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Back to the USSR: why the past does matter in explaining differences in the economic reform processes of Kazakhstan and Uzbekistan

In October 2003, Uzbekistan finally ended its multiple exchange rate system and agreed to complete currency convertibility of the current account. The country had maintained a distorted exchange rate system with as many as three different exchange rates, since 1996. Uzbekistan formally implemented its multiple exchange rate regime in 1997, which was one of the reasons that the International Monetary Fund (IMF) suspended its only conditional financial arrangement with the country. Kazakhstan, however, had taken the important step of currency convertibility in 1996. Kazakhstan’s pace of economic reform in other areas such as price liberalization and financial sector reform has consistently placed it among the stronger reformers of the Commonwealth of Independent States (CIS), while Uzbekistan has been slow to continue with reforms, reversing many of those reform efforts in 1996. The divergent economic reform processes of these states require additional analysis about the determinants of reform efforts because many early comparative statistical analyses of the transition economies correlated a change in political leadership (non-communist) with economic reforms. Because former communist leaders have ruled Kazakhstan and Uzbekistan since each state’s independence, the variable of political regime type loses its explanatory value in these cases. What other reasons explain why Kazakhstan continued with economic reform while Uzbekistan did not? Kyrgyzstan’s early political and economic reform, for example, seemed to confirm that a change to non-communist leadership was necessary for economic reform in the other Central Asian states (CAS). Since Askar Akayev was the only president of the CAS who was not a former First Party Leader, much of the country’s success in these areas was attributed to the fact that he had not been a former member of the communist party. However, over time, Akayev began to restrict political freedom and to implement more authoritarian policies in a vain attempt to hold onto power. In the remaining CAS of Turkmenistan Central Asian Survey (December 2005) 24(4), 391–404