National Currency Slides Against the Dollar

Tajikistan, Uzbekistan and Belarus are the only countries in the Commonwealth of Independent States whose national currencies have fallen against the US dollar in the first half of this year. NBCentralAsia experts say that in the case of Tajikistan, the trend has been caused by the trade deficit and the reluctance of savers to put their money in the bank.



The exchange rate slipped from 3.43 to 3.44 somoni to the dollar in January-June. The Uzbek and Belarusian currencies also lost value, but those of other CIS countries remained stable or strengthed.



NBCentralAsia economic observers say the somoni has continued to fall in value over many years firstly because Tajikistan imports more than it exports – meaning that it is spending more foreign currency than it earns – and secondly, because people prefer to hold their savings in hard cash, in the form of foreign banknotes, rather than depositing them in the banks.



An economic expert who asked to remain anonymous said the exchange rate is in decline because Tajikistan has consistently run a trade deficit over many years. Last year, the deficit stood at more than 300 million dollars.



The resulting shortage of foreign-currency receipts from exports pushes up the market price of the dollar, the expert said.



The answer, he argues, is to offer tax breaks to small and medium sized businesses to allow them to grow and to produce high-quality goods for export to narrow the trade gap.



He believes a strengthened commercial sector would attract some of the money that migrant workers send back to Tajikistan. These remittances are estimated at one billion dollars a year, most of it sent by expatriate workers who are away in Russia. Recipient families on average save half the money their relatives send them for future purchases of expensive items, but they still shy away from the banks and keep the money in cash. The fact that these foreign-currency holdings are not in circulation is another reason for the shortage of dollars.



Suhrob Sharipov, director of the Strategic Studies Centre, agrees that the cash sent home by migrant workers could be tapped to help stabilise the somoni, but he argues that it is more important to develop the domestic stock and currency markets.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)