Tajikistan’s central bankers have issued another round of reassurances that they are not running out of cash, but they are again lobbying International Monetary Fund for a bailout just to be on the safe side.
Asia-Plus website on July 25 cited National Bank chairman Jamshed Nurmahmadzoda as saying that the amount of cash in circulation at the moment stands at around 6.6 billion somoni ($838 million), which he said was 36 percent more than at the same period in 2015.
Apparently pointing to the success of policies such as the widespread closure of small money exchange offices and the introduction of stiff criminal penalties for unauthorized money exchange operations, Nurmahmadzoda said it had now become the norm to conduct transactions in the local currency.
"Of course, this has created a great demand for the national currency and so we have accordingly increased its volumes in circulation to meet demand,” he said.
While it is hard to disprove any claims Nurmahmadzoda might care to make, it only takes a visit to one of Tajikistan’s several distressed banks to know that liquidity is far from healthy. At least three banks are teetering on the verge of bankruptcy. Some lenders have imposed withdrawal limits of 2,500 somoni ($315). And customers at the country’s largest bank, Tojiksodirotbank, are as much as it is possible choosing to move their accounts to other banks.
Nurmahmadzoda dismissed such worries, saying that Tojiksodirotbank is just suffering from management issues and that the country’s second biggest bank, Agroinvestbank, is doing perfectly fine. Even the normally circumspect IMF put lie to such brazen deception months ago.
A puppet polling organization in Uzbekistan has revealed that 98.9 percent of the population are positively disposed toward the introduction of bank cards.
The figure defies belief considering the intensely cash-based nature of the national economy.
Local media cited slavishly government-loyal polling company Izhtimoy Fikr as stating that cards are increasingly giving way to cash in retail transactions.
“Cards are very convenient, safe and reliable means of payment,” website Nuz.uz quotes 98.9 percent of people as thinking, according to the Izhtimoy Fikr research.
Banks cards were made available to local customers in Uzbekistan in 2004 as a means of reducing the public’s reliance on cash. The payment system was first introduced in the retail and catering sectors, since these are areas of the economy where the grey economy is strongest. Authorities made it mandatory for retail outlets to install payment terminals, which were imported in large quantities from abroad.
Outlets refusing to accept payment by card were subject to substantial fines, which could be as high as the equivalent of 200 times the minimum wage. Advertisements on television and radio stations publicized telephone numbers that members of the public could call to complain about retailers’ failure to accept card payments.
The drive has been largely successful in the capital, Tashkent. But paying by card is hardly convenient, as the Izhtimoy Fikr poll claims.
Tajikistan’s National Bank is once again pleading for an international bailout as the country’s lending sector remains mired in an existential crisis.
At a meeting with a visiting European Bank for Reconstruction and Development delegation, National Bank deputy chairman Jamoliddin Nuraliyev appealed for assistance to the country’s systemically important banks.
“It is necessary to carry out remedial work in some of the lending institutions,” Nuraliyev said, according to a National Bank statement. “I urge the executive directors of the EBRD during their coming board meetings to support proposals from the National Bank.”
Nuraliyev did not specify what those proposals were, but given that Tajikistan suffers from chronic liquidity problems, it is not hard to guess: Tajikistan desperately needs for its banks to be recapitalized.
The National Bank has already obtained assurances that the EBRD is to take a controlling stake in Tojiksodirotbank, the country’s second largest bank. The situation at that bank is grim. People who draw their salaries at the bank have had no joy for the best part of half a year and ATMs only began issuing money in June, after a hiatus lasting several months.
For what it’s worth though, Tojiksodirotbank chairman Tojidin Pirzoda has shrugged off talk of insolvency.
“Rumors about Tojiksodirotbank being on the verge of bankruptcy have been spread by certain people and certain interested parties,” he told state news agency Khovar back in January, without providing names or details.
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.
Hot on the heels of a corruption scandal in Uzbekistan’s financial sector comes news that a commercial bank that has foreign shareholders has been barred from conducting hard currency operations.
The development is the latest sign of troubles hitting Uzbekistan’s banking industry, as Central Asia reels from an economic crisis that is slowing growth and pressuring currencies across the region.
Uzbekistan’s central bank has imposed a six-month ban on Hamkorbank conducting foreign currency operations with businesses on the grounds that it has been breaking currency laws, the Anhor.uz news website reports.
No further specifics were offered for the ban, which is unusual and will present a significant barrier to a bank with foreign capital conducting commercial operations.
The International Finance Corporation (a financing arm of the World Bank) and the Netherlands Development Finance Company (a development bank controlled by the Dutch government) between them own 30 percent of shares in Hamkorbank, according to documents filed with Uzbekistan’s stock exchange.
A top banker has been arrested in Uzbekistan on suspicion of making a fortune out of Uzbekistan’s black currency market and laundering the proceeds.
The arrest comes as the rate of the currency, the sum, soars against the dollar on the black market, creating even larger than usual profit margins for those in control of the illegal trade.
Asaka Bank chairman Kahramon Oripov is in detention on suspicion of “currency crimes and legalization of criminal revenues,” an unnamed spokesperson for the General Prosecutor’s Office told Russia’s RIA Novosti news agency on February 12.
The confirmation of Oripov’s arrest, which had been rumored, came days after he was dismissed by the government as chairman of the state-owned Asaka Bank, which handles payments for the automobile industry in Uzbekistan.
Oripov is suspected of exploiting the bank’s position as the financial institution responsible for taking payments for car purchases to carry out his scheme, the Tashkent-based Uzmetronom.com website reported earlier this month.
This was allegedly made possible by the unorthodox system through which payments are made to purchase cars in Uzbekistan, whereby only dollars, rather than sum, are accepted to buy some models of vehicles assembled in-country by the GM Uzbekistan, a US-Uzbekistani joint venture which accounts for the bulk of the country’s car sales.
The money to buy a car must be deposited in dollars at an account in Asaka Bank, which is supposed to transfer it in hard currency to Uzavtosanoat, the state company that holds Tashkent’s share in GM Uzbekistan.
Kazakhstan’s President Nursultan Nazarbayev has dismissed the head of the central bank as the national currency continues to lose value against the dollar.
Nazarbayev dismissed Kayrat Kelimbetov, who has presided over two major currency devaluations during his two years as chairman of the National Bank, on November 2 and replaced him with Daniyar Akishev, a presidential adviser and a former deputy chairman of the central bank.
“Confidence in the [central] bank and in the national currency, the tenge, has been reduced, and this cannot be permitted,” Nazarbayev told parliament in remarks quoted by his office. “A shortage of tenge liquidity is being felt in the country, and the volume of credit to the economy has been reduced.”
The move did not appear to do anything to restore the confidence of the market in the tenge, however. The currency fell below 280 to the dollar in trading on the Kazakhstan Stock Exchange on November 2 for the first time since mid-September, to close at 281.13.
The tenge has lost around 50 percent of its value since the National Bank abandoned its policy of maintaining the tenge in a managed corridor — a strategy Kelimbetov inherited from his predecessor, Georgiy Marchenko.
After months of pressure on Kazakhstan’s currency, the central bank has moved to allow the tenge to slide – but avoided the large snap devaluation that doomsayers have long been predicting.
On July 15, the National Bank eased the corridor within which the tenge trades to allow it to drop by 5%, to 198 to the U.S. dollar.
Chief central banker Kayrat Kelimbetov explained, in remarks quoted by Tengri News, that the measure was adopted as the tenge was pushing the upper margin of the corridor of 170-188 tenge to the dollar that the bank had previously committed to enforcing.
There were no immediate signs of panic over the mini-devaluation in Kazakhstan, where the National Bank maintained its exchange rate at 186.8 tenge to the dollar and the currency closed at 187.05 on the Kazakhstan Stock Exchange on July 15. In exchange offices, the tenge was trading at around 187.5 to the dollar after the central bank’s announcement.
Financial analysts predict the slide will be gradual.
“The scenario of a sharp devaluation is not being considered, and in principle that’s correct,” economist Olzhas Khudaybergenov, a former adviser to Kelimbetov, wrote on his Facebook page.
Khudaybergenov predicted a slow depreciation of 0.5-1 tenge per month, with the currency reaching the upper limit of the new corridor (198 tenge) in about a year.
The calm with which the news was received contrasted with the last devaluation in 2014, when the tenge lost nearly 20% of its value in a single day, sparking public anger that escalated into small-scale unrest in Almaty.
Reports that Russia is uncomfortable with the Shanghai Cooperation Organization (SCO) stepping into banking are nothing new. In particular, Moscow’s quiet efforts to block the creation of an SCO development bank that would funnel largely Chinese credit into Russia’s backyard have featured at the organization’s meetings in recent years.
But a thought-provoking analysis by Alexander Gabuev of the Carnegie Moscow Center, published last week by Russia in Global Affairs, suggests the Kremlin is mistaken, placing fears about appearing to be a junior partner over a sound geopolitical strategy that could give it a measure of control over China’s Central Asia policy.
The SCO – which groups China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan – has tried hard to convince the world it is more than just a club for dictators. China’s push to include economic initiatives on the SCO agenda was a part of this process, Gabuev notes, and a development bank has been on the table at SCO powwows since 2009.
In the corner of a small pizzeria in central Bishkek, an experiment is unfolding. Central Asia’s first and only bitcoin ATM converts dollars into the world’s most popular cryptocurrency. The machine – which looks like one of the city’s ubiquitous electronic pay terminals – offers a way to convert hard currency into a digital medium that is increasingly used in online transactions.
That could impact how Kyrgyzstan’s estimated one million migrant workers transfer their earnings home, says the machine’s owner, Emanuele Costa, an Italian financial analyst. The World Bank estimates that last year migrant remittances totaled the equivalent of 31 percent of Kyrgyzstan’s GDP. Most of that money, several billion dollars, was transferred through expensive, fee-based services like Western Union and Zolotaya Korona. Costa, a former analyst with Goldman Sachs, sees bitcoin as a low-cost, secure and confidential alternative.
Bitcoin, invented by a group of anonymous Internet users in 2009, is the first and most prominent digital cryptocurrency to gain wide circulation. Not controlled by national governments or banks, bitcoin offers a peer-to-peer encrypted payment system that can be readily converted into cash or, increasingly, used in exchange for products or services. Fees, when they exist, are agreed upon by users and are usually nominal. Bitcoin’s value fluctuates based on supply and demand; one bitcoin is currently worth about $642.
Though Costa is a staunch believer in bitcoin’s potential, he admits that it faces some hurdles. Foremost is a lack of understanding.