Uzbekistan’s Lucrative Currency Exchange Black Market

We all take different approaches to how we acquire currency when abroad. My first choice is always to pay by credit card in order to earn points, but that’s not a practical option in many countries.

When it comes to getting cash, I almost always employ the same approach — I go to an ATM when I land in a country and take out money that way. This has lower fees than going to a currency exchange place on arrival, and I prefer it to getting money converted before departure, since there’s an added risk to traveling with cash (there’s a greater chance of the money getting lost, stolen, etc.), not to mention the hassle of doing so.

This strategy almost always works perfectly for me. At a minimum it does the trick.

The catch is that there are some countries with a currency black market, where you can get significantly more of the local currency by instead having a certain foreign currency. For example, while I haven’t been to Argentina recently, in the past there was a significant difference between the official exchange rate and the black market exchange rate between USD and ARS.

The catch — again, at least when I was there — is that the whole black market currency exchange thing is pretty shady, involves going to questionable shops, etc.

There are some other unstable countries where there’s a similar black market for currency exchange.

However, we’re in Uzbekistan at the moment, which I didn’t realize until we arrived apparently has the craziest currency exchange black market out there. Not only is the difference between the official and unofficial exchange rate huge, but the process is also straightforward.

For one, you can pay for virtually anything in USD or the local currency, UZS. Fair enough, as there are many countries where that’s the case.

The part that’s especially interesting is how the exchange rates differ. Officially one USD gets you ~4,120 UZS (Uzbekistan Som). Meanwhile on the black market one USD gets you 7,000+ Som. That’s a massive spread.


What 10USD will get you in UZS

What makes this black market so unique otherwise is how straightforward it is. You don’t have to go to some shady black market currency exchange place to get this rate. Instead you’re always within 100 feet of someone willing to trade you money. It’s simply a question of whether they have enough local currency to trade you.

So of course I regret the fact that I didn’t bring more USD. As a result I’m paying 75% more than I’d otherwise have to for most things (which isn’t a lot — taxi rides seem to average 1-2USD, so it’s not a huge deal). Still, to think I could have paid my hotel in local currency at the black market rate rather than the official exchange rate.

So, what’s causing this huge disparity? Here’s how E21 describes it:

Why the divergence? While the Uzbek government fixes the exchange rate to other currencies, its central bank also cannot seem to keep its hands off the printing presses. The excess of som results in high inflation rates. Inflation was 8.7 percent in 2015, which is actually an improvement over the double-digit rates of years past and the quadruple-digit ones of the early 1990s. Since 2000, prices in Uzbekistan have risen 18-fold.

Does anyone know of another country with such a lucrative and straightforward black market exchange rate? Not only can you get 75% more for your USD, but the process of exchanging money is also very easy.

Comments

  1. Great write up Ben. Yeah.. the one that comes to mind now, especially due to being in the news recently is Venezuela! Officially.. U$1 is equal to 10.31 Bolivars.. yet the black market rate for a U$1 ~12,164.00 Bolivars! Now that’s just crazy, but not as crazy as when Zimbabwe’s currency took a dive.. printing trillion dollar notes!

  2. “However, we’re in Uzbekistan at the moment, which I didn’t realize until we arrived apparently has the craziest currency exchange black market out there.”

    Come on, Ben. You read The Economist sometimes. Venezuela says hello.

    Inflation is expected to surpass 1000% this year and the black market as I type this is 2900ish vs 12000ish.

    A few months ago it was 700ish to 7000ish. And if you wanna go back to 2013ish at some point it was 6.3 to 60-80Bs…that’s when you could have bought first class fares with an +80% discount.

    But yeah…blackmarket, lucrative and straightforward usually don’t go together, I see Uzbekistan must be an exception.

  3. I’ve known several countries that had black market currency trading, all of it illegal. I’ve also known several foreigners who got arrested and convicted for being involved in illegal currency trading. Usually it was their own greed that got them in trouble; selling hard currency on the black market, buying it back at the official exchange centers, rinse, repeat. Never occurred to them that when they presented their passports to exchange their currency, they were being tracked lol.

  4. I traveled to Uzbekistan in 2010, before they introduced the 5000-som note pictured at the top of this post. Highest denomination was 1000 som, or less than 50 cents even at the official rate then, IIRC. I felt like some drug dealer carrying around huge wads of cash. Uzbeks are VERY well practiced at counting money quickly – faster than some machines!

  5. The Argentine currency market has an interesting history. Until 2001, the peso was pegged to the USD. After the peso was allowed to float, there was rampant inflation, and by the time I lived there in the summer of 2009, it was about 3.5 ARS to US$1.

    In the early 2010s, corrupt President Cristina Kirchner imposed major currency restrictions on Argentine citizens, severely restricting their access to US Dollars. (This was particularly problematic in a country where real estate transactions are conducted in USD only). This led to the black market, and it wasn’t just limited to the shady types. The black market rate was so prevalent that the major newspapers in Buenos Aires would publish both the official rate and the “dólar blue” rate. As I recall, when I visited friends in 2012, the official rate was around ARS 6 = 1 USD, while the “dólar blue” was around ARS 14 = 1 USD – more than double the official rate. While it was technically illegal, many businesses were happy to take your USD at rates much closer to the dólar blue rate.

    A couple years ago, newly elected President Mauricio Macro lifted the currency restrictions that had virtually crippled the economy for several years. Within 24 hours of lifting these restrictions, the peso began to float at rates near the old black market rate.

    The rate is now around 17.75 ARS = 1 USD, with virtually no black market. The big problem down there afterwards was the denomination of the bills. The largest bill was 100 pesos, worth about USD $6. They were supposed to introduce to 500 and 1000 peso notes, but as of last June when I visited friends, those new notes had yet to materialize.

    Probably more than you wanted to know about the history of the Argentine Peso…

  6. You might want to exercise caution in exactly how much you withdraw as Uzbekistan specifically prohibits exiting the country with more money than declared on arrival. In addition, exchanging UZS is nearly impossible outside of the region, even in Tajikistan. The exchange disparity you quoted is quite optimistic, ATM withdrawals and the local cash rate are extremely far apart, particularly outside of Tashkent. The bullet train is also a really nice way to get around…if you can get tickets. Enjoy your time!

  7. Definitely Sudan has a more lucrative black market

    Official rate is 6 SDG/$ while the black market is 22 SDG/$

    The transactions is easy and everywhere

  8. Also one of the reasons the Argentine black market in currency trading is so prevalent is because there is so much fake currency and it’s obviously an easy way to pawn some of that off. The place is awash with the stuff.

  9. I am currently living in Uzbekistan…
    The rate is 8000+.
    Be careful where you change. While it looks wide-open and OK, it is illegal and it is possible to have issues with the police.
    Don’t feel bad about not getting to pay your hotel bill at the market rate. Foreigners have to pay in hard currency.
    While the 1000 soum note is most common, there is a 10,000 note. It came out in the spring. It is not widely circulated. There are coins but they are rarely seen. 100 soum coins are sometimes used at the metro ticket windows.

  10. My wife and I travelled independently to Uzbekistan last October for over two weeks. At that time the official rate for UZS was about 3,000 to the USD and the black market rate was over 6,000. The largest bill was the 5000 som note worth less than $0.80. Accordingly, one needed a sack to carry the local currency. We paid our hotel bills in som acquired at black market rates. We paid for purchases in dollars and got slightly less than the black market rate. If you pay hotels in hard currency or use a credit card you will only get the official rate.
    The solution is to bring into Uzbekistan a substantial amount of dollars or of Euros and to fully declare them on arrival and departure. The risk is carrying more cash than one would like but in a relatively crime-free environment.

  11. Iran also has a large spread between the official government exchange rate and the rate from most currency exchange places. The spread isn’t as large as Uzbekistan though, it’s only a 20 percent difference.

  12. I am dating myself but in the 1990s there was hyperinflation in both Serbia and Turkey. I was the first EBRD consultant in Tashkent in Spring of 1994 (to make recommendations for upgrading their telephone system).

  13. Have you imagine what would happen if the local authorities caught you making $$$ exchange with unofficial money changer? A white caucasian blonde male US citizen caught doing illegal transaction. When checked, his passport full of stamps, suggesting he has travel around the world. Maybe he is a spy? Nevertheless, it seems he have a lot of money. Let’s have some.

    If thet didn’t get you, don’t assume you’re free yet. You may get a fake banknotes in illegal exchange. When there’s a suspicion at local merchant, you will have a hard time explaining where you get it without admitting you have done something unlawfull.

    Please, don’t be like otto somebier who look at a picture, thought it was cool, and decided to take it home. Just because you didn’t think it was a big deal, doesn’t make everybody agree with your thought.

  14. If you used the official exchange rate in Venezuela a cup of coffee would be $100. Almost all puchases are done at the black market rate.

  15. This used to be the case in Poland 30 years ago: 860 zl to the dollar at the official rate and 5,500 on the black market.

  16. It’s better not to travel to countries like those mentioned above. Why get into some legal and corruption problems or why be at financial loss because of two different types of exchange rates. Only go there if for official or business reasons so that your finances are taken care of by your organization or office. Only

  17. James – Less of the hysterics! This is Uzbekistan, not North Korea. They don’t target “blonde American Caucasians” to use as pawns, nor will they put tourists in forced labour camps for using the black market… As for them thinking he’s a spy!?

  18. @callum
    That’s what probably otto something have in mind as well. This real world. I see nice people here in North Korea. No cruel dictator whatsoever. Besides, I’m a tourist and just a teenager. A small prank wouldn’t hurt anybody….

  19. Same thing happened in Nigeria. Due to oil incertainty (amongst other reasons) the official exchange rate was around 310 NGN (Nigerian Naira) per USD, but in the black market you could get 500 NGN or even more. Now it’s more stable and you’ll officially get 340-360 NGN per USD. The funny thing is that not only do you use the black market rate for daily purchases, but whole projects (of several 100,000s USD) would be exchanged at black market rates.

  20. In the socialist paradise that is Venezuela, 2 years ago i turned 1,000 usd into 10,000usd thanks to the black market and a local friend

  21. The argentina changes have already been well covered here but what I found hilarious about Argentina is that while they would offer you very high rates (several years ago before the devaluation)… if the US currency you exchanged was remotely wrinkled, had the smallest writing on it, or was of a denomination less than $20, it might as well have been monopoly money to them.

    Meanwhile, I routinely received change in Pesos that had major tears, holes in it, etc. At first I thought this was just me being taken advantage of, and while that was probably true to some extent, I didn’t meet a single cashier that raised an eyebrow at accepting the torn/mutilated pesos… only for “high demand” USD.

    Great country nevertheless.

  22. @Elijah
    Is there anything wrong by doing anything on accordance to the prevailing laws and logic? Well aside from not entertaining one’s greedyness perhaps?

  23. When I was traveling in Eastern Europe pre-breakup (early 80s) the trick to avoiding being entrapped by the plainclothes police was not to respond to the people constantly approaching you to change dollars, but to approach others, especially truck drivers, who are about the least likely of anyone not to be plainclothes cops.

  24. I do not think you approached this well, Ben. I think you started it off well with the credit card comment, but aside from that, I think it depends where you are going.

    In general, I do not exchange for cash before I go somewhere, but when dealing with certain currencies, you do not have much of a choice for various reasons.

    Also, ATMs are not always good because in some cases you need the bank receipt to exchange back to dollars later, assuming this is not a currency you frequent then you would not want to hold on to it.

    With regards to the black market, there are many places around the world with a black market for the currency and many are just as open as what you described. It depends what currency you hold and which currency you are looking to get. For some places it is not really surprising, while for others it is.

  25. Yep that is childpay compared to Venezuela. Its been crazy for many years. The official currency exchange rate is STILL 10bs per USD while on the street it is actually 16,000 and sometimes more (changes by the hour). Back in 2010-2013 you could buy a ticket for First class for $5,000 in official exchange at 50,000bs but in real life exchange money (black market) it was $500…

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