The Central Bank of Uzbekistan expects to reduce the inflation rate from the current 6.5 percent to the target of 5 percent next year. This was stated by the Chairman of the Central Bank, Timur Ishmetov, during an interview with Financial Times at the Silk Road Finance and Technology Forum in Tashkent.
Commenting on the decade of economic liberalization, Ishmetov noted that Uzbekistan has abolished current account restrictions and ensured full currency convertibility while maintaining a conservative approach to the capital account. Early price deregulation, including energy tariff reforms, temporarily led to inflation above 20 percent in 2017, after which monetary tightening gradually reduced this figure to the current 6.5 percent.
He also emphasized that the International Monetary Fund officially reclassified Uzbekistan's exchange rate regime as floating, calling it an important milestone in the decade of currency reforms. Affirming commitment to the floating exchange rate, Ishmetov stated that the Central Bank will not revert to managing the exchange rate to stabilize foreign investment inflows or market volatility.
He stressed that risks should be managed through long-term foreign direct investment, expansion of local currency financing, and stimulating domestic economic growth, rather than relying solely on external loans.
Structural Reforms and Risk Management
As part of the next stage of structural transformation, the Central Bank and the IMF have developed a roadmap for capital account liberalization, which will be published after interagency coordination to provide clarity to international investors. The main focus remains on strengthening risk management and regulatory safeguards to handle potential exchange rate volatility.
Regarding inflationary risks, Ishmetov observed that internal factors have largely been eliminated due to price deregulation, while the main threats are now linked to external supply shocks, such as fluctuations in global food and energy prices. To mitigate supply pressure, the Central Bank is cooperating with the government to ensure alternative trade corridors and increase domestic import substitution production.
To reduce dependence on foreign currency debt, Uzbekistan is increasingly shifting to domestic currency financing. After issuing 'Samarkand Bonds' in sums by the International Financial Cooperation Corporation in 2019, the Ministry of Finance began issuing Eurobonds in national currency, and all Ministry of Finance borrowings this year are denominated in sums. Commercial banks are also increasing the issuance of bonds in local currency, supported by exchange rate stability and investor confidence in long-term low inflation.
Financial Sector and International Cooperation
In terms of financial sector regulation, the Central Bank has aligned capital and liquidity standards with international frameworks and plans to transition all commercial bank financial reporting to IFRS standards by next year. Simultaneously, new requirements for currency risks are being introduced for banks with unhedged positions.
Concerning the diversification of foreign investment, Ishmetov confirmed that China remains a major economic partner due to geographical proximity, but Uzbekistan is actively expanding economic ties with Europe and the United States. Furthermore, he highlighted the potential of Central Asia as a unified investment destination, noting that regional economic integration could form a combined economy worth about one trillion dollars.
Ishmetov reaffirmed the operational independence of the Central Bank regarding interest rate and monetary policy decisions, stating that the regulator will maintain a moderately tight monetary policy aimed at long-term economic sustainability amid global market uncertainty.
