Expert Warns: Fines on Foreign Currency Use Could Boost Shadow Market

Thursday, October 24, 2024 15:08 Can all purchases and sales be tracked effectively in Kyrgyzstan? The Ministry of Economy and Commerce of the Kyrgyz Republic has proposed a ban on using foreign currency for real estate and automobile transactions, with fines for violations. A draft law to this effect has been prepared by the ministry. Economist Iskender Sharsheev expressed doubts to Vesti.kg about the practicality of enforcing this measure. “How exactly will they implement this?” he questioned. “De-dollarization laws by the National Bank have been in place since the Almazbek Atambayev administration. Back then, Kyrgyzstan ended its partnership agreement with the U.S. and closed the Gansi airbase at Manas Airport.” According to Sharsheev, several laws and regulations were introduced between 2013 and 2015 to curb foreign currency use in transactions. “These measures banned foreign currency settlements and stipulated that all contracts be denominated in soms. In real estate and car transactions, notaries sometimes record amounts in U.S. dollars, but they also include the equivalent in soms based on the current National Bank exchange rate. Transactions, however, are conducted exclusively in soms. After leaving the notary office, people may still pay in different currencies. How much more can they do to enforce de-dollarization? Track buyers and issue fines? In essence, the groundwork for de-dollarization has already been laid,” he explained. To further support control, the government also intends to promote non-cash payments by increasing state fees for real estate transactions conducted in cash — up to ten times higher than for non-cash transactions. “Non-cash settlements in soms are already standard in business transactions,” Sharsheev said. “For individuals, however, currency exchanges are still common. When they transfer funds, the law requires a conversion to soms, which then may be exchanged back to the desired currency by the recipient. This might be more of a symbolic move to demonstrate alignment with BRICS and other organizations against dollar dependency. In practice, these de-dollarization measures are already established.” Sharsheev also addressed the feasibility of enforcing non-cash payments in real estate and car transactions. “While it's possible to encourage most citizens, the risk is that this could fuel the shadow market. People may report one price officially but transact at another in practice. Street-level enforcement, fining citizens, could risk infringing on individual rights and contravening the Kyrgyz Republic’s Constitution.” Reported by Mikhail Gotfrid https://vesti.kg/zxc/item/131277-ekspert-shtrafy-za-ispolzovanie-inostrannoj-valyuty-mogut-privesti-k-rostu-tenevogo-rynka.html