The National Bank of Tajikistan made public a special audit report revealing the improper usage of several hundred million dollars and unprecedented criticism towards the former head of Tajikistan’s National Bank, Murodali Alimardon, who is an acting deputy prime minister in Tajikistan’s Government. The special independent audit of Tajikistan’s National Bank was conducted by the international corporation Ernst & Young, following an agreement between the International Monetary Fund (IMF) and the government of Tajikistan. In order to provide transparency for the results of the audit, the report was published on the official website of the National Bank of Tajikistan as had been agreed by the IMF and the Government.

The National Bank of Tajikistan agreed to an independent audit by an international company after a financial scandal with the IMF caused by erroneous information provided by the Government of Tajikistan regarding the gold and currency reserves of the National Bank. As a result of the scandal, the IMF charged the National Bank of Tajikistan to pay US$79 million of credits provided by the IMF and to submit to an independent audit. The aim of the audit was not only to provide an audit report, but also to elaborate recommendations for the Government on how to reconstruct the management and oversight structure of the National Bank.

The report reveals several facts about serious abuses by the National Bank’s former leadership. The audit brought to light the fact that the National Bank was providing funds from the state reserve, including foreign loans, for firms investing in cotton. This scheme was designed by the former head of the National Bank, Murodali Alimardon, whom the report blames for misusing state funds. For instance, the National Bank provided the “Credit-Invest” company with US$856 million for providing credits to the cotton sector. According to the audit, the former National Bank head had a conflict of interest in this issue since his family members were shareholders of Credit-Invest. Furthermore, the report shows that Credit-Invest used part of the received funds aimed at the cotton sector for other purposes, including building a restaurant for US$256,000. Meanwhile, Credit-Invest still owes US$295 million to the National Bank. Ernst & Young experts claim that they faced problems in their work due to restricted access to required information. Thus, the auditors claim that they had access only to 13 percent of the required documentation. Furthermore, some accounting documents of Credit-Invest were simply burned, and most of the credits provided by the National Bank for the cotton sector were not even substantiated with necessary documents. The audit revealed that state funds in the range of US$220 million aimed at supporting the cotton sector had simply disappeared.

In the conclusion to the report, Ernst & Young experts strongly recommend the National Bank to abandon the financing of private cotton firms. Moreover, experts recommend the Government to create a new system for accounting and monitoring the National Bank’s activities, because the previous one was considered unreliable and non-transparent. They claimed that the Bank needs a new system of management and internal audit.

Despite the scandal, Murodali Alimardon retains his position in the Government. Alimordon argues that the engagement of the National Bank in direct financing of cotton investors was the only way to maintain the cotton sector during that period. “The period of transition was very difficult. The side effect of the period was the system of cotton financing”, says Alimordon. He added that “there is no sense to disclaim liability for the facts mentioned in the audit report, but we need to remember that the scheme helped save the national economy at that time”.

All in all, independent experts say that the audit results may put the Tajik Government’s further cooperation with international financial institutions under question. They say that the scope of the financial scandal may undermine the Government’s credibility and threaten foreign investments at a time of global economic crisis. Nevertheless, despite the results of the audit, the IMF approved a new three year financing program for Tajikistan, which amounts to US$120 million. In order to receive these funds the Government agreed to fulfill the IMF’s requirements –to implement the recommendations presented in the audit report and to reconstruct the structure of the National Bank, making it transparent and accountable to the Government and the Parliament.