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By Dilafruz Nabiyeva
DUSHANBE – The devaluation of the somoni is creating a double-edged problem of inflation and a shortage of foreign currency in Tajikistan.
Since late April, the somoni has lost 18 dirams, dropping 4%, from 4.47 to 4.65 TJS to the US dollar. It has also lost ground against the rouble and euro, going from 1.45-1.465 to 1.65-1.66 TJS per 10 roubles and from 5.80-5.90 to 6.64-6.67 TJS to the euro. Prices have increased 15-18% over that time as a result.
Analysts called the somoni’s drop seasonal, and the government said the exchange rate will soon level out.
With the somoni’s drop, the demand for foreign currency has also increased, Ravshan Safarov, owner of a currency exchange in Dushanbe, said.
“No one is selling hard currency today; most people are only buying – especially those departing for Russia in search of seasonal jobs,” Safarov said. “The somoni is in demand only in Tajikistan, and even here many transactions are usually made in foreign currency.”
Another trader agreed.
“Our own reserves are nearly exhausted; no one wants somoni anymore, so you won’t find dollars in any exchange office today,” currency trader Tavvakal Azizov said.
National Bank supplies dollars
The National Bank has sought to rectify the situation by supplying US dollars in a bid to moderate the somoni’s fall. In its dollar sale, the National Bank has maintained a stable exchange rate – 4.5 TJS to the dollar – in inter-bank operations, Mirzomuddin Mavlonov, director of the Bank’s currency market regulation department, said.
“Cash transactions in retail sales account for only a minor segment of the market, and the stable exchange rate in cash-less transactions gives little reason to worry,” Mavlonov said. “The somoni’s decline is only a seasonal trend – the old rate will be restored as soon as the demand for hard currency for cash transactions decreases.”
Deputy Finance Minister Dzhamoliddin Nuraliyev cited the seasonal outflow of migrants, prevalence of imports over exports, and the rise in oil product prices as major reasons for the somoni’s slide.
This is a recurrent, seasonal drop related to the spring planting that starts in Tajikistan in April-May, requiring huge hard-currency spending on imported diesel fuel, seeds and fertiliser, economist Pulod Nasimov said.
“This is a time when domestic reserves peter out, there’s no production, and imports notably prevail over exports,” he said.
The situation usually returns to normal when farmers gather the first harvest, Nasimov said. “The market will be filled with less expensive home-grown agricultural produce, and hard-currency spending on imported food will decrease.”
Labour migrants, agriculture season will stabilise rate
The national currency’s exchange rate will stabilise during the next few months, Firuz Saidov, chief specialist at the presidential Strategic Research Centre, assured.
“Labour migrants have shipped part of the foreign currency stock out of the country, causing a shortage of it on the domestic market,” he said. “In about a month, when the migrant workers start sending money back home, the situation on the currency market will stabilise. We watch this seasonal thing happen every year.”
A further decline of the somoni against foreign currencies is unlikely, Saidov said.
The dollar’s growth on the domestic market affects external debt servicing, because part of this year’s state budget provisions for paying off debt is in somoni, Nuraliyev said.
“This year’s budget was approved last year, with an exchange rate of 4.8 TJS to the dollar prognosticated. Naturally, the dollar’s growth impacts foreign debt servicing.”
The Finance Ministry and National Bank are taking steps to keep budget deficit growth within the allowed 1% limit, Nuraliyev said.
“When the national currency falls, spending on state debt servicing increases,” he said. “Our main task is to match the Finance Ministry’s fiscal policy with the monetary policy of the National Bank.”