Banking and Finance
Uzbekistan began a movement toward a two-tier banking system under the old Soviet regime. The new structure, which was ratified by the Banking Law of 1991, has a government-owned Central Bank wielding control over a range of joint-stock sectoral banks specializing in agricultural or industrial enterprise, the Savings Bank (Sberbank), and some twenty commercial banks. The Central Bank is charged with establishing national monetary policy, issuing currency, and operating the national payment system. In performing these operations, the Central Bank manipulates as much as 70 percent of deposits in the more than 1,800 branches of the Savings Bank (all of which are state owned) for its own reserve requirements. A National Bank for Foreign Economic Affairs, established in 1991 as a joint-stock commercial bank, conducts international financial exchanges on behalf of the government. The national bank holds Uzbekistan's foreign currency reserves; in 1993 it was converted from its initial status to a state bank.
In the mid-1990s, the banking structure in Uzbekistan was limited to only a handful of primarily state-owned banks, and, compared with Western banking systems, the commercial banking system was still in its infancy. But the establishment in the spring of 1995 of Uzbekistan's first Western-style banking operation--a joint venture between Mees Pierson of the Netherlands and other international and Uzbekistani partners--suggests that this sector, too, may have prospects for change. The Uzbekistan International Bank that would result from the new joint venture is intended primarily to finance trade and industrial projects. The bank is to be based in Tashkent, with 50 percent of ownership shares in Western hands. If successful, this and other similar ventures may reward policy makers' cautious approach to reform by establishing an infrastructure from which economic growth can begin.
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