Microsoft Word econ 2004 16. doc

3.3 Securities Market 
Debt instruments. 
The securities market is still in the early stage of development in Uzbekistan. Until 
1996, the only instruments available for the mobilisation of savings were 
household saving accounts and term deposits at commercial banks. In March 1996, 
3-month Treasury Bills (T-bills) were issued for the first time, and 6-month T-bills 
started to be issued one year later. The major aim of the issuing of State T-bills for 
the government was to finance budget deficits out of non-inflationary sources. For 
the Central Bank, it was an attempt to conduct open market operations to influence 
market liquidity and market interest rates. These bonds have no coupon and are 
sold at a discount in auctions held once a month by the Republican Currency 
Exchange (RCE). As of January 2000, there were 22 dealers (21 bank) authorised 
to operate in the bond auction as dealers on their own account and on behalf of 
their clients. A secondary market was created, providing a degree of liquidity for 
these securities; secondary market auctions are held by the RCE four times a week, 
and both maturities are traded in the same auction. However, market depth of T-
bills is still limited, with only 25 percent of the outstanding stock (or less than 1 
percent of GDP) was held by the non-bank public in June 1998 (IMF, 1998). This 
is primarily due to (i) low yields compared to inflation and the high return on 
holding foreign currency notes (mainly US dollars) (see Figure 2); (ii) the absence 

---

27
of permission for the banks to sell the bonds to the public outside the auction; and 
(iii) the non-existence of repurchase agreement operations (repo) between banks 
and the public, based on the T-bills in banks’ portfolios.
0
10
20
30
40
50
60
70
80
90
100
1996
1997
1998
1999
Consumer prices
Weighted exchange rate depreciation
3 monthly T-bills
6 monthly T-bills