Tajikistan’s Finance Ministry has conceded that the national currency will continue to lose value, although it only expects it to happen gradually, over the coming three years.
Reuters reported on July 14 that Finance Ministry forecasts, drawn up as part of budget planning, see the somoni slipping from its current 7.9 to the dollar to 9.6 in 2017, 10.4 in 2018 and 11.2 in 2019. Inflation for those years is seen at 7 percent.
“This is just a forecast. There will be no devaluation. The rate depends on many factor, mainly external ones, and indicators of the gold and currency reserves,” a National Bank source told Reuters.
External factors indeed.
Russia’s Central Bank announced in March 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.
Still the National Bank appears bullish about the prospects.
“We believe that there will not be so much external pressure as in 2014, since we see a certain degree of progress in the Russian economy, despite the negative prognosis,” the National Bank source told Reuters.
Tajikistan’s arsenal for stabilizing the currency is severely depleted. Foreign reserves are dwindling at dangerously low levels. And the banking system is teetering on the verge of a total meltdown.
Accountholders at the main two banks — Tojiksodirotbank and Agroinvestbank — have for months had trouble getting their hands on their savings or withdrawing salaries paid through the lenders. And there is anecdotal evidence the rot is now spreading to more of the country’s half a dozen or so systemic banks. Customers at Eskhata Bank and Imon International have reported some instances of reduced liquidity.
Evidence is mounting that the economic situation is getting grimmer in Turkmenistan, although the government is giving nothing away.
Chronicles of Turkmenistan, a foreign-based news website, reported on a meeting of local businessmen in which attendants were asked to gather money to support the government.
These events took place last month, but details are emerging only now.
The CoT account begins on June 8, when President Gurbanguly Berdmukhamedov met with representatives of the country’s business community. Two days later, the Union of Industrialists and Entrepreneurs summoned a meeting of the same businessmen to make their unusual request. The list of attendees was drawn up by union chairman Alexander Dadayev, who issued the appeal, CoT reported.
“Our deeply esteemed president, speaking before you all, spoke about the global economic crisis, which has led to a sharp drop in prices for energy resources,” Dadayev is quoted as having said by CoT’s unnamed source. “In this difficult time, we members of the national business community should help our country and our dear president.”
Getting down to brass tacks, Dadayev suggested every person present in the room pony up $100,000.
Asked whether the money would be returned, either directly or through future tax breaks, Dadayev apparently said no guarantees could be given. Threats were more forthcoming, however.
“Those that do not pay the sum will have their oxygen cut off. You know that the [Union of Industrialists and Entrepreneurs] has the means to do this,” he reportedly said.
As for regular members of the public, they are now having more trouble getting their hands on money sent to them from abroad.
Kyrgyzstan’s state debt has almost hit the $4 billion mark, sailing upward past a government-imposed debt ceiling.
That figure, which is dated to the start of June, is a big leap from the figure reported at the end of March, when debt stood at $3.7 billion.
The Finance Ministry’s press service said on July 1 that $3.7 billion is owed to foreign creditors, mainly to the state-run Exim Bank of China, which is owed $1.4 billion. Another $642 million is owed to the International Development Association, a branch of the World Bank that is focused on development in poor countries.
The scale of the debt is not in itself necessarily catastrophic, although it does surpass the 60 percent debt-to-gross domestic product ratio ceiling mandated by parliament in 2014. Deputies have proposed legislation to raise that ceiling as a way to authorise raising additional outside funds for major projects.
The size of debt at the end of March put the country’s liabilities at 60.3 percent of its 2015 GDP in dollar terms, although that figure is lower when the calculations are done in the local currency, the som, as local economists like to point out.
Also, almost all the foreign debt is too all intents and purposes interest-free. Most of the debt is repayable decades from now and is accumulating interest between 0.75 percent and 2 percent.
Accruing debt seems to have become an established strategy for development in recent years. The policy is line with the government’s “National Sustainable Development Strategy for the Kyrgyz Republic 2013-2017,” which envisions sweeping reforms and investment in industry, agriculture, communications and transportation.
Tajikistan’s banking regulators are forcing retailers and restaurants to accept payment by bank card against the threat of fines of up to $1,000 in the latest wheeze to compensate for the lack of cash in circulation.
A National Bank decree that came into effect on July 1 reminds businesses that under a law adopted in December 2014, shops covering an area larger than 40 square meters need to have card processing terminals installed.
Entities liable to be fined have until next January to come into line with the rules.
The truth is though that outside the capital, shoppers are unlikely to get any satisfaction with their cards.
“Unfortunately, the infrastructure for card payment mainly exists in Dushanbe — the situation in other regions requires attention,” the National Bank had to admit ruefully.
While it might be desirable for business out in the regions to transition toward cashless transactions, if not just to help develop the country’s weak banking sector, there is clearly an ulterior motive at play. Developments in recent days, which have seen banks suffer fresh liquidity problems, suggest this is in fact a desperate, last-ditch measure to wean people off reliance on hard cash. Both the countries largest banks — Tojiksodirotbank and Agroinvestbank — are both experiencing trouble getting hold of enough money to hand out to desperate clients.
The summit of leaders from Eurasian Economic Union member states in Astana this week brought much grumbling with it, but there are some incremental signs of progress.
Kyrgyzstan’s President Almazbek Atambayev set the tone on May 31 by pointing out problems on the border with Kazakhstan.
“Despite the positive aspects of integration, including the elimination of customs controls on the Kyrgyz-Kazakh border, the improvement of conditions for [Kyrgyz labor] migrants in Russia and other [EEU] states, I would like to note a number of problems. These are the matters of the harmonization of railway [transit] tariffs, the ban on the export of Kyrgyz potatoes to Kazakhstan, [phytosanitary-veterinary] controls on the Kyrgyz-Kazakh border, the transit of goods in Russia and a number of other things,” Atambayev said in remarks cited by Sputnik news agency.
There is a lot to unpack there, and even the good news Atambayev offered needs to be qualified.
Although custom controls were indeed lifted at the Kyrgyz-Kazakhstan border, it was only for them to be replaced with more stringent inspection regimes aimed at quashing the activities of unregistered traders exploiting differences in prices for various goods in the respective countries. Lengthy waits are still the norm for motorists and it will be a long time before the EEU becomes the kind of border-free space one sees in western Europe.
Villages in the Pamir mountains of Tajikistan and Afghanistan have been joined by an electricity transmission line that will bring power to 3,000 Afghans for the first time in their history.
A ceremony to commemorate the event was observed by representatives from the US Embassy and the Aga Khan Foundation, who jointly funded the project, and Tajik and Afghan government officials, a US Embassy said in a statement issued on May 31.
The tortuous road that snakes along the Panj River, which marks the boundary between Tajikistan’s Pamir region and Afghanistan, presents a scene of stark contrasts. Villages on the Tajik side receive steady supplies of electricity from Pamir Energy, an energy company founded in 2002 as a public-private partnership between the government of Tajikistan, the Aga Khan Fund for Economic Development and the International Finance Cooperation. When night falls, Afghan villages are largely plunged into darkness, while countless electric lights almost a literal stone’s throw away twinkle in the Tajik villages.
The US Embassy statement said that joining the Afghan villages to the electricity grid in Tajikistan’s Gorno-Badakhshan Autonomous Oblast
was completed with $1 million grant from USAID and a complementary $464,000 contribution from the Aga Khan Foundation.
“In addition to the newly connected villages, the project helped Pamir Energy upgrade its existing systems and infrastructure, laying the groundwork for further expansion and service improvement to customers on both sides of the Tajik-Afghan border,” the statement said.
Similar stories of cross-border cooperation are all too rare, but this precedent is a heartening change from the stories of violence and drug-trafficking more typically associated with the Afghan border.
The value of Uzbekistan’s national currency spiked sharply over the weekend in a development that some have linked to the unfolding corruption scandal involving GM Uzbekistan.
Traders on the black market in the capital, Tashkent, were buying dollars for around 5,500 sum on May 15, up from around 6,400 sum in the days before. They were selling dollars for around 6,000 sum. Rates in the capital typically set the pattern for the rest of the country.
The sudden change in fortunes of the sum has come as something of a shock to small and medium-scale businesses.
Umid, a market trader who rents a small stall from which he sells ice-cream, drinks and fast food snacks, said that he pays $400 in rent every month.
“For me it’s good when the exchange rate is low, since I have to spend much less on buying dollars. The question I have is: How long is this going to last?” Umid told EurasiaNet.org.
Firuze sells clothes imported from Turkey at her stall at the Ippodrom wares market. With the dollar rate dropping, Firuze said she had decided to close up shop for a while.
“The drop in the exchange rate is profitable to those that earn their money in sum, but those who make their money in dollars don’t see any benefit,” she said.
The speculation in Tashkent markets is that the sudden change in the fortunes of the national currency is somehow related to an ongoing corruption scandal involving senior management at carmaker GM Uzbekistan — a joint venture between Uzbekistan’s UzAvtosanoat (75 percent) and US giant General Motors (25 percent).
Prior to the scandal, GM sold some of its cars in dollars, which drove up local demand for the US currency. Now, however, payment is made in sum, which has led naturally to a fall in the desirability of the dollar.
It has been an open secret for months that Tajikistan’s No. 2 bank is completely broke, but the lender has finally come out into the open with a plea for international assistance.
bne Intellinews reported on May 11 that Tojiksodirotbank this week discussed a possible cash injection with officials from the European Bank for Reconstruction and Development in exchange for a 50 percent equity stake.
Tojiksodirotbank chairman Pirzoda Tojidin told the financial news website that he had already met with EBRD top brass and agreed on an assistance program.
"We have another meeting with them [on May 12], but it remains to be seen if we can meet the EBRD's conditions,” Tojidin told bne Intellinews.
This marks the first time Tojiksodirotbank has admitted to its severe liquidity problems, which has been no mystery to anybody unlucky enough to have their savings in the bank.
The lender tried in vain to downplay insistent media reports about its difficulties in March, when it issued a statement attributing interruptions in its services to a switchover in its money-processing system.
“Short-term disruptions in the functioning of bank cards are possible. We apologize for the inconvenience,” the statement said.
Countless deposit-holders at Tojiksodirotbank remain unable to get their cash to this day, however.
Negotiations with EBRD to facilitate some kind of rescue package have been in the works for some months.
The shortage of cash and salary delays in Uzbekistan have now started reaching the capital, Tashkent.
With April over, many working for state companies in the city are complaining they have yet to see payments for even February and March.
A teacher at a Russian school in Tashkent, Alina, told EurasiaNet.org that she last received a wage packet at the end of February.
“We complained to the headmaster, but he just said that there was no money in the bank, so we just have to wait. We don’t earn that much money — around 700,000-900,000 sum ($120-150) — and still they have the gall to delay payment,” said Alina, whose surname has been withheld. “A lecturer at the teacher training college said that they started getting their pay on their bank cards in January, but that they have seen nothing for two months. Earlier, this only used to happen out in the provinces.”
An employee with InfinBank in Tashkent told EurasiaNet.org that all available ready cash is going toward completion of roads and other infrastructure in preparation of a major summit expected later this year.
The hard cash problem is nothing new for Uzbekistan. The scale of the problem became apparent when a leaked letter written last April by the deputy head of the Central Bank and addressed to Prime Minister Shavkat Mirziyoyev revealed there were insufficient funds to cover state salaries, pensions and benefit payments.
A press conference in Almaty on the proposed plans to rent land to foreign investors had to be cancelled April 29 after police detained the organizers.
The heavy-handed effort to prevent a public discussion is highlighting the nervous state of a government that is flailing in its attempts to quell a wave of protests over the land issue.
Mukhtar Taizhan and Rysbek Sarsenbaiuly, who were set to speak at Almaty’s National Press Club, were forcibly denied from getting to the building by police. Rights activists filming the detention, like Galym Ageleuov, were themselves also hauled away by police.
Some time later, Sarsenbaiuly’s wife, Marzhan Aspandiyarova, did manage to reach the National Press Club to explain to reporters what had happened to her husband, but the scene degenerated into chaos as she spoke. As journalists gathered around her to listen, several policemen barged in to physically drag her away into a waiting car.
“If you want to prosecute, go ahead. The land will not be sold,” Aspandiyarova yelled as she was being manhandled.
The protests that have sprung up in several locations in Kazakhstan revolve around government plans to sell off unused farming land, which many Kazakhstanis fear could be bought up by foreign buyers — the Chinese are the main suspects.
Authorities have tried to reassure the public, specifying that the land being made available can be sold only to citizens of Kazakhstan, while foreigners must do with renting for periods of up to 25 years.
Those reassurances have had little effect. Some argue that once the 25 year period is up, foreigners may choose to squat on the land, while others suspect unauthorized sales will be approved on the sly.