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Uzbekistan's Black-Market Traders Brace For The Worst As Currency Reforms Take Effect


Uzbeks are anxiously awaiting the official decree allowing them to freely buy and sell foreign currency at a market rate instead of skulking around sketchy bazaars in search of a few dollars.

Not everyone in Uzbekistan is happy with the government's decision to liberalize currency regulations as of September 5.

Under the new regulations, the Uzbek currency, the som, will no longer be fixed to the U.S. dollar, while restrictions on the amount of foreign currencies individuals and companies can buy will be abolished.

The government made the announcement online on September 3.

While citizens are anxiously awaiting the official decree allowing them to freely buy and sell foreign currency at a market rate instead of skulking around sketchy bazaars in search of a few dollars, black-market traders are girding for hard times ahead.

Not only does their market literally disappear overnight, but the decree takes dead aim at them.

The legislation calls for "the State Prosecutor's Office, the State Tax Committee and the Ministry of Internal Affairs of the Republic of Uzbekistan to take effective measures to curb the illegal circulation and conduct of operations with cash foreign currency on the territory of the Republic of Uzbekistan."

"After yesterday's [presidential] decree we have lost our clients: today we do not have either buyers or sellers of hard currency," says Eldor, a currency exchanger at the Chorsu market in Tashkent.

The currency reforms are part of a series of steps President Shavkat Mirziyoev, who was elected in December, is taking to help open up Central Asia's second-largest economy, attract foreign investment, and reduce the isolation of the country of some 30 million people.

Islam Karimov, the ex-Soviet republic's first ruler after independence, had pinned the value of the som to the dollar. But the policy has led to a flourishing illegal market as the difference between the official exchange rate of 4,210 soms to the dollar has soared on the black market.

Banking sources told Reuters on September 3 that the initial rate when the regulations were removed would be set slightly above the black-market rate, currently about 7,650 soms to the dollar, according to DollarUZ.com.

Currency Crackdown Coming

The "valyutchiki," as they are known, is a ring of hard-currency sellers and buyers with roots that run deep into the Soviet-era. Many have made hundreds of thousands of dollars in a country where the average monthly net salary is below $300.

A tight-knit group, they know about each other's problems and warn each other about possible searches to hide their cash reserves from the authorities.

But that may be changing already.

In the eastern city of Andijon, officials of the department to combat tax evasion, currency-exchange crimes, and money laundering on September 4 raided the Yangi Bozor (New Market).

Izzatilla Holmirzaev, who works as a vendor at the market, told RFE/RL that he'd heard rumors that "the department officers have seized all the cash at the black market."

"Those who came to exchange up to $100 at the market were deprived of that cash and informed that they will face trials. Those with $3,000 and more in their possession were detained," the vendor said, adding that he heard that the houses of all known hard-currency exchangers in Andijon were searched.

There was no immediate confirmation by officials on whether Holmirzaev's claims were true.

In enacting the decree, the president noted that the existing foreign-currency regulations "created an inefficient system of privileges and preferences for individual industries and business entities."

Foreign companies have largely stayed out of resource-rich Uzbekistan because decades-old regulations under Karimov forced most businesses to sell foreign currency at a knockdown official rate while buying it at a much more costly one.

The decree states that the central bank will still have the responsibility of maintaining the som's stability, but it does not specify how that should be accomplished other than to say a tight monetary policy will be needed.

In addition, citizens and organizations will be able "without limitations, to purchase foreign currencies in commercial banks for use in regular international transactions," it says.

In August, Uzbekistan had dropped a regulation that required exporters to sell one-quarter of their hard-currency revenue to the government.

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