From May 20, 2025, to June 19, 2025, the U.S. dollar declined from 12,885 Uzbek som to 12,625 som, reaching its lowest level since early December 2023. This trend is anticipated to persist. Over the past 30 days, the dollar has depreciated by 2.08% against the som.
The Central Bank of Uzbekistan adheres to a flexible exchange rate mechanism, commonly referred to as a floating exchange rate. This approach allows the value of the Uzbek som to be primarily influenced by market forces of supply and demand, rather than being fixed or pegged to another currency. In the context of Uzbekistan, the Central Bank defines the market-determined exchange rate, permitting the som to fluctuate freely based on the interactions between buyers and sellers in the foreign exchange market.
In 2017, Uzbekistan transitioned to a flexible exchange rate regime, aligning the som with market conditions and narrowing the gap between the official and parallel exchange rates. This move is expected to enhance export competitiveness, as noted by the European Bank for Reconstruction and Development (EBRD). While the market predominantly determines the exchange rate, the Central Bank reserves the right to intervene in the foreign exchange market to mitigate excessive fluctuations or address significant imbalances. However, it does not maintain a fixed exchange rate. The primary objective of the Central Bank is to uphold price stability, ensuring low and stable inflation. The flexible exchange rate regime empowers the Central Bank to utilize interest rates as a tool to influence inflation and manage the overall economy. Since 2020, the Central Bank of Uzbekistan has been implementing an inflation targeting framework that guides its monetary policy decisions, including those related to the exchange rate.
Uzbekistan has recently achieved a remarkable milestone, with its international reserves soaring to an unprecedented $49.6 billion, primarily driven by a substantial increase in gold prices. This significant figure, recorded at the end of last week, represents the highest level of international reserves since the Central Bank of Uzbekistan began tracking this data in 2013.
Uzbekistan has been on a remarkable journey of financial growth, marked by a sustained increase in its reserves over the past five months. Since the beginning of the year, the country’s reserves have increased by an impressive $8.48 billion, reaching a new historic high of $49.66 billion. In May alone, the reserves saw a substantial boost of $410.2 million, translating to a 0.8% increase compared to April.
This consistent upward momentum not only highlights the resilience of Uzbekistan’s economy but also demonstrates its ability to adapt and thrive in a dynamic global landscape. Central to this financial ascent has been the role of gold, which has enjoyed significant demand due to its elevated prices in international markets. Over the last month, gold prices surged by 3.27%, rising from $3,280 to $3,390.07 per ounce. When examining the broader trends, it is evident that gold has significantly appreciated, with a striking 25.5% increase since the start of this year and an even more impressive 41.3% surge over the past year. Factors contributing to the strong performance of gold include changes in U.S. trade policies under President Donald Trump, a growing preference among several nations to transact internationally using non-dollar currencies, and ongoing geopolitical tensions in the Middle East, especially between Iran and Israel.
From February to April, Uzbekistan maintained an active approach by selling approximately 12 tons of gold each month. However, there was a significant decline in sales in May, which plummeted to just 30,000 troy ounces, equivalent to approximately 0.9 tons. Currently, the total physical volume of gold held in the country’s reserves stands at 11.43 million troy ounces, or 355.5 tons, marking the lowest level since June 2022.
Despite the reduced physical volume, the value of gold within the reserves increased by $2.2 million in May, reaching a total of $37.65 billion. In addition to gold, Uzbekistan’s foreign currency reserves also experienced noteworthy growth, adding $411.9 million to reach a total of $11.44 billion, the highest level since December 2022. In a strategic effort to diversify its financial portfolio, the Central Bank of Uzbekistan has been proactive in making investments; in May alone, it allocated an additional $2.4 million into securities, boosting the overall value of its securities holdings to $706.3 million. These strategic decisions reflect Uzbekistan’s unwavering commitment to fortifying its economic foundation and enhancing the stability of its international reserves for the future.
How can we interpret the recent appreciation of the Uzbek som? Over the past month, the U.S. dollar has experienced a decline against many currencies, including the som, as illustrated above. The Uzbek som has notably gained strength, reaching a point it hasn’t seen against the dollar in recent times. According to various sources, this shift marks the som’s best performance in the last ten months, showcasing a decrease in the dollar’s value when measured against the som. This trend is reflected in daily trading results and can be attributed to several influencing factors. Increased remittances from abroad, a rise in foreign investment, stabilization of currencies among trading partners, and a surge in global gold prices are all contributing elements to this upward trajectory.
While predicting short-term exchange rate dynamics can be challenging, there is a reasonable expectation for the Uzbek som to maintain a stable exchange rate against the dollar into 2025. It is essential to note that this appreciation of the Uzbek currency may not necessarily impact the export of local manufacturing products, as the country’s primary resources are derived from minerals and gold. From a policy perspective, this development presents an intriguing opportunity. The passage highlights the critical need to develop a high-skilled education system, aligning with President Shavkat Mirziyoyev’s vision of establishing Tashkent as a leading financial center in the near future. However, it raises an important question: Are the education leaders in Uzbekistan sufficiently equipped to achieve this ambitious objective?
The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of the publication, its affiliates, or any other organizations mentioned.
