The annual collapse in migrant laborer remittances from Russia to Tajikistan has proven just as catastrophic as expected.
Russia’s Central Bank announced last week that the amount of money transferred to Tajikistan last year has fallen almost 67 percent, from $3.8 billion in 2014 to $1.28 billion last year. The figure in 2013 was $4.16 billion.
The rout has affected all countries in the region. In Uzbekistan, remittances fell to $2.37 billion last year from $5.58 billion in 2014. In Kyrgyzstan, they dropped from $2.03 billion to $1.08 billion over the same period.
But no country will be a deeply affected as Tajikistan, where remittances account for roughly half of the gross domestic product.
The impact will be felt most strongly by communities where food security is weak and in which cash from relatives abroad constitutes a very literal lifeline. The World Food Program estimates that food security is an issue for around 20 percent of rural households.
“Fifty five percent of rural households depend on remittances as their main source of income, and a record 81 percent of remittances is spent on food expenditures,” the World Food Program noted in a recent report.
There are two obvious underlying causes for the drop in remittances. One being the fall in the value of the Russian ruble, which is hovering around 70 mark against the dollar compared to 30 before the current economic crisis began. The economic slump has also led to a 25 percent drop in the number of Tajiks going to Russia between 2014 and 2015. Around 400,000 Tajiks are currently banned from going to Russian as a result of deportation orders, according to Tajik Labor Ministry figures.
Meanwhile, prices for basic goods are on the rise and Tajikistan’s own currency has been struggling to fend off devaluation.
Efforts have primarily focused on punitive and administrative measures. In December, a shortage of foreign currency prompted the National Bank of Tajikistan to shut down currency exchange offices and limited money-changing solely to banks. Changes to the law have also been made to stiffen the penalty for the illegal trade in currency to a maximum of nine years in jail and confiscation of property.
On February 2, new rules came into effect obliging people in Tajikistan receiving transfers made in rubles to collect the funds exclusively in the domestic currency, the somoni.
President Emomali Rahmon has throughout the current crisis displayed a less than firm understanding of market processes.
In January, he told a government meeting that it was “necessary to abolish thinking about a state [currency exchange] rate and a market rate. There should only be one rate and it should not be set on the street but by the National Bank of Tajikistan.”
Rahmon’s lack of nous appears to apply equally to business, according to the Asian Development Bank.
Chang Ching Yu, ADB country director for Tajikistan, lamented in a blog post on March 18 that despite his institution’s efforts, Tajikistan continues to be a bad place to do business. His bank gave Tajikistan $60 million in 2015 to help promote reforms and bolster protection for the private sector, but to little obvious effect.
“Many legally registered companies are currently facing heavy taxation burdens and irregular tax collection methods that have created opportunities for corruption. On the other hand, a large number of businesses are operating underground, without paying taxes. Firms also face challenges in foreign exchange restrictions, high financing costs, and poor power supply during the winter months,” he said.
Experience shows, however, that no improvement in government administration and regulation should be expected in Tajikistan if implementing such measures stands in any way to undermine vested interests close to the Rahmon regime.
The ADB appeal could just as well have been written on tissue paper and flushed down the toilet for all the good it will do.