Recently, an IMF delegation visited Uzbekistan for the first time since 1996, and discussed the issue of convertibility of the Uzbekstani currency, the soum. No firm statements about the terms of liberalizing the currency regime were made, but during the spring of this year, one of two official exchange rates were abolished making the official exchange rate more realistic. Beginning on July 1, a few banks received permission to open foreign currency exchange offices and to set exchange rates themselves. Business entities and organizations are not served by these changes and only Uzbekistanis traveling abroad are allowed to buy up to US$ 300. Exchange volumes so far have been small. Considerable foreign investments that Uzbekistan attracted during the first years of its independence and its vast natural resources helped keep the Uzbekistani economy afloat. Now, however, Uzbekistani economy is in a desperate condition.

Credits received from foreign banks made the implementation of several projects possible. The Uzbekistani economic model, much-touted in Uzbekistan have been lauded by official propaganda as "great successes of the Uzbekistani economic model" although it is never mentioned which countries throughout the world are studying or adopting the model. When President Karimov at the beginning of the year declared that new liberalization measures should be implemented in Uzbekistan, it led many analysts to question the reason for such a change in plans for Uzbekistan’s economy that only a few months ago was declared an example of success. Perhaps Karimov finally seems to be showing the desperate concern about the low living standards of the Uzbekistani population that face desperate levels of poverty. But in order to build wealth through increase exports and modernize obsolete infrastructure, Uzbekistan needs billions of dollars that cannot be generated by the Uzbekistani economy itself. Foreign investments to Uzbekistan are tiny.

The inconvertibility of the soum was often cited as the main obstacle for investments but other formidable problems exist as well, such as high taxes, bureaucratic red tape, corruption, and low purchasing power of population. Compared to Uzbekistan, for example, Russia has many advantages, such as much larger volume of market, better geographic location, lower taxes, comparative stability, and a fully convertible currency. Uzbekistani hard currency reserves are running low. Most sources indicate that Uzbekistan had about US$1 billion in hard currency reserves at the beginning of 2000. An estimated US$ 600-900 million of foreign debt must be repaid during 2000 alone. While Uzbekistan is current on its repayment obligations, many experts question how long this positive situation will last.

It cannot be expected that the introduction of convertible currency will help Uzbekistan’s ailing economy. The measure should indeed eliminate many inefficiencies of state regulation and decrease the scope of government corruption. Nevertheless, more will have to be done to bring the economy around. Uzbekistan’s present high tax rates represent a problem of equal importance as convertibility. But tax reduction for Uzbekistanis is not mentioned in Karimov’s liberalization program adopted at the beginning of the year. The great concern is that all liberalization measures implemented in Uzbekistan during the first half of 2000 were too small in scope and to slow in implementation. It is becoming increasingly clear that Uzbekistan has literally a few months left to launch full-scale liberalization measures or face bankruptcy.

Anonymous, Tashkent