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Uzbek currency drops 48% after central bank allows float

Uzbekistan’s som lost almost half of its value in a single day on Tuesday, after the government announced it would remove its peg against the dollar in an attempt to crack down on black market trade in the currency.

The central bank’s previous “crawling peg” regime had allowed the som to gradually weaken after energy prices plunged in 2014, but the complete removal of controls today saw the number of soms required to buy a dollar go from 4,210 to 8,100.

In an official decree, the government said – per a Radio Free Europe translation – that the previous regulations “created an inefficient system of privileges and preferences for individual industries and business entities”.

The move is the latest in a series of reforms introduced by Mr Mirziyoyev since the death of long-serving leader Islam Karimov last year.

Maximilien Lambertson, Russia and Commonwealth of Independent States analyst at the Economist Intelligence Unit, said Uzbek president Shavkat Mirziyoyev “had signalled that he would introduce currency reforms this year”, but had given little detail on the timing of the move until this week.

Mr Lambertson predicted the move would have a particularly big impact on producer price inflation in the country, which imports most commodities and industrial inputs, as well as eating into real wages through higher consumer inflation.