The law on the Central Bank of Uzbekistan: what did the 1995 text and the new 2019 edition change?

In the news we often hear that "the Central Bank kept the policy rate unchanged". Where does this decision get its force? The answer: from a separate law. Over the past thirty years the status and tasks of the Central Bank of Uzbekistan have been set by this law: it was adopted in 1995 and approved in an entirely new edition in 2019.

Key points

The 1995 law. The Law "On the Central Bank of the Republic of Uzbekistan" was adopted on 21 December 1995 as No. 154-I (Central Bank website, a scholarly article on CyberLeninka). Researchers note that it was adopted at a regular session of the Oliy Majlis and set out the bank's status, objectives and powers.
The link with the national currency. The law was adopted about a year and a half after the soum entered circulation (1 July 1994). In other words, the national currency entered circulation first, and the law on the Central Bank was adopted afterwards.
2017: the foreign exchange market opened. In its 2018 report, the IMF noted that access to foreign currency was liberalised and the different exchange rates were unified in September 2017. This laid the ground for later reforms: if the exchange rate is formed in the market, the central bank can focus more on price stability.
The new 2019 edition. The new edition of the law on the Central Bank was approved by Law No. ZRU-582 of 11 November 2019 (Kinstellar, Invest in Uzbekistan). As the journal Central Banking writes, the new text replaced the 1995 text and clarified the bank's role in ensuring price stability and in supervising banks and payment systems.
Inflation targeting. According to the Central Bank's monetary policy concept, the bank has operated from 2020 under an inflation targeting regime. The target was set at 5 percent by Presidential Decree No. PF-5877.
The main instrument: the rate. The same concept states that the policy rate is the main instrument of monetary policy and that the exchange rate is in a free-floating regime. In plain language: the bank does not "hold" the exchange rate; instead it influences the price of loans and deposits through the rate.

Then and now

Aspect	Period of the 1995 text	After the new 2019 edition
Legal basis	Law No. 154-I (21 December 1995)	New edition, approved by Law No. ZRU-582 (11 November 2019)
Main focus	The bank's status, objectives and powers	Price stability, supervision of banks and payment systems
Monetary policy regime	No inflation targeting yet	Inflation targeting from 2020
Exchange rate	Until 2017 access to foreign currency was restricted	Free-floating rate

Example: nominal and real interest

The example below was compiled by the author; the figures are hypothetical (not the current rate or inflation).

Malika opa, a hypothetical teacher, placed a deposit of 10 000 000 soum in a bank at an annual rate of 20%. At the end of the year she will have 12 000 000 soum. But suppose prices rose by 10% on average that year. By how much did the purchasing power of Malika opa's money increase?

Indicator	Calculation	Result
Nominal income	10 000 000 × 20%	2 000 000 soum
Approximate real rate	20% − 10%	10%
Exact real rate	(1.20 ÷ 1.10) − 1	about 9.1%

Check: 1.20 ÷ 1.10 = 1.0909..., so the exact real rate is about 9.1%. Simple subtraction (10%) gives a quick estimate, but the exact result is slightly smaller. This is the practical meaning of the Central Bank's efforts to lower inflation: the lower the inflation, the smaller the part of the depositor's nominal interest that gets "eaten up".

Link with the previous period: in the 19th century Bagehot described a central bank's task during a panic, and in the 20th century central banks separated from commercial banks and became the centre of monetary policy. The steps in Uzbekistan's history became a distinctive continuation of this common path.