The CBU: Thirty Years to Independence

Why the CBU’s history matters

• Even on its own website, the history of the Central Bank of Uzbekistan is incomplete. For three decades the CBU operated as an arm of the state: that era ended in 2017, when a new president liberalised the exchange rate, rebuilt the central bank with a genuine mandate, and launched the kind of institutional shift that preceded sustained re-ratings in Vietnam, Georgia and Kazakhstan a decade earlier.

• The market has not caught up. Local currency sovereign debt, financial sector equity and commodity-linked exposure all look mispriced against a reform trajectory that is real, even if it is running behind schedule. The risks are front of mind: CBU independence is recent, privatisation is slow, and legal frameworks lag the monetary reform. But the direction is clear. What follows is an updated timeline which provides clarity into why these shifts have gone unnoticed.

1991-1993 — Built from Nothing

• When Uzbekistan declared independence in August 1991, it inherited a banking system designed to serve Moscow. Under the Soviet mono-bank structure, there was no real monetary authority in the republic: just Gosbank branches executing orders from the centre. The CBU had to be built from scratch with no institutional precedent (Central Bank of Uzbekistan, 2026).

• Fayzulla Mullajanov became its first Chairman, a post he held for over two decades. His tenure ran almost perfectly in parallel with Karimov’s presidency, and the two shared the same philosophy: Uzbekistan would reach the market on its own terms, at its own pace. Karimov called it “gradualism”, which was a deliberate rejection of the shock therapy being pushed by the IMF and World Bank on other post-Soviet states (Djanibekov, 2021). In practice, that meant the CBU was never really independent. It was an arm of the state, and monetary policy answered to the broader project of national control.

Crisis Stabilisation (1994-1996)

• The early years were brutal. Inflation averaged close to 1,000% annually between 1992 and 1994, peaking above 1,200% as the new state struggled to control a money supply still tied to a disintegrating ruble zone (US Department of State, 2001). The introduction of the soʻm in July 1994 was the CBU’s first genuine act of monetary sovereignty. With IMF support, it worked: inflation fell to 64% by 1996 and continued easing. The crisis phase was, on its own terms, a success (US Department of State, 2001).

The Long Plateau (Late 1990s–2016)

• Through the 2000s Uzbekistan grew at roughly 5% a year, supported by cotton, gold and gas revenues, and a state-led model that was more competent than its critics gave it credit for (Djanibekov, 2021). The CBU kept reserves up and the banking system stable. But the cost was a persistent gap between the official exchange rate and the parallel market — a shadow economy in foreign currency that quietly eroded the credibility of official monetary policy. The CBU’s formal independence remained, in practice, notional (Near East Policy Forum).

• By the mid-2010s the contradictions were impossible to contain. Falling commodity prices, a collapsing Russian ruble and shrinking remittances from the estimated two million Uzbek migrant workers abroad pushed the parallel rate to more than double the official one (IMF, 2018). Karimov died in September 2016, leaving his successor Mirziyoyev strong fundamentals on paper and a monetary system under serious strain beneath the surface.

The Break (2017)

• What followed was fast. In September 2017, the government liberalised the foreign exchange market — unifying the official and parallel rates and letting the soʻm float. The currency fell roughly 50% against the dollar immediately (IMF, 2018). Painful, but necessary. Mullajanov had died in office that June, the only Chairman the CBU had ever known. His successor, Mamarizo Nurmuratov, inherited an institution being pushed, for the first time, toward genuine independence (Gazeta.uz, 2024). The IMF, a distant presence for years, became an active partner almost overnight (IMF, 2017).

Building an Independent Institution (2018–2023)

• The years after 2017 were about turning a policy shift into durable institutional change. A new central bank law in 2019 formally enshrined the CBU’s independence and gave it a dual mandate: price stability and financial stability (IMF, 2021). Inflation targeting was adopted. The CBU began setting its own policy rate and publishing its own forward guidance. For the first time, it was being run like a central bank rather than a ministry department.

• The structural problem, inherited from the beginning, is that the state still dominates banking. State-owned banks controlled around 85% of assets as recently as 2021, and a privatisation strategy launched that year has moved more slowly than planned (IMF, 2021). Reducing that share remains the defining unfinished task.

2020-2023 — Banking Sector Strategy, COVID-19 Response and Macroprudential Development

• A Banking Sector Reform Strategy for 2020-2025 was approved, targeting a reduction in state-owned banks’ share of total banking assets from approximately 85% to 40%, with private banks rising to 60% of the system by 2025 (IMF, 2021).

• In response to the COVID-19 pandemic, the CBU cut its policy rate by 200 basis points to 14%, provided additional liquidity to the banking system and eased reserve requirements; banks were directed to offer loan deferral arrangements to affected households and businesses (IMF, 2021). The Financial Stability Department was established within the CBU in 2021, formalising its macroprudential oversight function (IMF, 2025). The CBU also launched Finlit.uz in 2020, which is an online financial literacy platform.

• In 2023, a formal Macroprudential Policy Strategy was adopted, defining the CBU’s instruments, goals and decision-making processes for systemic risk management, and aggregate capital adequacy ratios across the banking system have remained above 17% (against a 13% regulatory minimum) since 2020 (IMF, 2025).

Where Things Stand (2024–Present)

• In December 2024, Timur Ishmetov replaced Nurmuratov as Chairman, with a mandate to push reform further (Gazeta.uz, 2024). The CBU today is more independent and more market-oriented than at any point in its history. But it is still working through the structural legacy of the Karimov era: a banking sector built around state direction, and an economy that has not yet fully made the transition the monetary framework now demands of it.

The Cordoba View

• Uzbekistan is not a trade for everyone. But for the right allocator, the reform story is too underpriced to ignore. Local currency sovereign debt is where we would start. The CBU has a credible inflation target, a policy rate it is actually willing to move, and a track record of defending its mandate. For EM fixed income managers with a frontier allocation and a medium-term horizon, Uzbek local currency bonds offer genuine real yield in a market almost nobody is benchmarked against. That is the opportunity. The risk is that institutional independence, at three years old, is still fragile. Position sizing matters more here than conviction.

• Financial sector equity is the longer-duration bet. A banking system being structurally re-rated from state-owned to privately held does not reprice overnight, but when it does, it tends to move fast. This is one for specialist frontier funds and investors with the access and patience to ride out a privatisation schedule that is moving slower than the government promised.

• The bottom line: this is a reform dividend in early innings, across asset classes that are structurally improving but not yet priced for it. Frontier specialists, EM fixed income allocators with high yield tolerance, and commodity funds with a regional lens are best placed to capture it.