DUSHANBE (TCA) — As Tajikistan is being hit hard by decreased remittances from Tajik labor migrants in Russia and the weakening national currency, the somoni, against the US dollar, we are republishing this article, originally published by EurasiaNet.org:
On the fringes of Tajikistan’s capital, Dushanbe, 27-year old Zebo opened a tiny shop she hoped would lead her family out of poverty. Instead, it has become the millstone around her neck.
It was 2010 and her parents, both poorly paid government workers, decided to take out a loan to fund the new business. The store is a blink-and-miss-it affair — a kiosk tucked between two apartment blocks. The income Zebo makes there goes toward feeding 10 people and servicing the family’s debt.
Zebo embarked on the enterprise in the hope of better economic times, but the optimism was ill-founded. The combination of a downturn in oil prices and economic sanctions hit Russia hard — and, as a result, Tajikistan even harder.
“People are panicking, salaries are tiny and prices are growing. People are economizing, they’ve stopped buying meat, butter and candy. Only the absolute essentials — flour, potatoes, carrots, vegetable oil. But we cannot cut our prices, because what we pay for the groceries is already high. We too need an income,” said Zebo, whose surname was withheld out of concern for her safety.
The trend for price rises is stark. If one kilo of beef cost 32 somoni ($3.80) a month ago, now it costs 40 somoni. A 50-kilo sack of sugar has gone up from 320 to 375 somoni. Potatoes by the kilo have increased from 2.6 somoni to 5 somoni. A kilo of carrots cost 1.2 somoni, now the price has doubled to 2.5 somoni.
The World Food Program noted in its Food Security Monitoring bulletin in February that one-quarter of households questioned in its surveys spend more than 75 percent of their disposable income on food.
“The share of food expenditure seems to have been increasing in both the winter and spring seasons in 2016, while the food expenditure share is highest in the spring,” the WFP said.
Fluctuations in prices for groceries are, on one hand, a seasonal trend contingent on the availability of particular goods, but this particular surge is also linked to performance of the national currency, the somoni. At the start of the year, the somoni was trading around 7.9 to the dollar, but that had risen to 8.5 somoni by mid-April.
The external support many people could normally count upon has weakened. Where in 2013, Tajik labor migrants based in Russia had sent home around $4 billion, that figure had dropped to $2 billion by 2016.
Despite attempts at reassurance by the National Bank, the somoni continues to be viewed as unreliable, so people try whenever possible to keep their savings in dollars, which are becoming ever more difficult to find in circulation.
The strengthening dollar has grim implications for those like Zebo, who took out a dollar-indexed loan to start her business. “We took out a loan in dollars when the cost of one dollar was 4.5 somoni. But we earn somoni,” she said. “We have had to extend the [repayment date] of the credit, and in the end we are paying twice as much as we borrowed.”
“We want to sell our shop and settle our debts. This would be cheaper than waiting for some more fluctuations in the currency rate and having to overpay the bank. But everybody understands that running a business at the moment is impossible, and there is no way of finding a buyer. And so we work,” she said.
Zulfira, a government worker whose surname is being withheld, said that the troubles of the somoni have also made medicine more expensive.
“My mother suffers from a heart condition and she needs constant medication. Before we spent 300 somoni in total, now it costs us 600 somoni. So we have to save costs on some other medicines,” she said.
Zulfira said, by way of an example, that Roxera, a drug designed to lower cholesterol levels and reduce the likelihood of heart attacks, used to cost 80 somoni, but now costs 110 somoni. Another drug, Amlesa, which assists in regulating heart pressure, cost 60 somoni, but now costs 97 somoni.
“We have to economize on medicine, and keep an eye on what we eat. This is risky, but we have no choice until better times appear,” Zulfira said.
Another cause for the shortage of dollars is the ongoing saga with Tajikistan’s problem banks.
Market leaders Agroinvestbank and Tojiksodirotbank, as well as the now-liquidated Fononbank and Tojprombank, after a long period of withholding savings from their customers, recently began paying out. They did so exclusively in somoni, even for accounts indexed in dollars. The flood of fresh somoni on the market caused yet more downward pressure on the currency.
A peripheral effect of this development has led to the almost complete monetization of the payment system. The habit of paying by card has withered since the bulk of money supply is held physically in people’s wallets and homes.
While some factors buffeting the economy may lie outside government, others are explicitly domestic in nature. “The deeper the corruption, the higher the prices in the markets,” said economist Samidjan Nasriddinov. “The prices of our groceries are comparable to those in Europe, if not worse. Sales are in decline, so taxes are paid out of savings. In the expectation of something better, people began to eat through their reserves, and as a result they are left with nothing.”
Authorities, meanwhile, are taking it all in their stride.
President Emomali Rahmon routinely boasts of victories in reducing poverty levels. And the government has declared it intends to see the proportion of people living in poverty drop to 20 percent by 2020, down from the 31 percent level recorded in 2015.
The National Bank has denied that there is any issue with the currency fluctuations either, remarking in a statement on April 7 that “problems with the shortage of foreign currencies in Tajikistan do not exist.”
“Because of currency exchange speculation, a sense of panic has spread throughout the population, which has ramped up the demand for dollar. Speculators are buying dollars in large quantities in the banks, and they are selling it to the population at inflated levels,” the National Bank said.