Stop the
presses. The Conway Bulletin has
uncovered a major scoop in Uzbekistan. Or so it may think.
The Bulletin notes that the exchange rate of
the som, Uzbekistan’s currency, for a US dollar has increased to 8,390 som.
“Uzbek soum strengthens more than 2% to four-month high,” the Bulletin headlines. It asserts that Tashkent
has been managing a depreciation of the som and intones, “There has been no
notification from the Central Bank on just why it appears to have reversed this
process.”
One reason for
the lack of notification may be that the som, in fact, is not strengthening. The
Bulletin has apparently misread the exchange
rate. An increase in the home exchange rate with respect to a unit of foreign currency
(like the dollar) is a weakening of
the home currency (like the som).
For example,
suppose that the exchange rate of the Russian currency rises from 10 rubles per
dollar to 20 rubles per dollar. On the market, a buck can now buy twice as many
rubles as before, so it has strengthened: That is, its foreign purchasing power
has increased. Conversely, the ruble can buy only half as much of a dollar than
before: The value of the ruble has fallen from one-tenth of a dollar to
one-twentieth.
Likewise for
the som. Its dollar value has fallen 7.7% since July.
The som was grossly
over-valued, and a favorite of the black market, until the central bank made it
convertible in September 2017 – a key reform of the new Mirziyoyev regime. The som
promptly crashed, from an exchange rate of 4,210 per dollar to 8,100. Since then the currency has been on a relatively
even keel but continues to weaken. –Leon
Taylor tayloralmaty@gmail.com
References
The Conway Bulletin. Uzbek soum strengthens more than 2% to
4-month high. March 22, 2019. Page 9.
Eurasianet.org. Uzbekistan returns to currency
convertibility, delivers blow to black market.
September 5, 2017.
