DUSHANBE, November 11, 2008, Asia-Plus – A financial catastrophe is looming for Central Asia’s poorest countries, as migrant workers in the once booming powerhouses of Russia and Kazakhstan are having increasing trouble finding work, and are thus unable to send cash back to loved ones in impoverished Kyrgyzstan, Tajikistan and Uzbekistan.
For years, remittances has have kept the Kyrgyz, Tajik and Uzbek economies afloat. Billions of dollars cross borders every year and mean the difference between crushing poverty and a modest standard of living for hundreds of thousands of families in the region.
But as the global financial crisis takes its toll on labor markets across the former Soviet Union, experts and governments alike are warning of severe economic and social consequences. Along with a decreased inward flow of hard currency, the grinding unemployment that sent so many abroad in the first place will grow worse in Central Asia, said Maria Disenova, an Almaty-based risks analyst with the Institute of Economic Strategies – Central Asia.
“Remittances from migrants are very important for [Central Asian] countries. For example, in Kyrgyzstan total remittances may be as much as 15 percent of GDP and in Uzbekistan as much as 20 percent of GDP. This definitely has a social effect because it helps the families of those migrants to cope with poverty and lack of [jobs] at home,” Disenova said.
“The slowdown in Kazakhstan has already affected migrants working here because many of them worked in the construction sector [and] many of the projects in which they were involved have been stalled,” Disenova continued.
Authorities in Bishkek, Dushanbe and Tashkent can expect to come under severe pressure in the coming months to develop programs that alleviate mounting social woes. The challenges will be all the more formidable because as a result of the general economic decline, regional governments will experience a significant drop in revenue.
“Less [money] being sent back home means more tension in those poorer countries and more strain on the governments,” Disenova said, adding that labor migration represented for regional officials a solution to the twin evils of poverty and unemployment. Now, regional governments will have no other choice but to tackle the social challenges head-on, she added.
The Kyrgyz Prime Minister, Igor Chudinov, Economic Minister, Akylbek Japarov, and the chairperson of the Kyrgyz State Committee for Migration and Employment, Aygul Ryskulova, have already sounded alarms. “Our government is, in real terms, on the threshold of a financial crisis. A decline in Kyrgyzstan’s economic situation is quite possible by February or March 2009,” Japarov said in early November, citing falling remittances and slowing Russian and Kazakh economies as key factors.
“As much as people may say that the global crisis will not touch us, declining economic growth across the world and among our leading partners – Kazakhstan, Russia and China – will leave its mark on our economy,” said Prime Minister Chudinov.
More than $800 million in remittances has been sent to Kyrgyzstan since the start of 2008, Ryskulova said. “[But] given that our migrants are also buying real property and sending cash through their acquaintances, this sum is over a billion dollars,” she added.
Official estimates from the Kyrgyz State Committee for Migration and Employment put the number of Kyrgyz migrant workers between half a million and 800,000. The Migration Service of Tajikistan says there are close to 600,000 Tajiks working abroad, among them 220,000 Tajiks who departed for Russia during the first six month of 2008.
According to the Asian Development Bank, 79 percent of remittances to Kyrgyzstan and 98 percent of remittances to Tajikistan originated in Russia. The International Monetary Fund estimates that $1.8 billion of Tajikistan’s $3.8 billion GDP is generated by migrant workers’ remittances.
The United Nation’s Economic Commission has warned that official estimates tend to be conservative, and a working paper on remittances in the Commonwealth of Independent States found that “Kyrgyzstan and Tajikistan have remittances twice the official value.”
In Uzbekistan, where the government has not released any official data on remittances, the UN estimates them to be worth at least 10 percent of GDP. Partial data indicates that the amount of remittances sent to Uzbekistan during the first half of 2008 alone approached $2 billion.
Magnifying the impact of dwindling remittances, significant prices hikes for essentials, including food and energy, are being forecast throughout Central Asia. For example, the Kyrgyz National Bank’s outlook or 2009 says the cost of bread and flour is likely to rise by 15 to 20 percent, and housing tariffs could rise by as much as 45 percent.
The cost of bread and vegetable oil in Tajikistan has more than doubled since August 2007 and most other foodstuffs have seen price hikes of 50 percent over the same span, according to the World Food program. As a result, more than 2 million Tajiks face “food insecurity” this winter, and 800,000 may face “famine” conditions, the organization said.
