Uzbekistan Central Bank doesn’t expect large loss on deposits due to currency devaluation
Baku, Azerbaijan, Aug 21
By Fakhri Vakilov-Trend:
Banks of Uzbekistan will have to adjust interest rates on deposits amid devaluation of the soum in order to avoid the outflow of depositors, First Deputy Minister of Finance Timur Ishmetov made this announcement at a press conference on August 20 in Tashkent, Trend reports citing the Uzbek media.
Since the beginning of the year, the dollar against the sum increased by 12.5 percent from 8336.25 soums on January 1 to 9379 soums on August 21. Most of the growth occurred in August, when the dollar went up by 679 soums.
According to the first deputy head of the Ministry of Finance, interest rates on deposits establish market mechanisms.
“Basically, the population itself provokes a change in rates. If, due to some economic changes, the population believes that the current interest rate on deposits is not enough to cover their risks and earn money, they will, of course, begin to withdraw their deposits. And banks will begin to react to this and raise rates,” he explained.
Ishmetov expects an instant adjustment of interest rates on deposits from banks in the event of the outflow of deposits.
“In order not to lose depositors, banks will adjust rates on soum and foreign currency, so there will be no such outflow. Outflow will occur if someone, the regulator or the government, interferes in the activities of banks,” the first deputy minister said.
As reported, Chairman of the Central Bank Mamarizo Nurmuratov noted that today the level of return on deposits is much higher than the level of inflation and devaluation.
The Head of the Central Bank stressed that a decision had been made to cancel the 0.5 percent range of exchange rate fluctuations at interbank trading sessions in advance and switch to a free floating sum of exchange rates in order to avoid the scenarios of the currency crisis in Russia in 2014 and the collapse of the tenge in Kazakhstan in 2015.
According to him, “the market will calm down today or tomorrow”.
Follow author on Twitter:@vakilovfaxri