Tajikistan: Financial Scandal Brings Fresh Disgrace to Dushanbe

In news that heaps ignominy upon misfortune, an audit by a prominent international accounting firm showed that the former head of Tajikistan's Central Bank, and a sitting vice premier, improperly diverted hundreds of millions of dollars from the impoverished Central Asian nation's coffers. The scandal is coming to light at a time when average Tajik citizens are facing growing hardships arising out of the global financial downturn.

The accounting firm Ernst & Young released findings April 13 that showed former Central Bank chairman Murodali Alimardon diverted over $850 million to a company named Center-Invest, which is controlled by his family, the Tajik news agency Asia-Plus reported. Instead of spending the money on agriculture-related projects as it was supposed to, the company spent lavishly on other ventures, including $800,000 on a restaurant in the city of Istaravshan. As of August 31, 2008, Credit-Invest owed over $295 million to the Central Bank, according to the Asia-Plus report.

In addition, the Ernst & Young audit found that $221.5 million in state funds that were allocated from 2004-2007 for projects to develop the country's beleaguered cotton industry have disappeared. [For background see the Eurasia Insight archive].

Alimardon served as the head of the Central Bank from 1996-2008. For the past year he has held the post of first vice premier responsible for agriculture.

The amount of funds involved in the scandal -- at least $1.07 billion -- approaches the total annual revenue for the government in 2008, according to CIA estimates. The scope of the scandal seriously damages the government's credibility at a time when it appears to be having trouble containing the damage done to the domestic economy by the global economic crisis. [For background see the Eurasia Insight archive].

For Rahmon's administration, the scandal could fuel opposition to its stewardship of the economy. Several weeks ago, a small group of Tajik MPs quietly began rebelling against the government over its handling of the economic crisis. A few MPs have castigated government ministers for continuing to spend on unnecessary projects and items, rather than developing austerity measures that could help the country cope with the burgeoning crisis.

"We should have frozen the construction of state palaces, purchase of cars, capital repair of state institutions -- except for the construction of the Rogun hydroelectric power station -- as early as in January [2009], and channel all freed funds into the elimination of consequences of the global financial crisis," independent MP Yusufjon Akhmedov said during a legislative hearing in mid-March.

Even before the Alimardon scandal became public, Akhmedov's ideas appeared to be gaining traction, suggested Abdugani Mamadazimov, the head of the National Association of Political Scientists of Tajikistan. "I think his statement will be the motivation and push to [start] anti-crisis measures in Tajikistan," he told EurasiaNet.

Many experts are worried that Tajikistan has yet to face the worst from the financial crisis. Tajikistan may well be entering the toughest phase right now, as many would-be labor migrants depart for Russia, Kazakhstan and other countries in search of work. A large number of migrants are expected to be unable to find jobs abroad, causing the amount of remittances sent home to plummet.

At a March roundtable organized by the International Organization for Migration, Deputy Finance Minister Jamshed Norinov admitted that the "reduction of demand for Tajikistan's main export commodities -- aluminum and cotton -- and the mass return of labor migrants, could provoke a growth of unemployment and a crime wave."

The Ministry of Finance is forecasting a decline of GDP in 2009, along with an abrupt decrease in direct foreign investments. Thus, the national budget could come under severe stress. The limited funding for all social sectors, including health care, education and welfare puts national economic reforms in peril. In addition, Tajikistan is facing serious ongoing energy and food shortages, UN officials have warned.

In his Novruz address on March 21, President Rahmon called for the introduction of measures to conserve food resources. "[E]nsuring food security . . . is acquiring a particular essence," Rahmon said. "We should use every piece of land effectively and develop a method of yielding two harvests from arable land as much as possible."

MP Akhmedov suggested that the country's looming food insecurity is linked to Tajikistan's disastrous business climate, which the World Bank recently criticized in its latest Doing Business 2009 country profile.

"We are importing more goods than exporting, and in the current conditions this may lead our country to collapse," he warned. "We are importing garlic from China, potatoes from Pakistan, and onions from Russia. Finally, the government should realize that the amount of dollars coming from the sale of aluminum and cotton, as well as amount of dollars being sent by labor migrants will substantially go down very soon."