Tajikistan Struggles to Defend Sinking Currency
Tajikistan’s National Bank has ordered the immediate closure of private currency exchange offices, a move that suggests Dushanbe is concerned about the somoni’s sharp depreciation. The currency has fallen 14.5 percent against the dollar this year as remittances from Russia slow.
The National Bank cited the need to assure the “stability” of Tajikistan’s currency market and the somoni exchange rate and “the protection of the interests of clients of credit organizations,” in a terse statement issued on April 17 announcing the closures with immediate effect.
The blanket ban on private exchange offices means more than half of the country’s exchange offices – 818 out of a total 1,581 – are being shuttered, leaving 763 operating, according to National Bank figures cited by Dushanbe-based Asia-Plus news agency.
With plenty of currency offices still working, the closures sparked little panic in Dushanbe, an observer in the city told EurasiaNet.org on condition of anonymity.
In dollar terms, remittances sent to Tajikistan from Russia declined by 7.6 percent in 2014 year on year, according to data recently released by Russia’s Central Bank. Remittances are likely to continue to drop this year amid ongoing economic turmoil in Russia.
This is bad news for the world’s most remittance-dependent country. The World Bank estimates remittances total the equivalent of 42 percent of Tajikistan’s GDP. Over a million Tajiks, or roughly half of working-age males, labor in Russia.
In March, the National Bank accused some private exchange offices – which people routinely use as they are more convenient than banks – of “speculation,” as the gap between the National Bank exchange rate and those in private offices widened.
The somoni-dollar exchange rate in some private outlets rose above 6:1 in early March, RFE/RL reported, at a time when the National Bank rate stood at 5.5 to the dollar.
On March 13, the National Bank announced that it was stopping the sale of currency to the public through its own exchange offices (where the dollar was much cheaper to buy than in private offices owing to the wide rate disparity).
Panic-buying had “artificially inflated the rate of the dollar,” hence the depreciation of the somoni, it said. This suggests there is a dollar shortage in Tajikistan – or at least a public perception of one.
The National Bank’s own exchange rate rose above 6 to the dollar on April 11, and now stands at 6.07.
The somoni has lost 14.5 percent of its value against the dollar since the beginning of the year (at the National Bank rate), partly because it is being pressured – like other regional currencies – by the fall of the Russian ruble.
The National Bank has been spending between $1.5 million and $3 million per day to prop up the somoni, Asia-Plus quoted its first deputy chairman Jamshed Yusufiyon as saying last month.
The National Bank also introduced tighter regulations for hard-currency purchases on April 17, ordering banks to collect identification details of people buying greenbacks.
Joanna Lillis is a journalist based in Almaty and author of Dark Shadows: Inside the Secret World of Kazakhstan.
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