In Russia’s Shadow, Tajikistan’s Remittances and Currency Plunge
Tajikistan’s economy faces mounting troubles. The impoverished country has long been the most remittance-addicted in the world, with cash transfers from migrant laborers totaling the equivalent of almost half of GDP. But with the slowdown in Russia and tightened regulations for foreigners wishing to work there, remittances are now, as predicted, falling.
The national currency, the somoni, is also hurting, and it is unclear if the authorities are realistic about their options.
Last year remittance inflows declined over 8 percent to $3.9 billion according to Tajikistan’s National Bank. This year will be even gloomier. In early March, the International Monetary Fund (IMF) forecast that remittances would drop 30 percent.
Meanwhile, officials in northern Tajikistan have reported a 30 percent drop in out-migration during the first months of 2015 compared to the same period last year. About one million Tajik citizens work abroad, mostly in Russia.
Part of the problem is the stricken ruble, which lost almost 50 percent of its value against the dollar last year, meaning the money sent home by migrants is now worth much less in real terms. Almost 89 percent of remittances sent back in 2014 were denominated in rubles, according to National Bank data, Asia Plus reported on March 9. With less cash entering the Tajik economy, there is less demand for the local currency. The somoni has already lost nearly eight percent of its value against the dollar since the start of the year. It fell 11 percent last year.
All this makes it clear just how much Tajikistan’s economic fate remains tied to Russia’s. “We can expect an economic slowdown in the country and pressure on the exchange rate of the national currency, the somoni, this year,” Aidyn Bibolov, the IMF resident representative in Tajikistan, told Asia-Plus in an interview this month.
In an effort to shore-up the floundering somoni, the deputy head of Tajikistan’s central bank, Jamshed Yusufiyon, told a news conference on March 13 that the bank would limit foreign currency sales.
"The National Bank of Tajikistan has established a ceiling for purchases and sales of foreign currency in cash," Yusufiyon told journalists. He warned of "severe" punishment for anyone violating the new rules.
Not everyone has listened, though. Officially, one dollar currently buys 6.3 somonis. But some traders are speculating on a further decline and buying dollars for 6.6 somoni. The Prosecutor General’s office recorded 192 cases of illegal currency selling during recent raids.
Critics say the government is unable to control a burgeoning black market for foreign currencies. Social Democratic Party deputy head Shokirjon Khakimov has slammed the criminal cases as as “inadequate” and largely symbolic, adding that authorities are ignoring other factors contributing to the somoni’s plunge.