Tajikistan: Mounting Debt Opens Up Country to Geopolitical Struggle for Control

Tajikistan's acute debt woes likely mean that the beleaguered Central Asian state will become the scene of increasing geopolitical competition.

Tajikistan's external debt has been steadily climbing in recent years. But with the country being battered in recent months by the harshest winter in generations, President Imomali Rahmon's administration appears to have lost all semblance of financial independence. [For background see the Eurasia Insight archive].

On February 6, the Tajik Central Bank issued an S.O.S, appealing to the world community for an emergency bailout. "Over the next few days, the government will submit a list of basic emergency items to international organization and donor countries, as well as a plan for their use and allocation," said a bank statement, distributed via the Avesta news agency. "The crisis has had a negative impact on the food supply situation, and has put industrial [enterprises] in a very difficult spot."

Top government officials met on February 5 with representatives of international lenders, including the International Monetary Fund, the World Bank and the European Bank for Reconstruction and Development, to start sketching a crisis plan.

In the meantime, Tajikistan's already serious plight only grows worse. On February 6, Uzbekistan suspended electricity supplies to its neighbor. It was not the first suspension imposed by Tashkent this winter, but, as opposed to earlier interruptions, which were prompted mainly by Uzbek anger over Tajikistan's mounting debt, this latest stoppage was "caused by [Tashkent's] own difficulties, including a fuel shortage needed for electricity production in Uzbekistan," Russia's Itar-Tass news agency reported. The Uzbek stoppage was partially offset by the doubling of the electricity amount exported to Tajikistan by Turkmenistan, according to the Asia-Plus news agency.

Even so, most areas of Tajikistan have no more than a few hours of electricity per day, if any. According to a February 1 Asia-Plus report, all industrial enterprises in the northern Sughd Region have been brought to a complete stop due to the electricity shortage.

The winter weather has wrought havoc with Tajikistan's finances. According to preliminary Central Bank data, the crisis has piled an additional $246 million on top of what is already a mountain of debt.

In late January, the government disclosed that the national debt stood at a whopping $1.2 billion, a figure that is almost one-third of the country's GDP. The rate at which Tajik debt is accumulating is approaching warp speed. In 2007, the country's total debt amount climbed 29.3 percent over the previous year's figure, according to Timurali Avtonov, head of the Finance Ministry's main department for government debt and financial assets.

Most alarming for the country's creditors, the government's 2008 budget allocates a mere $44.2 million for debt repayment. Tajikistan's two biggest creditors are China and Uzbekistan, which are owed $217 million and $63.6 million respectively.

The evident credit crunch makes a mockery of comments that President Rahmon made just a few days before the release of the debt figure. In his nationally televised speech January 28, Rahmon, while acknowledging the country's low industrial output, asserted that the country "scored a number of economic achievements" in 2007, heralding what he termed "the beginning of a qualitatively new stage of economic and social development." He claimed that the government's "annual plan of gross income and taxes was over-fulfilled by 12 percent," and he predicted that "real GDP growth of no less than 7 percent should be ensured and an inflation rate of 8 percent should be maintained in 2008."

Tajikistan has a per capita GDP of about $1,600, according to CIA estimates, and almost two-thirds of the population lives below the poverty line. It is the most socially vulnerable that stand to pay the most severe toll as a result of the government's malfeasance.

Over the past few years, Rahmon, thanks to elections deemed unfree by international monitors, managed to establish nearly unassailable dominance over Tajikistan's domestic political process. [For background see the Eurasia Insight archive]. But the disarray in the country's financial affairs make it virtually certain that Rahmon were be forced into a state of peonage, beholden to one of the regional powers vying for geopolitical supremacy in Central Asia.

The question is what state -- Russia, China or the United States -- will Rahmon turn to? Russia -- as the traditional overlord of the region, as well as a country with large investments in strategic economic concerns in Tajikistan -- would seem to have the inside track. China, which has the largest current debt-holder, would also appear to have some leverage.

Tajik relations with Russia have soured since late last summer, when Dushanbe summarily cancelled a contract with the Russian conglomerate Rusal to finish construction on the Rogun dam. [For background see the Eurasia Insight archive]. Also, Rahmon's administration continues to bristle over the Kremlin's high-handed effort to block India from formally opening an air base on Tajik territory. [For background see the Eurasia Insight archive].

Thus, prevailing conditions could open a window for the United States to revive an ambitious plan to link Central Asia's power grid to South Asia. Under the American-backed blueprint, first aired in the spring of 2006 by the State Department, infrastructure investment in Tajikistan would unlock the country's vast potential to generate hydro-power. [For background see the Eurasia Insight archive].
Tajikistan's surpluses would then be exported to South Asian nations, especially India and Pakistan. The possible reorientation of Central Asia's power grid would deal a substantial blow to Russia's geopolitical influence in the region.