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Iradi som

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The Iradi som (Iradi: Irad somu; abbreviation IS) is the currency issued by the Bank of Irad (Irad Banky), the monetary authority of the Irad Special Economic Zone (ISEZ). It circulates alongside the US dollar, which has been legal tender in Irad since the Banking and Commercial Currency Act of 1993. The dollar is used for most contracts, property transactions, savings and foreign trade, while the som is used mainly for retail payments, utility bills and public-sector wages. The som is divided into 100 tyiyn. Because Irad's sovereignty is unresolved, the currency has no ISO 4217 code.[1][2]

The name is shared with the currencies of Kyrgyzstan and Uzbekistan and comes from a Turkic word meaning "pure", once applied to ingots of refined silver or gold.

History

The Socialist Republic of Irad used the Soviet ruble, and the collapse of the ruble zone after October 1991, with inflation above 1,000 percent, wiped out most savings. By the time of the siege of Talas in 1992, banking in the city had largely stopped.[3] After the First Iradi Civil War, the territorial administration chose to adopt the US dollar rather than introduce a currency of its own at once. The Banking and Commercial Currency Act, passed by the Territorial Legislature of Irad in 1993, made the dollar legal tender, chartered Talasbank as the main commercial bank, and established the Bank of Irad to issue a local currency for small payments and wages and to supervise the banks.[1]

The Bank of Irad opened in the autumn of 1993 and put the first som notes into circulation late that year, at a fixed rate of 5 som to the dollar. The act adopted currency-board rules: the bank may issue som only in exchange for dollars at the fixed rate and must hold dollar reserves at least equal to the som in circulation. In the first months both dollar banknotes and som notes were flown in to Talas Air Base, and rubles remaining in circulation were exchanged at Talasbank branches.[3] The Bank of Irad Clearing House was set up in 1996 to settle payments between banks in both currencies.

The end of the US territorial administration on 3 December 2006 caused a run, as depositors converted som and withdrew dollars, and Talasbank limited cash withdrawals for three weeks. The Bank of Irad met conversions from its reserves and the official rate held, but during the Second Iradi Civil War in the first months of 2007 the som traded at a discount in the informal markets of Talas and Nurzhan. American correspondent banks froze or restricted Iradi accounts, and the bank moved what it could of its reserves to banks in Almaty and Istanbul. In the spring of 2007 the cabinet of the Democratic Republic of Irad drew on the reserves held in Talas to pay salaries and its forces, against government notes that the currency-board rules did not allow.[4]

By the end of the war the reserves covered only about 60 percent of the som in circulation. When the ISEZ reconstituted the bank under the Bank of Irad Act in 2008, it kept the currency-board rules but reset the fixed rate: from 17 March 2008 the som was exchanged at 8.40 to the dollar, a level chosen so that the remaining reserves again covered the som in full. The devaluation of about 40 percent fell hardest on pensioners and public employees paid in som; dollar deposits were untouched. The informal discount disappeared within months.[4][10] Azamat Temirov, deputy chairman of the Bank of Irad from 2007 and one of the authors of the reset, became its chairman in 2010. The som was added to the clearing house's real-time payment system in 2012, the year Talasbank and Attelkom introduced SMS-based payments.[2]

Monetary system

Irad's system is dual-currency and largely dollarized. The Bank of Irad issues the som, holds the dollar reserves that back it, supervises the commercial banks and operates the clearing house. Because most deposits, loans and prices of large purchases are in dollars, it has little room for independent monetary policy, and its main task is to keep the som stable against the dollar.[2] According to the World Bank, som accounts made up about a fifth of commercial bank deposits in the ISEZ in 2022.[5]

The two currencies have distinct uses:

  • US dollar. Contracts, property, vehicles, savings, bank loans and foreign trade. Export proceeds are paid in dollars into escrow accounts at Talasbank supervised by the Irad Foreign Trade Escrow Authority, and commercial and industrial customers of public utilities are billed in dollars.
  • Iradi som. Public-sector wages and pensions, household utility bills, local taxes and fees, public transport and everyday retail. The Talas Municipal Water Authority, for example, sets household tariffs in som and bills businesses in dollars.[6]

Since non-recognition limits Irad's access to international payment systems, dollar payments abroad are settled through correspondent banks, mainly in Almaty and Istanbul, and the som is not traded outside Irad.[5] Irad is not a member of the International Monetary Fund.

Banknotes and coins

The first series of banknotes, issued in 1993 and printed abroad under a territorial contract, came in denominations of 1, 5, 10, 20, 50 and 100 som. Their designs showed horses, the Church of St. Janyl, the Talas Alatau and Silk Road monuments. A redesigned series with improved security features was issued from 2011, adding a 500-som note; its 100-som note carries a portrait of Amanbek Alimbekov, leader of the Provisional Government in 1992. Coins of 10 and 50 tyiyn and of 1 and 5 som are struck, although small tyiyn coins are rarely used.[2]

The tribal regions

The Autonomous Tribal Regions (ATR) have no formal fiscal or monetary system, and the Iradi Freedom Society issues no currency. Herders who sell livestock and wool to ISEZ buyers are usually paid through Talasbank in dollars or som, but much local trade is conducted in barter or livestock, and near the frontiers Kazakh and Uzbek currencies also change hands.[7]

Debate

Economists and the World Bank have noted that dollarization has given Irad stable prices since the 1990s at the cost of an independent monetary policy, and that the som's role is largely confined to small payments. The commentator Jason Ilyasov has called for cryptocurrency to be made legal tender alongside the dollar and the som.[8] The Bank of Irad's 2023 annual report restates that only the dollar and the som are legal tender. Business groups credit the bank and Talasbank with keeping the payment system working through the crisis of 2006–07, while critics point out that holders of som paid for it in the 2008 reset. After Governor Erlan Toktarov withdrew from public view in July 2024 the bank stated that the payment system and the fixed rate were unaffected.[9]

The 2026 street rate

From the spring of 2026 dollar banknotes became scarce in the ISEZ. Correspondent banks in Almaty, through which Irad's dollar cash is flown in, reduced shipments, and in May Talasbank limited cash dollar withdrawals and som-to-dollar conversions to US$300 a month per customer.[11] Money changers in the bazaars of Talas and Nurzhan, who are not licensed, began quoting the som below the official rate: about 9.5 to the dollar in June and 11 to 12 by October 2026. Analysts cited the shortage of cash, the Governor's absence and the uncertainty before the 2027 election, the rising cost of remittances from Russia, and the memory of 2008, when the last fixed rate was abandoned.[11]

The Bank of Irad has said that its reserves fully cover the som in circulation, that the official rate of 8.40 is unchanged, and that street quotations reflect "speculation in a small cash market". Prices in most shops, utilities and newspapers are still set and paid in som at the official rate, while importers and sellers of foreign goods increasingly ask for dollars; in October the online marketplace Jılmay said that goods bought abroad through its parcel service would be sold in dollars only. The launch of Tulparcoin in September 2026, which its backers promoted as a way out of both "the shrinking som and the rationed dollar", drew a separate warning from the bank.[2][11]

References

  1. ^ Territorial Legislature of Irad (1993). Banking and Commercial Currency Act. Territorial Gazette, Talas.
  2. ^ Bank of Irad (2023). Annual Report. Talas.
  3. ^ Talas State University Press (2011). The Territorial Economy: Trade, Investment and Dollarization in Irad, 1992–2006. Talas.
  4. ^ Central Asian Geopolitical Review (2014). 'Dollars without a Sovereign: Escrow Banking in Irad since 1994.' Vol. 10, No. 3, pp. 61–88.
  5. ^ World Bank (2023). Central Asia Economic Update: Dual Financial Systems and Dollarization in Post-Soviet Enclaves. Washington, DC.
  6. ^ Talas Municipal Water Authority (2023). Annual Report 2022. Talas.
  7. ^ United Nations Mission in Irad (2020). Resource Arrangements across the Qara-Chik Line. Kara-Oi.
  8. ^ Talas Journal of Law & Political Economy (2022). 'The Anarcho-Capitalist Turn in Central Asian Media.' Vol. 9, Iss. 1.
  9. ^ Talas Herald (2024). 'Escrow Payments Continue, Officials Say.' Talas.
  10. ^ Bank of Irad (2008). Statement on the Reconstitution of the Bank and the New Fixed Rate. Talas, 17 March 2008.
  11. ^ Talas Herald (3 October 2026). 'Bazaar rate passes 11 som as dollar cash runs short; Bank of Irad says peg is safe' Talas.
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