settlements in rubles and soums increased, and the inflow of foreign
currency increased In 2024, the population sold $4.8 billion more in foreign currency to
banks than it acquired, which indicates a surplus in the foreign exchange market.
2. Improving macroeconomic stability In 2023, real GDP growth was 6%, and inflation
decreased from 12.3% at the end of 2022 to 8.1% in April 2024.
Uzbekistan's foreign exchange market is managed by the country's Central Bank, which
influences the market through instruments such as interest rates, currency interventions, and
regulation of commercial banks. The Central Bank conducts operations in the foreign
exchange market in order to maintain the stability of the national currency and ensure
macroeconomic stability. This is done through direct interventions, as well as through interest
rate policies that affect the cost of borrowing and saving in the national currency. The main
players in the foreign exchange market of Uzbekistan are:
• The central Bank is the main regulator of the foreign exchange market, which manages
national reserves and determines the general directions of monetary policy.
• Commercial banks — carry out currency exchange, provide foreign currency loans and
conduct foreign currency transactions for private clients and businesses.
• Individuals and businesses — buy and sell foreign currency for personal needs or for
conducting foreign economic activity.
The foreign exchange market of Uzbekistan, like any other country, directly depends on the
foreign economic situation. Among the main factors affecting the foreign exchange market of
Uzbekistan are:
1. Prices of oil and other commodities. Uzbekistan is a major producer and exporter of a
number of natural resources, and changes in world prices for these goods strongly affect the
foreign exchange market.
2. International economic and financial crises. For example, an economic downturn in
Uzbekistan's largest partner countries, such as Russia and China, may cause a drop in demand
for Uzbek goods and services, which in turn will affect demand for the currency.
3. Changes in external debt obligations. Uzbekistan actively participates in international
financial markets, and changes in the level of government debt or in the state of financial
markets can significantly affect the country's monetary system.
4. The credit rating of the country. Changes in Uzbekistan's international credit ratings
directly affect the level of investment and the value of the currency. Positive changes in the
rating may contribute to the strengthening of the sum exchange rate, while negative ones may
weaken it.
INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 05,2025
Journal:
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page 935
Despite the successful liberalization of the foreign exchange market, Uzbekistan faces a
number of risks that may have a negative impact on its economy. Such risks include:
1. Exchange rate volatility. Despite the efforts of the Government and the Central Bank, the
exchange rate of the national currency can fluctuate significantly, which creates risks for
businesses and households, especially for those who settle in foreign currency.
2. Lack of liquidity. The country's banking system has not yet reached full maturity, and the
liquidity of the foreign exchange market may remain limited, especially during periods of
external economic or internal crises.
3. Dependence on external factors. The strong dependence of the Uzbek economy on foreign
economic conditions makes the foreign exchange market vulnerable to fluctuations in world
oil prices, as well as to changes in international politics.
Identified risks:
1. Exchange rate volatility From the beginning of 2023 to June 2024, the sum depreciated by
about 12% against the US dollar.
2. Decrease in gold and foreign exchange reserves In 2023, Uzbekistan's international
reserves decreased by $1.2 billion, amounting to $34.56 billion.
3. Limited liquidity of the banking system. The central bank has begun to partially conceal
data on trading in the foreign exchange market, which may indicate a lack of transparency
and liquidity.
Recommendations for the liberalization of the foreign exchange market in Uzbekistan:
1. Strengthening of gold and foreign exchange reserves It is necessary to develop a strategy to
increase international reserves, which will ensure the stability of the exchange rate and
increase investor confidence.
2. Increasing the transparency of the foreign exchange market It is recommended to improve
the availability and completeness of information on currency trading, which will increase
confidence in the banking system and reduce the risks of speculation.
3. Diversification of foreign exchange reserves. The possibility of diversifying foreign
exchange reserves should be considered, including increasing the share of settlements in the
national currency, which will reduce dependence on fluctuations in the dollar exchange rate.
Uzbekistan's foreign exchange market has undergone significant changes in recent years due
to liberalization and integration into the global economy. However, despite the successes, the
country continues to face a number of challenges and risks that require further improvement
of monetary and monetary policy. The success of currency reform depends on a balanced
approach that takes into account both domestic economic conditions and global trends.
List of literature
1. The Central Bank of the Republic of Uzbekistan. (2024). A press release on priority
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consultations in 2024 with the Republic of Uzbekistan in accordance with Article IV.
3. Газета.uz . (2024). The Central Bank began to limit data on foreign exchange trading and
delay the publication of the reserves report.
4. Spot.uz . (2024). The share of the dollar and euro in Uzbekistan's foreign trade decreased
slightly.
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INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE
ISSN: 2692-5206, Impact Factor: 12,23
American Academic publishers, volume 05, issue 05,2025
Journal:
https://www.academicpublishers.org/journals/index.php/ijai
page 936
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