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Uzbek Bondholders Feel Short-Changed

Uzbek government bonds issued in 1992 have to be redeemed in the next few months.
Uzbek government bonds issued in 1992 have to be redeemed in the next few months.

Sarsenbai-Ota invested heavily in Uzbekistan's future, believing the money he put into government bonds would pay off in his golden years.

But when time came to cash in, the resident of the western Uzbek city of Nukus found they were worth little more than the paper they were printed on.

The Uzbek Finance Ministry recently announced that the bonds, which promised a 12 percent yield when they were issued in 1992, must be redeemed by November 30.

Sarsenbai-Ota answered the call, but was shocked to find that the payoff apparently did not account for Uzbek currency devaluations.

"Only at the last minute, at the cashier's desk, did we find out that the government was only giving us the face value of the amount we invested 20 years ago," Sarsenbai-Ota says.

That means the elderly man will be paid 1,173 soms for every 1,000 soms he invested -- nearly the 12 percent yield he was promised. The problem is that, as Sarsenbai-Ota puts it, the amount he invested "could have bought him a car 20 years ago" and now it can get him about a half kilo of beef.

Sarsenbai-Ota joined some 500 other bondholders, mainly elderly people, who staged a protest rally in front of Khalq Bank's main branch in Nukus on August 4. Adding to their frustration was that the state-owned bank announced it did not have enough cash on hand to pay bondholders, and told them they would have to open accounts to which the funds could be transferred.

Similar protests have been held outside Khalq Bank branches across the country, including in the capital, Tashkent, and the cities of Bukhara, Fergana, and Samarkand.

A statement on the Finance Ministry's website says bond redemptions are being carried out "for unconditional fulfillment of obligations previously undertaken by the state, for safeguarding citizens' savings, and strengthening the trust of the population."

Many bondholders, however, say their trust was abused, and accuse the government of deception.

"Back then I invested 25,000 soms in the bonds," says Sergei, a 60-year-old Tashkent resident who declined to give his full name. "By my calculation I should receive 1.2 million soms."

Instead, he will have to settle for 32,325 soms.

"How could the government insult people like this?" the pensioner asked

"It's pure fraud on the part of authorities," says 36-year-old Tashkent resident, Munisa, who inherited a package of bonds from her parents. "In democratic countries people would sue the government for this."

An Uzbek economist, who spoke on condition of anonymity to RFE/RL's Uzbek Service, said that the government gave no hint that anything was awry. "The Finance Ministry has always said the bonds were performing well, and raised people's expectations," he said.

Now, the hopes of citizens like Sarsenbai-Ota have been crushed.

He bought the bonds after President Islam Karimov publicly urged Uzbeks to buy up 24-billion-som's worth of bonds to help the fledgling country's economy.

"Karimov said we would get our money back with interest, and we trusted him, but our leader let us down," says Sarsenbai-Ota.

Written by Farangis Najibullah based on reporting by RFE/RL's Uzbek Service and
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    Farangis Najibullah

    Farangis Najibullah is a senior correspondent for RFE/RL who has reported on a wide range of topics from Central Asia, including the impact of Russia’s invasion of Ukraine on the region. She has extensively covered efforts by Central Asian states to repatriate and reintegrate their citizens who joined Islamic State in Syria and Iraq.

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    RFE/RL's Uzbek Service

    RFE/RL's Uzbek Service relies on innovation and a wide network of local sources and platforms to uncover news and engage with audiences in one of the world’s most restrictive societies.

RFE/RL has been declared an "undesirable organization" by the Russian government.

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