The Chairman of the Central Bank of Uzbekistan Mamarizo Nurmuratov reported on the regulator’s activities for 2022 to the Senate on June 2. He also explained why the bank deposits in U.S. dollars have decreased.

Senator Shavkat Jalolov said that bank deposits have grown 1.7 times since the start of the year. However, he noted that long-term foreign currency deposits have dropped by 9% compared to 2021, while demand deposits have risen by 9%. He suggested that most people prefer to keep hard currency at home and asked the Central Bank chief to evaluate the level of public trust in banks.

“This can be commented on by two facts. I have already noted the [decrease] of the level of dollarization. Preservation of slight fluctuations in the exchange rate and the attractiveness of rates on [soum] deposits at 20−21% increase the interest of the population to withdraw money from foreign currency deposits and transfer them into the soum deposits. We see it in practice,” the chairman of the Central Bank said.

Mamarizo Nurmuratov called this a good trend.

“According to our calculations, there are almost $12 billion in the hands of the population. We can’t attract all these funds. But there is a tendency to transfer money to banks, the process of transferring dollars into soums and putting them into time deposits has begun. We are happy about that. It is also good for the resource base of banks, it will increase their ability to provide loans in soums,” he said.

The geopolitical situation has attracted more than 60,000 non-residents to open bank accounts in Uzbekistan, depositing $892 million in total. This was revealed by the Central Bank, which also reported a significant increase in demand deposits.

The Central Bank reported that the real interest rates on time deposits in national currency were 7.1% for individuals and 4.1% for legal entities, adjusted for inflation. This led to a 40% growth in the balance of deposits in banks, reaching 131.8 trillion soums by the end of 2022.

In this case, the balance of deposits of individuals increased 1.5 times — up to 45.2 trillion soums, and legal entities — 1.3 times (up to 86.6 trillion soums).

“This, in turn, expands domestic opportunities for continuous financial support of the economy by banks in the face of rising costs of financial resources in international financial markets. The increased attractiveness of deposits in national currency and the relative stability of the exchange rate have a positive impact on reducing the level of dollarization,” follows from the report.

In 2022, the level of dollarization of loans to the economy decreased by 2 p.p. to 45.6%, while the level of dollarization of deposits decreased by 4.7 p.p. — to 34.2%.