Ismailov, Alisher. "Maintenance of the Monetary System Stability in Uzbekistan". European Journal of Business and Economics, Vol.8, No.3 (2013): 1-3.

Ismailov, Alisher. "Maintenance of the Monetary System Stability in Uzbekistan". European Journal of Business and Economics, Vol.8, No.3 (2013): 1-3.

• Uzbekistan has experienced a combination of factors which have a negative effect on its macroeconomic stability. A mix of high GDP deflator from strong growth and a low level of monetization. These means that companies have difficult finding enough Uzbekistani so'm to exchange for foreign currencies to repay debts (1).
• The current Uzbekistani so'm was introduced on 1 July 1994 in notes of 1, 3, 5, 10, 25, 50, and 100. These notes are regulated and backed up by the Central Bank of the Republic of Uzbekistan (1).
• From 2006 to 2011, the Central Bank pursued a policy of reform, setting new exchange rates and changing the required reserves for businesses. These measures have decreased inflation rates and increased economic monetization, from 10.5% in 2000 to 21.7% in 2011 (1).
• Prior to 2007, the Central Bank required businesses to retain reserves of 15% of funds in so'm and 8% of funds in foreign currency. In 2003, the total combined values of reserves had to be 13%, raised to 15% in 2008. These requirements forced banks to curb lending and limited inflation (2).
• The increased prevalence of plastic debit and credit cards in the 2000s, resulting in a decreased demand for cash in Uzbekistani economic life. From rarity in 2006, the use of debit cards has expanded greatly with transactions increasing 20 fold to 2011, totaling 8.3 million cards that year (2).
• In contrast to low growth rates of money supply in developed countries, Uzbekistan experiences a high and unstable money supply growth rate. This is reflected in high GDP deflator and inflation vis-a-vis other currencies. This makes imports more costly, an effect exacerbated by lack of available cash for currency exchanges (2).
• The low level of monetization and high inflation rates also make the payment of debts, especially if foreign currency needs to be exchanged, difficult for foreign companies operating in Uzbekistan. This results in an unnecessarily high rate of default on debts (2).
• Uzbekistan does not allow the purchase of securities or bonds other than those issued by the Central Bank of Uzbekistan. This means that foreign government bonds or the securities of private companies cannot be purchased by Uzbekistani banks. This policy insulated Uzbekistan from international mortgage security collapse in 2008, but also limits the ability of the government to balance money growth through investment (2).
• The author believes that it would be beneficial for Uzbekistan to invest in economic options which reduce the exchange rate uncertainty and make business easier. Dr. Ismailov recommends that the Central Bank of Uzbekistan engage in currency swaps with other central banks, potentially using gold to back so'm value in exchanges because everyone wants gold, but almost no one wants the Uzbekistani so'm (3).
• Because there is such great variance in demand for different foreign currencies, with US dollars being the most sought after, the Central Bank should adopt different reserve rates for different currencies to maximize cash usage based on risk of default. The high demand also means that Uzbekistan should ban foreign currency transactions between private businesses (3).
• The rates of currency reserve demanded by the Central Bank of Uzbekistan are very high and should be lowered to better reflect international standards in reserve rates (3).
• The money supply's dependence on the sometimes unstable Central Bank of a developing country should be rectified by allowing securities with high approval ratings from international agencies, like Moody's or Standards and Poor's, to be traded in Uzbekistan to ensure availability of methods to grow the money supply (3).