Small business owners and consumers are being hit hard by the rapid and seemingly uncontrollable fall of the Tajik currency against the US dollar. While some experts say the National Bank appears to have no control over the plunge of the Tajik somoni, others suggest that some large businesses are taking advantage of bank moves to turn a quick profit.
In May alone, the somoni fell by 12 percent against the American dollar. Since the beginning of the year, the somoni has lost almost 27 percent of its value against the US currency. Sharif Rahimzoda, Chairman of the National Bank of Tajikistan, said back in April that the bank had to allow a depreciation of the somoni to adjust to the falling currencies of Tajikistan's main trading partners, Russia and Kazakhstan. Both countries have experienced devaluation by 25 to 30 percent since last autumn. On May 26, Rahimzoda said the somoni had appeared to bottom out at 4.6 somoni to the dollar after a month of "intensive" devaluation.
Analysts agree the somoni was ready for a fall. But the manner in which it dropped raised eyebrows among some observers. Large enterprises, especially those that are export-oriented, were able to benefit from the National Bank maneuvering. While Tajik exporters still exchange their goods for hard currencies, they disburse payroll and other taxes in revalued somoni, thereby undercutting employee salaries and tax obligations, while increasing profits by almost 30 percent, local economists assert.
Given Tajikistan's negative balance of trade, economist Alisher Ruziev and others doubt the National Bank will be able to continue to control the fall of the somoni. So far this year, the country's imports are three times higher than its exports, according to the State Committee on Statistics. Further pressuring the currency, according to National Bank data, the volume of remittances received from migrant workers in Russia dropped by 30 percent during the first four months of this year. Previously, remittances kept the somoni stable by providing a constant flow of foreign currency into the country.
"For our people, the dollar rate is like an alarm. As the rate goes up, the population becomes concerned that something is wrong with the economy," Ruziev said.
The panic was reflected on the streets of Dushanbe on May 29 when most exchange offices suspended operations. That day, one dollar was briefly worth 4.80 somoni before falling back to 4.40 somoni.
On condition of anonymity, an economist from Tojiksodirotbank, one of the largest commercial banks in the country, said that a rate of 4.40 somoni to the dollar cannot be maintained and banks are expecting another rapid increase in the dollar's value in the first 10 days of June.
"With the weak bank system, in Tajikistan it is very easy to implement [change] just by passing an unofficial order to the head of the banks. People were in panic of not being able to obtain dollars. As the rate was going up, exchange offices on the streets preferred to buy US dollars and wait to sell until the rate went higher," said the bank employee. But suggesting an omnipotent hand, he added, "At the end of May, the National Bank put millions of dollars on the market to stop the panic."
The street currency traders say they feel like pawns in a larger financial game. "We cannot predict the situation even for tomorrow," said Davron, owner of an exchange office in Dushanbe. But, he suggested, the bank's invisible influence is never far away. "We receive unofficial orders from officials to stop the dollar or somoni trade, and we have to obey in order to be able to work."
Tajikistan will face "at least two more rapid drops in the value of the somoni over the next few months," predicted Yusuf Zainidinov, an economist at the Institute of Economic Research in Dushanbe.
Businesses and banks lost money when the rate was higher. Now they are eager to recoup, he suggested. "First of all, it depends on the low migrant remittance flow into the country. Second, [further devaluation] is in the interest of those people and agencies that bought dollars at the rate of 4.75-4.80 somoni. These are mostly people involved in big business, people that have information and important people that can influence the currency change in the country," said Zainidinov.
Consumers are likely to be hurt most of all, analysts say. In addition, small businesses that purchase their goods in somoni are likely to suffer, believes Shomahmad Sainakov, an economist with the Tajik Institute of Commerce and Trade in Dushanbe. "For Tajikistan's small and medium businesses . . . the increase in the US dollar rate is not profitable. It increases the fixed costs of imported goods," Sainakov told EurasiaNet.
At least one entrepreneur agreed with this assessment. Khorogh-based Nigina Mazabshoeva, who runs a household supplies shop in Tajikistan's remote Gorno-Badakhshan region, told EurasiaNet that most of her colleagues are facing big losses. The rapid fall of the somoni has driven away her customer base. Many entrepreneurs are now unable to repay their loans. "Most of the small businesses in this isolated region have stopped functioning. If the situation continues like this, small business will go totally bankrupt. In order to keep the clients and work going, we sell our goods at cost now and are losing a lot of money," she said.