Tajiks Assess Damage From Ruble Decline

The plummeting value of the Russian ruble has had a serious effect on Tajikistan’s economy, although one local economist says the damage could be less than feared.

Ruble depreciation has played out in several ways, nudging the Tajik somoni into decline, although not nearly as dramatically.

The most direct result is that the money that hundreds of thousands of labour migrants send home has lost value because of the exchange rate. This year, job cuts in Russia’s contracting labour market are also likely to reduce the numbers who can afford to send money back. These money transfers are a lifeline for Tajik households, and are estimated to be equivalent to half of total gross domestic product.

“Of course there will be an impact, as the money transfers by migrants are one of the main sources of income for the economy. I think these labour migrants are our main income source and our principal export,” Konstantin Bondarenko, director of the Free Market Centre, told IWPR.

Local businesses will suffer as purchasing power declines in these households, and hence government tax revenues will fall, according to economist Firuz Saidov.

Bondarenko explained how the reduced influx of money could indirectly lead to a rise in retail prices.

“Even if there isn’t a major recession in Russia, or total economic collapse, the earnings of our migrants are ruble-denominated and no one is going to double or treble them because the ruble has lost value,” he said. “So if someone is earning 30,000 rubles a month, they will continue to get that amount and send it back to Tajikistan. But even assuming the overall volume of money transferred does not fall, it will lose in value. That’s because we mainly spend money on imports; we bring in large amounts of goods which we buy using foreign currency, and mostly not in in rubles. Imports will therefore become more expensive, prices will rise, and so on.  

The government has set up a cross-departmental working group to steer monetary and economic policy, and to ensure that benefits are paid on time to cushion the loss of foreign transfers.

Bondarenko does not believe Tajikistan will automatically suffer as deep a recession as Russia.

“Although the impact will be direct, it won’t replicate 100 per cent the effects felt in Russia. We can already see that the Russian ruble has lost more than half its value over the last year, whereas the somoni has also depreciated but by eight to ten per cent since the start of the year [2014],” he said. “One cannot say the situation will deteriorate in Tajikistan to the same extent as it does over there. But I think it will be obvious that things are getting worse, especially this spring…. Economic growth rates will fall back significantly… although growth will continue.”  

Jamila Sujud is IWPR’s radio editor in Tajikistan.

This audio programme went out in Russian and Tajik on national radio stations in Tajikistan. It was produced under two IWPR projects: Empowering Media and Civil Society Activists to Support Democratic Reforms in Tajikistan, funded by the European Union, and Strengthening Capacities, Bridging Divides in Central Asia, funded by the Foreign Ministry of Norway. The contents of this article are the sole responsibility of IWPR and can in no way be taken to reflect the views of either the European Union or the Norwegian foreign ministry.