Over the past month, the U.S. dollar (USD) has lost 1.5 percent of its value against the Tajik national currency, the somoni (TJS).
A month ago, the exchange rate of USD against YJS was 1:10.9, while the official exchange rate of USD against TJS set by the National Bank of Tajikistan on June 10 is 1:10.74.
In an official response to a request from Asia-Plus news agency, the Tajik national financial regulator cited the main reasons for the decline in the USD exchange rate against TJS.
According to the NBT, the official exchange rate of the US dollar against the somoni over the first five months (January-May) of this year has decreased by 1.8 percent.
“The trend of strengthening of the national currency against the US dollar was mainly observed in May, 1.5-percent increase,” says the statement released by the NBT.
The national financial regulator noted that they continue to follow a policy based on a “floating regulated exchange rate without defining and announcing exchange rate limits.” According to this policy, the official exchange rate of the somoni against foreign currencies is set based on supply and demand in the domestic foreign exchange market.
The main factors influencing the change in the national currency's exchange rate, as noted by the NBT, are external, particularly changes in the global economy and politics, and the strengthening of the main currencies entering the republic.
“The main reasons for the strengthening of the national currency against the US dollar in May this year include:
- The increased capacity of financial and credit organizations to meet the demand of legal and physical entities for foreign currency, as well as the excess of currency supply over demand;
- The strengthening of the Russian ruble against the US dollar.
It should also be noted that the increase in satisfying demand for foreign currency as a seasonal factor is observed annually during this period, leading to the strengthening of the national currency,” the National Bank says in its response to Asia-Plus request.
Additionally, the NBT note that the official exchange rate of the national currencies of most major trading partners and neighboring countries of Tajikistan against the US dollar has also strengthened. Specifically, the Russian ruble strengthened by 2.17%, the Turkish lira by 0.54%, the Kyrgyz som by 0.99%, the Uzbek sum by 0.001%, and the Belarusian ruble by 1.48%.
Dollar falls, but Prices don't
Meanwhile, some economists link the decline in the dollar's exchange rate to the increase in the use of national currencies for trade settlement with the Russian Federation and the fall in the price of a barrel of oil from US$94.00 to US$77.
Bahrom Sharifzoda, a researcher at the Institute for Economic Studies, told Radio Ozodi (Radio Liberty’s Tajik Service) that this process could have various consequences for the country’s economy.
“There are both positive and negative aspects. The positive aspect is the increase in the purchasing power of the national currency, the somoni. However, from the perspective of investors who invest money in Tajikistan, the decline in the dollar's exchange rate reduces their motivation because they can buy fewer goods with dollars, pay lower wages, and the investment projects they implement in Tajikistan bring them less profit,” the researcher said.
According to Sharifzoda, if the decline in the dollar's exchange rate continues in the long term, it could lead to reduction in the volume of foreign investment in the country and to decrease in the competitiveness of domestic goods in foreign markets.
“The National Bank always needs to use effective tools to maintain balance in the foreign exchange market. Because both the rise and fall of exchange rates beyond the planned indicators can intensify negative phenomena,” the researcher notes.
Overall, Tajikistan's foreign exchange market is highly dependent on the Russian ruble and the dollar. Specifically, as soon as the dollar begins to rise, prices in the market increase – entrepreneurs raise prices for their goods with each increase in the exchange rate to gain more profit. But the decline in the dollar's exchange rate does not affect the situation – prices for goods do not decrease.
