The government of Tajikistan adopted an anti-crisis program due to the ongoing events in Russia. However, the experts say it is too late because it takes many years to prepare for such crises.
The conflict between Russia and Ukraine and the sanctions against Russia imposed by the Western powers already affect the Tajik economy. The economists predict that the country will face shortages of flour and oil – two essential food products for Tajik households.
These products are imported mostly from Russia and Ukraine.
According to the Ministry of Economic Development and Trade of Tajikistan, in 2021, the trade turnover between the Republic of Tajikistan and the Russian Federation reached $1.3 billion, or over 21.3% of the total trade turnover. The major lines of Russia’s export to Tajikistan are fuels and lubricants, wood, and food products.
The economy of Tajikistan is also highly dependent on labour migrants’ remittances from Russia. According to unofficial statistics, more than a million citizens of Tajikistan work in Russia. In 2021, they sent $1.795 billion to Tajikistan.
According to the UN, international food prices could rise by 8 to 22% due to the events in Ukraine. Russia and Ukraine are among the most important producers of agricultural commodities in the world. The UN specialists predict that due to the suspension of oil and wheat supplies from these countries, about 40 million people around the world could fall into extreme poverty.
In addition, the war in Ukraine indirectly affects the import of products to Tajikistan from other countries. More than 90% of wheat is purchased from Kazakhstan. In 2021, about 1 million tons of wheat were imported from there. Meanwhile, due to the war between Russia and Ukraine, the government of Kazakhstan decided to limit the volume of grain exports to 1 million tons for two months (until June 1). Thus, the average monthly volume of grain exports will be 500 thousand tons, while in February, it was 600 thousand tons with an upward trend.
Back in April 2020, the Ministry of Agriculture of Kazakhstan set a 200 thousand tons quota for the export of wheat and a 60 thousand tons quota for the export of flour to Tajikistan, Uzbekistan, Kyrgyzstan, and Afghanistan. It is not yet clear what quota will be introduced for Tajikistan this year and whether it will be introduced at all.
In addition, in early March, Russia temporarily banned the export of sugar and grain to the countries of the Eurasian Economic Union (EAEU includes Russia, Belarus, Kyrgyzstan, Kazakhstan, and Armenia) until August 31. Although Tajikistan is not a member of the EAEU, it will also be affected, since some of these products are imported to Tajikistan through the EAEU countries.
How Effective Is Tajikistan’s Anti-Crisis Program?
Amid the war between Russia and Ukraine, the authorities of Tajikistan adopted an anti-crisis program.
In particular, the government established the interdepartmental headquarters to prevent possible risks to the national economy, which developed an action plan in late February–early March. The goals are: to provide the food market with products and essentials, prevent possible risks in the banking system, reduce pressure on the exchange rate, improve the investment climate, etc.
In addition, on March 16, President Emomali Rahmon signed a decree imposing a moratorium on inspections of the entrepreneurs’ activities from April 2022 until January 1, 2023. There is no information about other details of the authorities’ anti-crisis program.
According to the Ministry of Economic Development of Tajikistan, the country has sufficient food reserves. In 2021, the country produced industrial and agricultural commodities worth about 80 billion somoni (approximately $64 million), including 828 thousand tons of flour, 876 thousand tons of wheat, and 415 thousand tons of bread and bakery goods.
According to official statements, domestic resources and capacities can meet the needs of the market for bakery and pasta products at the necessary level.
In addition, at the end of February, the Agency on the State Material Reserves obtained exemption from customs duties, taxes, and excises for 100 thousand tons of wheat, 40 thousand tons of sugar, 20 thousand tons of flour, 5 thousand tons of vegetable oil, 5 thousand tons meat, and other goods.
However, the experts believe this measure will not have a significant impact on the domestic market, since the Agency distributes most of its products among government agencies as additional assistance.
“They have their own points of sale in the markets, but the volume of their products is small; it is mainly distributed within the state system,” economics expert Nur Safarov told CABAR.asia.
At the same time, according to the World Bank and the Asian Development Bank (ADB), economic growth in Tajikistan is projected to slow down to 2% in 2022 due to the economic crisis in Russia.
ADB suggests the country’s authorities to promote private sector growth through measures to improve the investment climate; reduce reliance on external borrowing by developing the domestic capital markets. In addition, the experts recommended to regularly publish the reports of the Ministry of Finance on public debt, including audited annual statements of the 15 largest state-owned enterprises.
An Economist: “Anti-Crisis Measures Are Late”
A Tajik economist Abdumannon Sheraliev believes the Tajik government should have considered creating reserves before the outbreak of the war. According to him, the increase in prices for wheat and vegetable oil is inevitable. The reason for this, according to him, is the continuing rise in international prices for these products and, above all, the rich countries’ demand for them.
“Once again, the common people will carry the burden of the lack of these products,” said Sheraliev in a CABAR.asia interview.
According to him, such measures as increasing domestic production, attracting more investment, and saving the banking sector are constantly listed in government programs but they change nothing.
“Even if the implementation of these measures is taken seriously now, it will do little. It takes years to prevent such crises; it is useless to prepare for them after they happen. One cannot think about river banks protection during a flood,” the Tajik economist concluded.
Umarov: “It Is Necessary to Curtail the Monopolists’ Ambitions”
Doctor of Economics, Professor Khojimuhammad Umarov believes Tajikistan buys only 5% of the grain it needs from Russia, so there should not be an excessive rise in prices.
Now, according to him, the main problem is the remittances; the board of the National Bank should immediately resolve this issue during their trips to Europe.
Umarov urged the government to curtail the ambitions of the monopolists, who now unreasonably overcharge not only for Russian but also for domestic products.
In Tajikistan, the rise in prices became obvious in the early days of Russia’s invasion of Ukraine and the tightening of Western sanctions against Russia. Flour, oil, and sugar prices rose sharply by several percent. For example, a bag of flour that cost 270 somoni (about $21.6) in early March, was sold for 325 somoni ($26) at the end of the month – the price increased by 14-15%. Oil and sugar prices rose by an average of 20% and 14% respectively.
The exchange rate of the somoni against the US dollar rose from 1130 somoni to 1300 somoni for $100.
Considering the current situation, some economists say that Tajikistan should ‘diversify’ food imports, including flour, oil, sugar, and buckwheat, and reduce Russia’s share of imports. For example, oil can be imported from several other countries.
“In this case, when the problems arise, including a decline in production in one country, the damage will be minimal. The remaining volume will be supplied from another country,” a Ph.D. in Economics, Professor at the Tajik University Ahmad Karimzoda told CABAR.asia.