The pace of devaluation of the national currency against the US dollar in 2024 has significantly slowed down, according to data from the Central Bank reviewed by Spot.
On the last trading day on the Republican Currency Exchange — December 27, the exchange rate of the dollar was 12,920.48 sums, having decreased by 7 sums and 79 tiyin in just one day after several days of record highs. A year earlier, the American currency was sold at 12,338.7 sums. The fall of the national currency amounted to 581.78 sums in absolute terms.
Over the year, the sum depreciated against the dollar by 4.71% in relative terms. For comparison: in 2021, the rate fell by only 3.4%, in 2022 it decreased by 3.75%, and in 2023 it declined by 9.83%.
Economist Yuliy Yusupov explained in an interview with Spot the low rates of devaluation of the Uzbek sum due to gold sales, government loans, and state companies, as well as cross-border remittances from labor migrants.
Spot spoke with financial analysts about the reasons for the slowdown in the weakening of the sum in 2024, the risks of strengthening the national currency for the economy, and the factors that will influence the exchange rate in 2025.
Dollar Exchange Rate in 2024
Investment banker Muzaffar Rozikov from Kap Depo believes that a devaluation of the Uzbek sum of less than 5% in 2024 is a significant change compared to previous years, where positive changes are observed.
Senior analyst at Avesta Investment Group, Shodlik Nazarov, notes that despite the moderate slowdown in the weakening of the national currency, the indicator remains above the stable values of 2021-2022. Among the key factors that affected the exchange rate, the expert mentions the negative trade balance ($10.9 billion for the first 11 months) and the decrease in gold exports (from last year's $8.15 billion to $6.63 billion).
In Rozikov's opinion, gold sales and remittances from labor migrants, which are not only not decreasing but are even increasing, support the stability of the dollar rate in Uzbekistan.
“Moreover, there is a diversification of labor migration across countries. The most important thing is that government loans are a currency inflow that strengthens the national currency,” he noted.
Nazarov also highlights the maintenance of export activity at a high level (growth of 4.4%), noting the gradual diversification of the economy and the resilience of certain sectors. Another factor is the Central Bank's policy, which effectively controlled the currency market through interventions and limited excessive volatility. The monetary policy aimed at reducing inflation has strengthened public and business trust in the national currency, the expert emphasized.
Additionally, the slowdown in the growth rate of imports has supported the dollar rate. As a result, according to him, this has helped reduce pressure on the currency market related to the need to purchase foreign currency for paying for imported goods.
When asked about the negative effects of a strong national currency, Muzaffar Rozikov stated that the current dollar rate in Uzbekistan presents certain challenges but may also have positive aspects. However, to fully understand the imbalances in Uzbekistan's economy, it is necessary to examine the structure of real exports and imports.
“The negative trade balance for the first 11 months of 2024 indicates significant pressure on the economy. Although the stability of the exchange rate contributes to social stability, in the long term, it may increase dependence on imports and reduce foreign currency reserves. A flexible currency policy that stimulates exports and the development of domestic industries is required for the economy's sustainability,” believes Shodlik Nazarov.
Forecast for 2025
In the coming year, investment banker Rozikov expects that the exchange rate of the US dollar will exceed 13,340 sums. The national currency will directly depend on the sales and/or growth of gold, as well as on the volume of foreign loans and investments attracted by the government, state companies, and the private sector.
Senior analyst Shodlik Nazarov from Avesta Investment Group predicts that the dollar rate will likely remain below the mark of 14,000 sums. At the same time, the exchange rate will depend on the Central Bank's policy, the volume of cross-border remittances, the growth of imports, and the state of the global economy.
“It is expected that the regulator will continue to adhere to a moderate devaluation policy, allowing the pace of weakening of the national currency to remain at a level not exceeding inflation. This strategy will aim to maintain stability in the currency market,” he believes.
The expert notes that if money transfers remain at a high level, they may partially offset the deficit in the foreign trade balance, ensuring a steady inflow of foreign currency into the country. At the same time, increased demand for imported goods could create additional pressure on the currency market.
In addition to internal factors, external ones will also influence the sum's exchange rate. Among them, Nazarov listed rising interest rates in developed countries, changes in raw material prices, and the economic situation in major trading partners, including Russia and China. These circumstances may contribute to either strengthening or weakening the national currency's exchange rate, depending on their nature and scale of impact, he concluded.