International financial institutions predict the unimaginable fall in remittances in Tajikistan this year.
The Asian Development Bank (ADB)'s flagship publication notes that growth in Tajikistan is forecast to decelerate to 2.0% this year.
Asian Development Outlook 2022: Mobilizing taxes for development, April 2022 says the growth rate will depend, however, on impact from the economic downturn in Russia and adverse external environment, that will likely force migrant workers to return home, reducing remittances and investment, disrupting trade, creating shortages of dollars in the banks, worsening fiscal and external debt positions, and raising global oil and food prices.
According to the report, services are projected to contract by 20% in 2022 and a further 10% in 2023 as remittances drop by at least half in 2022.
Private consumption will drop significantly as remittances diminish.
Monetary policy will aim to combat inflationary pressures from currency depreciation linked to the plunge in the ruble, the currency of remittances, which equaled 20.5% of GDP in 2021. The central bank will try to contain inflation and limit currency depreciation by tightening liquidity, but tightening may be constrained by demand for budget financing. Lending to private firms may increase further with a recent decline in nonperforming loans. Given pressure from the plummeting ruble and depreciation of other trade partners’ currencies, the central bank may intervene to support the local currency.
Remittances are projected to diminish in US dollar terms by 50% in 2022 as economic sanctions on Russia reduce employment for migrant workers, causing many to return home, and as ruble depreciation slashes the US dollar value of most remittances received, the report says, adding that remittances may recover by 10% in 2023 if the international situation revives the demand for migrant workers
The World Bank noted in early March that Tajikistan, which is one of the most migrant-dependent countries in the world, will be most severely affected by the expected fall in remittances sent from Russia.
Experts from the World Bank predicted that Tajikistan faces a 22 percent fall in remittances this year.
The sanctions on the Russian banking system in the form of exclusion from the SWIFT network for fund transfers is likely to directly disrupt remittances through formal channels, which could lead to a partial shift to indirect and informal channels. Also, the sanctions can affect remittance flows indirectly if they lower employment and incomes for migrant workers in Russia.
According to data from the Ministry of Labor, Migration and Employment of the Population (MoLMEP), more than 60,000 labor migrants have returned to Tajikistan from Russia over the first three months of this year. It is reportedly 2.6 times more than in the same period last year.
The National Bank of Tajikistan (NBT) indirectly confirmed the downward trend in remittances a month, when the country’s financial regulator corrected the exchange rate of the somoni against the dollar by 15%. The NBT partly associated exchange rate changes with decline in remittances. At the same time, as usual the financial regulator did not specify how much money had come into banks and how much the volume of remittances had decreased.
