The total volume of operations in the domestic foreign exchange market makes up US$15.5 billion
Tashkent, Uzbekistan (UzDaily.com) -- The domestic foreign exchange market in 2019 was formed in the context of an increase in the volume of operations and the number of participants in all segments.
According to the Central Bank of Uzbekistan, in general, the total volume of transactions in the domestic foreign exchange market made up US$15.5 billion, an increase of 1.4 and 2.2 times compared with 2018 and 2017, respectively.
1.1. Interbank market and operations with legal entities
In 2019, the demand for foreign currency from legal entities increased by 32% compared with 2018 (US$10.4 billion) and reached US$13.7 billion.
At the same time, the total volume of over-the-counter transactions for the purchase of foreign currency by households increased 3.8 times and reached US$3.2 billion (in 2018 - US$$845 million). At the same time, the volume of exchange transactions grew by 10% (US$10.5 billion).
An analysis of the structure for the purchase of foreign currency shows that the bulk (72%) of the purchased currency was used to pay for the import of equipment, goods and raw materials for industrial purposes, 15% for the import of consumer goods and medicines, 9% for repayment of foreign loans, 2% for repatriation of income and 2% for other purposes.
The number of business entities-buyers of foreign currency funds during 2019 increased by 1.5 times, and by the end of the year reached 7.6 thousand units. against 5.1 thousand units in December 2018.
Operations of dividuals
In 2019, US$3.8 billion were sold through currency exchange points by individuals versus US$2.7 billion in 2018 (an increase of 41%), US$1.8 billion were bought (in 2018, US$975 million) - an increase of 1.9 times).
The balance of foreign exchange transactions between banks and individuals on the purchase and sale of foreign currency reached US$2.0 billion, which is 16% (or US$276 million) more than in 2018.
At the same time, despite a seasonal decrease in remittances, in December the historical maximum was recorded for the sale (US$500 million) and the purchase (US$305 million) by individuals of cash foreign currency, which may be explained by the intensification of repayment of financial obligations with parties of the population and entrepreneurs, traditionally implementing them by the end of the year.
Foreign currency offer
The total supply of foreign currency in the foreign exchange market, excluding sterilization operations (currency interventions) of the Central Bank, reached US$ 11.7 billion and increased by 43% compared to 2018.
In particular, the sale of foreign currency by:
economic entities was US$6.0 billion and increased 1.5 times compared with 2018 (US$4.1 billion);
The Ministry of Finance (loans from international financial institutions to finance development programs) and the Fund for Reconstruction and Development of Uzbekistan reached US$1.7 billion.
The foreign exchange interventions of the Central Bank in 2019 were carried out as part of market exchange rate formation and were based on the principle of neutrality of gold and foreign exchange reserves, i.e. retention of the volume of net sales of foreign currency by the Central Bank within the limits of monetary gold purchased during the year.
Thus, during 2019, the Central Bank in order to sterilize additional liquidity resulting from the purchase of monetary gold in the amount of 36.6 trillion soums, currency funds in the amount of 33.6 trillion soums were sold.
In the structure of import financing sources, in 2019, the share of funds (conversion) acquired in the domestic foreign exchange market decreased from 56% to 53%, and the share of import financing from loans in foreign currency increased from 19% to 25%.
During 2019, there was a correlation of key indicators of soum segments of the money and credit markets with the dynamics of demand for foreign currency. In particular, the change in liquidity in the banking system along with the growth of loans, with some lag, had an impact on the demand of foreign currency and, accordingly, the volume of interventions.
The dynamics of the exchange rate was formed taking into account the ratio of the current level of supply and demand in the foreign exchange market, reflecting also internal and external factors of influence.
So, in the first half of the year, amid moderate demand and supply growth, as well as relatively smaller volumes of interventions compared to target sales volumes, the exchange rate of the sum to the US dollar during trading sessions on the currency exchange weakened by 2.8%.
In July and August 2019, under the influence of the devaluation of the currencies of certain countries - trading partners and, as a result, an increase in devaluation expectations, as well as an increase in demand for foreign currency, the exchange rate depreciated by 10.2%.
In the following months of 2019, the soum remained relatively stable, or devalued by 1.3% during September and November 2019, and in December it slightly strengthened by 0.1%.
In general, during 2019, the exchange rate of the national currency against the US dollar devalued by 13.9% compared with the beginning of the year (from 8341 to 9501 soums per 1 dollar).