The consequences of economic sanctions against Russia imposed by the Western powers due to the war with Ukraine will affect Tajikistan in the worst possible way, the economists predict.
During the years of Tajikistan’s independence, its economy remained under Russian influence. The unprecedented package of sanctions against Russia imposed by the Western countries due to the war with Ukraine has already led to a number of problems in Tajikistan. The first to suffer were the banking sector, import and export relations, and labour migrants’ families.
According to the analysts, the Tajik government has to rethink its economic policy and reduce its dependence on Russia.
Volumes of Labour Migrants’ Remittances Will Decrease
All experts predict that the crisis associated with economic sanctions against Russia will significantly affect Tajik labour migrants and their families.
Economist Abdumannon Sheraliev believes that the Tajik economy is heavily dependent on migrants’ money. According to him, the statistics showing that the labour migrants’ remittances make up only about 31% of the country’s GDP is underestimated and the real figures are much higher.
“The authorities consider only official remittances via the banks. However, the official remittances make up no more than a third of all remittances coming into the country. The bulk of the money is transferred to the country unofficially and is not registered anywhere,” Sheraliev said.
Local media report that the ruble depreciation already affects the incomes of labour migrants’ families.
Economist, Professor Khojimuhammad Umarov believes that the restrictive measures of the Western countries will seriously affect the number of labour migrants from Tajikistan in Russia. At the same time, the migrants will experience the impact of sanctions both directly and indirectly.
According to Western experts, Russian GDP will decrease by 7% this year.
“This means the jobs will be cut. The Russian Federation will take some measures so that job cuts do not have a significant impact on the employment of its own citizens. Our labour migrants will be affected to a greater extent,” Umarov said in a CABAR.asia interview.
According to various sources, from 400,000 to 1 million Tajikistan citizens annually go to work in the Russian Federation. According to media reports, in the first 9 months of 2021, labour migrants transferred $1.3 billion from Russia to Tajikistan.
Will the Migrants Go to War?
Sheraliev makes even more pessimistic predictions. He believes the consequences will be catastrophic.
“I think, more than half of the migrants will lose their jobs and the income of the remaining half will decrease several times. If the war is prolonged, we will see migrants going to war for money to survive and feed their families. Most will leave Russia for the West, some will return to Tajikistan just so as not to starve to death in a foreign country,” says Sheraliev.
Meanwhile, there are messages on social media saying that the scammers in Russia offer the migrants to join the army and obtain Russian citizenship in three months.
Valentina Chupik. Photo from the internet
Human rights activist Valentina Chupik advises migrant workers not to fall for such offers since the Russian citizenship law does not provide for such benefits.
In a CABAR.asia interview, she said that the citizens of Central Asian countries address her daily; they say they received calls from some “law firms” with the offer to obtain Russian citizenship in 3 months of contract service in the Russian army.
“One of my volunteers called and said that near the Tretyakovskaya, Novokuznetskaya, Tverskaya, Tyoply Stan metro stations, there were tents with “Novorossia” written on them; there, the migrants were also recruited into the “voluntary army of the Donetsk People’s Republic” and promised Russian citizenship in six months. I explained that it was impossible,” she said.
Replying to such reports, local media published information that citizens of Tajikistan will receive prison terms of 12 to 20 years for participating in wars on the territory of foreign states.
In addition, according to Chupik, the detentions of migrants by police officers to check documents and illegally check the contents of their phones have now become more frequent in Russia.
“There are no reasons at all. They say it is an ‘identity check’. They put people in the police vans and take to detention to different districts of Moscow. They keep people in the courtyard of the police department for many hours; they take away their documents. They do not let them go for a long time. They often inspect the migrants’ phones,” said the human rights activist.
In Russia, Everyone Froze in Anticipation
Tajikistan citizen Isfandiyor works as a sales manager for Beeline Company in the Russian Federation. He says that business in Russia ‘paused’ its activity in anticipation of stabilisation of the political situation, and it does not make sense to transfer money home yet.
“Every business is paused; interest rates on loans and mortgages are rising. My clients have frozen their projects, which means my sales are also frozen. This will continue until the situation is clear. Therefore, we are all waiting for the end of the war. Nobody cares about the sanctions but I am concerned about the ruble depreciation. Half of my family is in Tajikistan and any transfers abroad in rubles are not profitable,” he said.
Sanctions Against Russia Affect Tajikistan’s Banking System
The sharp depreciation of the ruble devalued the migrants’ remittances from Russia. Officially, the ruble depreciated against the national currency – somoni – by more than 20%.
Dushanbe resident Zayniddin Shodiev travels to the Leningrad region of the Russian Federation every year and works at construction sites there. He is the sole breadwinner in a family of five. Previously, he sent home about 5 thousand rubles every month. This amount (until February 24, it was 750 somoni or about $67), was enough for his family to buy basic food. Now, after the ruble depreciation, this amount is no more than $40.
“Now, my family will have to save money and buy less food. I do not know for how long I will work here. We are working now. However, people say the construction sites may be frozen,” says Zayniddin.
The process of receiving bank remittances has become more complicated due to the disconnection of Russian banks that fell under sanctions from the SWIFT system.
On March 4, local media reported that the Tajik banks had stopped trading in Russian rubles and US dollars.
In Tajikistan, the US dollar exchange rate against the somoni rose sharply by 15-20%. On March 9, the National Bank of Tajikistan (NBT) set the US dollar exchange rate at 13 somoni per 1 US dollar. The national currency also depreciated against the euro: it is 14.31 somoni per 1 euro.
However, the banks do not issue dollars currently. On the black market, the dollar exchange rate is much higher than the official rate. Abdumannon Sheraliev predicts that the NBT will soon have to raise the dollar exchange rate even more.
“Tajikistan’s national currency rate is fixed and the National Bank changes it only when it is impossible to keep it. The exchange rate on the black market will greatly exceed the official and the currency will ‘run away’ to the black market. As the currency inflow decreases, which we will observe very soon, the difference will increase,” he said.
The Tajik banks need to establish new correspondent relationships with banks in other countries. Otherwise, difficulties will arise, according to the economists.
Prices for Goods Have Risen
Amid the ruble depreciation, the prices for basic food supplied from Russia rose in Tajikistan. For example, the flour and vegetable oil prices increased by 2-5%. The prices for other goods in Tajik stores change daily.
Since the Tajik market is import-driven, the sanctions imposed on the Russian Federation and the ruble depreciation will raise the prices for all imported goods, primarily those supplied from Russia and Belarus. These are fuel, building materials, machine tools, cars, office equipment, medicines, and other essential products.
“Once the stocks of goods in the warehouses run short, Tajikistan will not be able to receive medicines and chemicals, such as toothpaste, perfumes, and cosmetics,” Umarov said.
There will also be problems with goods re-exported from Russia to Tajikistan.
“There are a lot of such goods in Tajikistan. For example, bananas are shipped to the western ports of the Russian Federation and, after technological processing, they reach consumers both in Russia and in the CIS countries,” says Professor Umarov.
Sheraliev notes that the authorities will reduce the share of imports and increase exports to counter the economic crisis; however, the country has little to offer.
“Imports (the industrial and construction goods, equipment) will decrease by several times. Exports are likely to increase because the country exports mainly raw materials. To feed the starving people, we will have to sell everything we can – and the only thing for sale is raw materials,” he said.
The manufacturers of computer products are also leaving Russia creating a stir in the market. According to experts, this raised the price of computer parts in Tajikistan by 30%.
Khojimuhammad Umarov also highlighted the logistical problem, since a part of the raw materials for the manufacture of Russian products will be purchased from other countries. Due to the European countries’ refusal to provide ships to Russia, the goods will reach Tajikistan with a long delay or will not reach it at all.
“These goods arrived at the western or southern ports of the Russian Federation; then, they were distributed and delivered to Tajikistan. Such goods will be arriving in the future but with a long delay,” Umarov says.
The energy prices will rise; now, the analysts say that the price of 1 barrel of oil will gradually reach $150. This means that the prices of all other goods will also rise.
“We have to prepare for this and calculate the inflation rate in Tajikistan. In Russia, inflation will reach 10%. I think we will have the same indicators,” he said.
How to Minimise the Damage to the Tajik Economy?
The economic analysts advise the government to take the necessary measures quickly to minimise the impact of the crisis.
Abdumannon Sheraliev believes the government does not have enough tools to fight the crisis.
“First, the country’s authorities are not able to influence political processes abroad. Second, I do not remember a single crisis from which the authorities would have learned a lesson. Everything is left to chance,” he said.
Professor Umarov agrees with him. He says that after 2014, the authorities did not draw any conclusions and did not take measures to diversify exports and imports.
According to him, the government should reduce Tajikistan’s economic dependence on Russia, China, and Kazakhstan to avoid similar crises in the future. Within one year, it should carry out targeted reforms of export and import relations. In addition, Tajikistan’s external debt should be diversified.
“In times of crisis, the government should increase its influence on the country’s economy to reduce artificial price hikes,” Umarov believes.
The high level of market monopolisation has already led to higher prices for goods.
“Monopolists in Tajikistan responsible for the import and export of goods to/through the Russian Federation will seek to take advantage of the situation caused by sanctions. Now, the prices are already rising for goods that have not yet faced the restrictive measures and are supplied to Tajikistan. The government needs to curtail ambitions of these monopolies,” Umarov said.