TASHKENT, Uzbekistan, February 16. The Uzbek soum depreciated by 9.8 percent in 2023, Trend reports.
According to the data from the Central Bank of Uzbekistan's monetary policy review, structural diversification of exports was going slowly, while the growth rate of imports continued to accelerate in the context of high domestic demand.
Imports increased by 24 percent in 2023 year-on-year, while exports increased by 23.8 percent. Meanwhile, an increase in gold exports was the main factor supporting total exports. The growth rate of exports excluding gold was relatively low, at 4.2 percent.
There was a significant increase in imports of machinery and equipment, as well as oil and oil products, last year. The sharp increase in imports, disproportionate compared to the volume of exports excluding gold, created additional pressure on the domestic foreign exchange market in 2023, significantly increasing the demand for foreign currency.
Remittances returned to the level of the medium-term trend and amounted to $11.4 billion at the end of 2023. The Central Bank noted that this decline is explained by the effect of a higher base, partly by the decline in exchange rates of the main migrant-receiving countries, as well as by some decrease in the flow of labor migration.
Under the influence of the above-mentioned fundamental factors, the depreciation of the national currency amounted to 9.8 percent in 2023. Moreover, the real effective exchange rate index continued its moderate decline in the fourth quarter of 2023 and strengthened by 0.8 percent compared to the beginning of 2023. This is explained by the strengthening of the exchange rates of major trading partners and the acceleration of inflationary processes in them.
According to the Central Bank's estimates, lending in local currency to sectors with high demand for imports (in particular, car loans and consumer loans allocated to household appliances) may create liquidity risks in the banking system as well as pressure on the exchange rate due to increased demand in the domestic foreign exchange market.
In turn, the pressure on the exchange rate may cause an increase in inflation rates in the economy due to the "transfer effect" of the weakening of the soum.
The Central Bank emphasized that special attention is paid to taking effective measures to prevent the transition of financial stability risks into price stability risks during monetary policy.