The Central Bank and the Ministry of Finance to take coordinated actions to curb credit and fiscal expansion
Tashkent, Uzbekistan (UzDaily.com) -- The Central Bank in a statement from 9 August 2019 commented the situation with fluctuations in the domestic foreign exchange market.
In recent days, an increase in exchange rate volatility has been observed at auctions of the domestic interbank foreign exchange market. In particular, at the exchange trading on 20 August 2019, the exchange rate of the soum to the US dollar made up 9384 soums per US dollar.
These changes in the behavior of the exchange rate lead to the cancellation of the current range of exchange rate fluctuations at interbank trading sessions in order to stabilize the exchange rate, taking into account the current supply and demand ratio in the foreign exchange market.
As previously reported, the dynamics of the exchange rate in recent months has been shaped by the following factors:
Firstly, increased risks in the global economy and aggravation of trade conflicts, which leads to a slowdown in economic growth in the USA, China, the eurozone and other countries.
At the same time, the financial markets of many countries react to these changes by increasing volatility and depreciation of national currencies, including the main countries - trading partners of Uzbekistan. The rate of depreciation of their national currencies is ahead of inflation, which leads to the appreciation of the sum in real terms.
Secondly, the above factors, along with increased investment and credit activity in the economy, lead to a decrease in the price competitiveness of domestic producers in the foreign and domestic markets in the form of a “rise in price” of exports and an increase in the attractiveness of imports.
As a result, in recent years there has been a steady increase in demand in the domestic foreign exchange market.
Against the background of the emerging global economic development trend, the Central Bank admits the possibility of strengthening the influence of external factors on the formation of the exchange rate.
At the same time, the Central Bank will continue to closely monitor the situation in the domestic foreign exchange market and use market mechanisms to mitigate the impact of external shocks and ensure the balance of key macroeconomic indicators.
In particular, in cooperation with the Ministry of Finance, coordinated actions will be taken to curb credit and fiscal expansion, leading to additional pressure on inflation and the exchange rate.
As part of the implementation of measures to further liberalize the foreign exchange market from 20 August, commercial banks began selling foreign currency in cash through exchange offices.