Baku, Azerbaijan, June 17
By Fakhri Vakilov – Trend:
One of the reasons for the low level of inflation in Uzbekistan in the first quarter of 2019 was the scale of secondary effects from the November increase in regulated prices for energy in 2018, which was much less than expected, the First Deputy Chairman of the Central Bank of Uzbekistan Ilkhom Norkulov told Trend in an interview.
“This behavior of economic agents corresponds to the theory of price and wage rigidity, suggesting that prices are slowly adjusted to an equilibrium level over a long period,” he added.
By the end of March 2019, the annual inflation rate calculated by the consumer price index was 13.6 percent, a decrease of 0.7 percentage points compared with the December of 2018 (14.3 percent).
Noruklov added that among other factors that caused low inflation were improved storage conditions for fruits and vegetables due to the increase in the number of industrial refrigerators. In his words, this contributed to saturating the domestic market with fruits and vegetables, making it possible to smooth out the influence of the seasonal factor.
"Secondly, the tightening of monetary policy in the fourth quarter of 2018 contributed to a more moderate dynamics of domestic consumer demand by reducing consumer lending and stimulating savings activity of the population and business," said Noruklov.
"Thirdly, the external conditions were stable, which had a beneficial effect on the domestic market of Uzbekistan, allowing to cover the unsatisfied demand through imports," he noted.
In addition, the First Deputy Chairman of the Central Bank spoke about the need to achieve greater independence of the Central Bank from the state.
“Conducting an efficient and effective monetary policy requires the Central Bank to make independent decisions in this area, as the monetary policy decisions affect real economic indicators with a certain lag. Thus, they may not produce immediate results and may tighten economic and investment conditions in the short term. From this point of view, it is important that the Central Bank makes decisions based on thorough analysis and firmly upholds them,” Norkulov said.
Recently, strategic targets and priorities of the Central Bank were defined by a presidential decree in order to ensure further improvement of monetary policy and effective supervision of the stable functioning of the banking system and implement measures to increase the independence of the Central Bank.
Moreover, a new edition of the draft law “On the Central Bank of Uzbekistan”, which has been developed with the assistance of experts from the IMF and the World Bank and based on international best practices and the Basic Principles of the Basel Committee on Banking Supervision, is currently under discussion by the Parliament.
This bill establishes that the Central Bank fulfills its functions and powers independently of other state authorities and other state bodies and it is independent in making decisions within its powers, the First Deputy Chairman of the Central Bank noted.
This draft law provides the Central Bank with sufficient autonomy and independence in the conduct of monetary policy, decision-making and banking supervision.
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