Uzbekistan Softens Rules on Black Market

In a radical switch of policy, the Uzbek authorities will no longer prosecute black market currency traders, as long as they own up to their activities.

Analysts say the move will not address fundamental problems affecting the money market in Uzbekistan.

In November, the lower house of parliament, amended the law on the illegal acquisition and sale of currency, so that traders can escape punishment if they declare their intentions before hand – even though this means owning up to breaking the law before actually doing so.

The prosecution service, which is behind the law, argues that the liberalisation will reduce currency crime and encourage cooperation with the police.

The black market in foreign currency is the result of years of tight controls imposed by government, which fix the Uzbek som at an unrealistic exchange rate and thereby render it unattractive. This creates opportunities for illegal traders to exchange soms for more useful foreign currencies at a realistic rate dictated by supply and demand, earning a profit on the difference.

US dollars and other tradeable currencies are in short supply at the banks and legal exchange kiosks, so people turn to the black market where they pay more but can at least change their soms into something of more durable value.

To reduce the outward flow of foreign currency, the authorities attempt to block imports of the goods this money is typically spent on.

Local observers say illegal currency traders often collaborate with corrupt police officers, so they are able to escape punishment in any case.

Ruhiddin Komilov, a lawyer in Tashkent, doubts the new law will work, since it is effectively trying to get people to turn themselves in before they have committed any offence. It may instead be misused so that when police want to release a currency trader they have arrested, and with whom they are in cahoots, they will be able to forge a statement and make it look like it was submitted before the offence took place.

Irina, a veteran of the illicit currency trade in Tashkent, said softening the law would have little effect on people like her.

"The amount we have to pay to buy ourselves out depends on which authority detained us, and on who we’re getting protection from," she said. "Most often the bribe consists of all the foreign currency and Uzbek soms confiscated at the time of detention."

An economist, speaking on condition of anonymity, said that if the government was serious about eliminating the black market, it would need to institute proper monetary reforms.

This article was produced as part of IWPR’s News Briefing Central Asia output, funded by the National Endowment for Democracy.