Tajikistan Looking for Yet More Bailouts

Tajikistan’s National Bank is once again pleading for an international bailout as the country’s lending sector remains mired in an existential crisis.

At a meeting with a visiting European Bank for Reconstruction and Development delegation, National Bank deputy chairman Jamoliddin Nuraliyev appealed for assistance to the country’s systemically important banks. 

“It is necessary to carry out remedial work in some of the lending institutions,” Nuraliyev said, according to a National Bank statement. “I urge the executive directors of the EBRD during their coming board meetings to support proposals from the National Bank.”

Nuraliyev did not specify what those proposals were, but given that Tajikistan suffers from chronic liquidity problems, it is not hard to guess: Tajikistan desperately needs for its banks to be recapitalized.

The National Bank has already obtained assurances that the EBRD is to take a controlling stake in Tojiksodirotbank, the country’s second largest bank. The situation at that bank is grim. People who draw their salaries at the bank have had no joy for the best part of half a year and ATMs only began issuing money in June, after a hiatus lasting several months.

For what it’s worth though, Tojiksodirotbank chairman Tojidin Pirzoda has shrugged off talk of insolvency.

“Rumors about Tojiksodirotbank being on the verge of bankruptcy have been spread by certain people and certain interested parties,” he told state news agency Khovar back in January, without providing names or details.

But for all Pirzoda's protestations, a range of activities have been suspended at Tojiksodirotbank for the past few months. The bank is not issuing new loans. Delinquent construction companies owning money  to Tojiksodirotbank have had half-built sites taken off them as collateral. But since the bank is now unable to stump up the money to complete the work, those sites are standing idle and of no benefit to the lender. 

For what it’s worth, Pirzoda has been maintaining an oddly low profile considering the position of his bank. One might have expected him to crop up with the EBRD being in town, but not a bit of it. The last he was heard from was around the third week of May.

That was around the time bne Intellinews reported that Tojiksodirotbank had discussed a possible cash injection with officials from the European Bank for Reconstruction and Development in exchange for a 50 percent equity stake. Officials from the EBRD and the National Bank lager met in London, where they discussed the appointment of a temporary administration for Tojiksodirotbank, Asia-Plus news website reported.

“It is expected that the EBRD will invest $165 million into the bank and will thereby own a controlling stake,” Asia-Plus reported.

A wholesale restructuring of the bank, which will entail cutting staff and costs, is to be expected as a result of the EBRD deal.

The authorities will maintain a say in the lender, however, since they plan to acquire a 25 percent stake in Tojiksodirotbank, Asia-Plus reported.

While Tojiksodirotbank may be seeing some light at the end of the tunnel, matters are still messy over at Agroinvestbank, which is the country’s largest bank. In November, the government adopted a rescue program that involved the General Prosecutor’s office, the anticorruption agency, the Auditing Chamber and other government departments trying to claw back unpaid debts.

Yet for the last couple of weeks, crowds of people have again appeared outside bank branches in a desperate attempt to get their salaries. Now it is the turn of Agroinvestbank ATMs to run dry. And customers are certainly not reassured by the regular bulletins about auctions of bank property being held to drum up funds.

Some financial experts have warned against panic and reading too much into the problem with the ATMs.

“The (economic) crisis has affected all banks, but the situation at Agroinvestbank is relatively better,” economist Khodzhimukhammad Umarov told RFE/RL’s Tajik service, Radio Ozodi, in mid-June. “The bank has, as far as I am aware, received financial assistance or low-interest credit from the government and China.”

Umarov said the worst situation was at Fononbank and Tojprombank, which is a daughter company of Tojiksodirotbank.

Then again, that was then and this is now.

The disaster that is Agroinvestbank is a classic Tajikistan mess. The bank’s dismal burden of bad loans is a legacy of doling out risky and uncollateralized loans to cotton producers and other agricultural concerns. Some of those loan beneficiaries are known to have links to a confidante of President Emomali Rahmon who, as it happens, is also the current head of Agroinvestbank, Muradali Alimardon. This makes the chance of redeeming those loans are good as negligible.

If Nuraliyev is hinting that the EBRD might be tempted to bail out Agroinvestbank, he should in theory be hoping in vain, although it should be said that the international community appears willing to underwrite Tajikistan’s mind-boggling corruption in ever more perverse ways.

The cost of saving Agroinvestbank could be huge, as the International Monetary Fund indicated in a February report.

“Assuming that nearly 50 percent of [Agroinvestbank’s] loan book consists of nonperforming loans due to directed lending, this could have reduced annual gross domestic product growth by as much as one-quarter percentage points. And while the fiscal costs are also hard to measure, restructuring Agroinvestbank could require the injection of public funds in an amount equivalent to around 2.5 percent of gross domestic product,” the IMF said in the recent report.

Beyond recapitalizing at the state’s expense, which does not appear an option given the disastrous state of its finances, IMF solutions for Agroinvestbank include placing the bank under temporary administration, or liquidating it. Compensating depositors would be the responsibility of the government, which is likely in no position at the moment to cover even a fraction of those costs.

Tajikistan Looking for Yet More Bailouts

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