AKIPRESS.COM - Uzbekistan plans to allow its citizens to buy and sell foreign currency at banks and exchange bureaus from early September, two banking sources told Reuters on Thursday.

The measure would be a potentially decisive step on the path towards full convertibility of the country's sum UZS= currency, helping open up Central Asia's second-biggest economy to badly needed foreign investment.

Foreign companies have so far largely stayed out of the resource-rich nation of 32 million because decades-old regulations there force most businesses to sell foreign currency at a knockdown official rate while buying it at a much more costly one.

In a nod to a more reform-minded economic agenda under President Shavkat Mirziyoyev, who took office in December, the former Soviet republic this month abolished a rule obliging exporters to sell a quarter of their hard currency revenue to the state.

It had earlier allowing a limited number of banks and companies to deviate from the official exchange rate in deals.

Allowing full convertibility of the currency, aligning the official and market rates and lifting restrictions that force ordinary Uzbeks to buy foreign currency from the black market would be the final steps in the foreign exchange reform.

Authorities have not said when this would happen, but two Uzbek bankers told Reuters banks were preparing to start retail foreign exchange operations in early September. Both sources were involved in the preparation process.

The two sources said, however, that instead of selling cash foreign currency, Uzbek banks would deposit it into special cards issued to customers.

One of the sources said the banks would quote the dollar slightly above the black market rate, currently about 7,700 sums per dollar. The official rate is 4,210. The second source provided no figures.

A central bank spokesman said on Thursday a decision on cash convertibility had not yet been made.

The central bank this week issued a regulation under which it plans to provide sums in cash to banks and exchange bureaus so they can buy foreign currency from individuals. But the document does not mention sales of foreign currency or provide any timeline and exchange rate guidance.

With individuals in Uzbekistan, a major exporter of cotton and gold, having been effectively barred from holding cash foreign currency, a black market for it has thrived.

With its economy having remained closed, the mostly Muslim nation has struggled to create jobs for its quickly growing population, and millions of Uzbeks have become migrant labourers, most of them working in Russia.