Tajikistan: Migrant Remittances Now Exceed Half of GDP
New statistics show migrant labor remittances are now equivalent to over half Tajikistan's GDP, crossing an important psychological threshold and emphasizing the Central Asian country's vulnerability to external shocks.
The impoverished country has long been the most remittance-dependent in the world, with cash transfers accounting for approximately half of the economy. Migrant transfers totaled more than $4 billion in 2013, the equivalent of 52 percent of GDP, the World Bank said in its most recent migration and development brief. That figure was 45.5 percent in 2010 and 48 percent in 2012. In neighboring Kyrgyzstan, the second-most dependent on remittances globally, remittances stayed level at the equivalent of 31 percent of GDP.
Both formerly Soviet countries are believed to have sent over one million migrants abroad, mostly to Russia and, to a lesser extent, to Kazakhstan. Remittances are also critical in neighboring Uzbekistan, which receives about one-third of all Russian wire transfers sent to former Soviet republics, accounting for the equivalent of about 16 percent of GDP last year.
Officials in Tajikistan do not like to acknowledge migrants’ importance to their economy. Last year the National Bank said it would stop reporting remittance data, claiming the information could be “politicized.” (The World Bank’s numbers come partially from Russia’s Central Bank.) Other officials have downplayed the role and number of migrants, apparently attempting to deny Tajikistan’s utter dependence on Russia.
Tajik officials should not only be concerned that Moscow could destabilize their country by deporting migrants, as it has threatened to do during slumps in relations. The World Bank also warns that ongoing instability in Ukraine, and its effect on Russia's economy, could impact Central Asia:
[T]he outlook is uncertain. Two major drivers of remittances from Russia to the region are movements in oil prices and the ruble exchange rate, both of which are difficult to predict at the moment due to fast unfolding events in Ukraine. In part due to the crisis in Crimea, the Russian ruble depreciated by over 9 percent in the first quarter of 2014 against the US dollar, and by more than 10 percent against the European euro. [… The region’s economies are] highly dependent on remittance flows these migrants send from Russia, and the weaker ruble, combined with departures back to their countries of origin induced by a lack of employment opportunities in Russia, mean that remittance flows may be dampened in 2014.
A report released this month by the United Nations Development Program underscored some of the ways these remittances help families in Kyrgyzstan and Tajikistan stay afloat:
Remittance inflows provide critical external balance support for Central Asia’s low-income countries. According to official data, remittance inflows in Tajikistan during 2011-2012 were more than twice as large as merchandise exports, and fully financed Tajikistan’s merchandise trade deficit. For the Kyrgyz Republic, remittances have financed between half and three quarters of the merchandise trade deficit during most of the past decade.
The UNDP also noted how remittances are driving Central Asia’s integration with Russia, specifically as countries like Kyrgyzstan and Tajikistan see few alternatives to joining the Moscow-led Customs Union of Belarus, Kazakhstan and Russia (which is slated to become the Eurasian Economic Union next year). Though there are pluses and minuses to membership, both Kyrgyzstan and Tajikistan have little leverage in formalizing migration policy with Russia -- potentially to their detriment:
Eurasian integration could boost Central Asia’s human development prospects–particularly if it goes beyond preferential trading relations to address questions of institutional development, formalizing migration and remittance flows, and boosting the competitiveness of labor-intensive export-oriented sectors. But if the Customs Union creates more barriers to trade between members and non-members, and if it hinders Central Asia’s inclusion into global value chains, then the region could miss out on important development opportunities.