“CENTRAL BANK INDEPENDENCE AS REFORM INFRASTRUCTURE: THE 2019 LAW, EXCHANGE-RATE FLEXIBILITY, AND UZBEKISTAN'S PATH TO INFLATION TARGETING”

Abstract

This article examines the institutional reform of the Central Bank of the Republic of Uzbekistan (CBU) as infrastructure underpinning the country's broader macroeconomic transformation since 2017, rather than as a technical or peripheral policy change. On November 12, 2019, President Shavkat Mirziyoyev signed a decree replacing the 1995 central bank law with a new statute of 11 chapters and 72 articles, more clearly specifying the CBU's role in price stability and its oversight of banks and payment systems, and according to the IMF Resident Representative in Uzbekistan, the reform “strengthened credibility and independence” at the institution. This legal reform followed, and was designed to lock in, the September 2017 liberalization of the exchange rate, which unified Uzbekistan's multiple exchange rates and moved the sum toward a market-determined regime. The article traces how this sequence — exchange-rate liberalization first, then legal independence, then a formal 5 percent inflation target — has functioned as connected reform infrastructure rather than three isolated policy changes. It sets this institutional story against Uzbekistan's current macroeconomic performance: real GDP growth reached 7.7 percent in 2025 and accelerated to 8.7 percent year-on-year in the first quarter of 2026, while headline inflation declined to 7.3 percent at end-2025 from 9.8 percent a year earlier, still above the CBU's 5 percent medium-term target. The Central Bank has held its policy rate at 14 percent through multiple 2025–2026 board meetings, down from a high of 17 percent earlier in the reform era, while conceptually approving three-year Monetary Policy Guidelines for 2026–2028 in October 2025. The article argues that Uzbekistan's disinflation and growth performance cannot be fully explained by monetary policy technique alone; it is inseparable from the institutional credibility the 2019 law sought to build, and the central open question for the next phase of reform is whether that credibility is durable enough to survive external shocks - including the oil-price pressure associated with the Middle East war - without eroding the independence the law was designed to protect.