Cash-Strapped Uzbekistan Promises Pay Rises

President Islam Karimov has promised that average monthly wages will hit 500 US dollars by the end of 2010, but the current economic situation does not suggest that is likely.

Speaking as Uzbekistan celebrated the anniversary of its independence from the Soviet Union, Karimov said gross domestic product had increased by eight or nine per cent a year in 2008-09, and this year was expected to increase by 8.5 per cent. This, he said, was a “fact that should be recognised and respected by the international community”.

Independent economists say claims that the Uzbek economy is booming are suspect, given that inflation seems to be rampant and the national currency is in double trouble – it is depreciating fast against other currencies, and cash in circulation is in short supply.

So difficult is the monetary situation, in fact, that the authorities are finding it to pay public-sector wages at all, let along raise them.

Last year, the plastic payment cards were introduced in some areas of the country, and salaries and pensions were transferred direct to them to avoid cash pay-outs. However, even then the card owners complained that the money was coming in late.

“They’re delaying everything – public-sector wages, pensions and welfare benefits,” an NBCentralAsia economic commentator said. “This cash deficit is structural in nature, so it cannot be resolved even with radical measures until systemic reforms are carried out.”

In February, Karimov announced that the average wage had reached 300 dollars. To try to show this was true, the authorities raised public-sector wages, but took away with one hand what they were giving with the other.

According to a staffer at the National Bank for Foreign and Economic Activity, who requested anonymity, “At the same time as raising salaries, the authorities cut or abolished various benefits – transport subsidies, food subsidies, and various supplementary payments. As a result, the net income of public-sector workers remains the same as it was.”

Jahongir Shosalimov, an independent economist in Tashkent, notes that the Uzbek som is depreciating rapidly, its nominal value now worth about half what it was two years ago. He is critical of the official policy of pegging the som at two different exchange rates, saying it makes the currency look less respectable.

“Assertions of economic growth are deceptive,” he said.

Tashpulat Yoldashev, an Uzbek political analyst based in the United States, is similarly sceptical.

He notes, for example, that while the national statistical agency has admitted that oil production has fallen, this figure has not led to the overall growth predictions being amended.

“If there’s no real growth and revenues have fallen, where will they get the money to raise wages?” he asked.

Inside Uzbekistan there is similar disbelief.

“When the president talks about an average wage of 500 dollars, it’s meant for the consumption of foreigners who know little of the realities of Uzbekistan, not for the local population,” Anvar, a schoolteacher in Tashkent, said. “I earn 300,000 soms or 200 dollars at the official exchange rate, but I’ll have to spend it using the black market exchange rate, where I’ll get 150 dollars.”

This article was produced as part of IWPR’s News Briefing Central Asia output, funded by the National Endowment for Democracy.