THE PROCESS OF LIBERALIZING THE FOREIGN EXCHANGE MARKET IN UZBEKISTAN — SUCCESSES, RISKS AND LESSONS

Аннотация

The article analyzes the process of liberalization of the Uzbek foreign exchange market, which began in 2017 and continued in 2023-2024. Key achievements such as a decrease in the share of the dollar in foreign trade calculations, an increase in foreign currency inflows and an improvement in macroeconomic stability are considered. At the same time, risks have been identified, including exchange rate volatility, declining gold and foreign exchange reserves, and limited liquidity in the banking system. Based on the analysis, recommendations are proposed for further improvement ofmonetary policy. Keywords. Liberalization of the foreign exchange market, Uzbekistan, exchange rate, gold and foreign exchange reserves, inflation, currency risks, macroeconomic stability, monetary policy. The foreign exchange market is an important part of the economy of any country, including Uzbekistan, where its development is directly linked to successful integration into the global economy, attracting foreign investment and the stability of the national currency. In recent years, Uzbekistan has been actively pursuing reforms aimed at liberalizing the foreign exchange market. These reforms create new challenges and opportunities for the functioning of the monetary system. Understanding the theory of the foreign exchange market in Uzbekistan requires consideration of its main aspects, such as the exchange rate, supply and demand for foreign currency, as well as theinfluence of external economic factors. The foreign exchange market is a system of market relations that arise in the process of exchanging one currency for another at a set exchange rate. It plays a key role in determining prices for international goods and services, as well as in maintaining domestic economic stability. The country's foreign economic activity (import, export, financial transactions) directly affects the foreign exchange market by regulating supply and demand for foreign currency. There are two main types of transactions in the foreign exchange market: spot transactions (short-term transactions) and forward transactions (long-term contracts). Spot transactions are concluded on the terms of immediate currency exchange at the current exchange rate, while forward transactions involve currency exchange at a future date at an agreed exchangerate. The process ofliberalizing the foreign exchange market in Uzbekistan began in2017with the introduction of a new exchange rate, when the National Bank of Uzbekistan abandoned the fixed sum rate and switched to a market-based exchange regime. Prior to that, the exchange rate of the national currency was strictly controlled, which limited opportunities for foreign trade and attracted significant currency risks for businesses and citizens. The liberalization of theforeign exchange market has led tothecreation ofseveral newconditions, including: 1. Free currency exchange: since 2017, currency exchange has become possible at the market rate. This has increased transparency and reduced market distortions related to currency scarcity and itsartificial high cost. page933 INTERNATIONAL JOURNAL OF ARTIFICIAL INTELLIGENCE ISSN:2692-5206,ImpactFactor:12,23 AmericanAcademicpublishers,volume05,issue05,2025 Journal: https://www.academicpublishers.org/journals/index.php/ijai 2. Diversification of foreign exchange reserves: the country began to actively increase its gold and foreign exchange reserves, which increased the confidence of foreign investors and stabilized theexchange rate of thenational currency. 3. Attracting foreign investment: the liberalization of the foreign exchange market has become one of the factors contributing to the improvement of the investment climate in the country. Uzbekistan has become more accessible to foreign investors, who can now freely exchange and export profits in foreign currency. Themain achievements ofUzbekistan in this field are as follows: 1. Reducing the dollar's share in foreign trade calculations Since 2019, the share of the US dollar in payments for imported goods has decreased from 83% to 79.5% in 2023. The dollar's share in exports decreased from 99.1% to 93.2% over the same period. At the same time, the share of settlements in rubles and soums increased, and the inflow of foreign currency increased In 2024, the population sold $4.8 billion more in foreign currency to banks than it acquired, which indicates asurplus in theforeign exchange market. 2. Improving macroeconomic stability In 2023, real GDP growth was 6%, and inflation decreased from 12.3%at the end of2022to 8.1%in April 2024. Uzbekistan's foreign exchange market is managed by the country's Central Bank, which influences the market through instruments such as interest rates, currency interventions, and regulation of commercial banks. The Central Bank conducts operations in the foreign exchange market in order to maintain the stability of the national currency and ensure macroeconomicstability. This is done through direct inter