The foreign exchange market in Tajikistan fluctuates feverishly. In May alone, the Tajik somoni fell by 12 percent against the US$, amounting to a total depreciation of 25 percent against the dollar since the beginning of the year. The drastic fall of the somoni results in significant losses for enterprises and ordinary citizens. Suddenly, after steady growth, the US$ fell by 10% against the somoni in the last week of May. The National Bank of Tajikistan claims that this exchange rate has settled naturally, without intervention.

On May 29, in just a few hours the American dollar suddenly depreciated by 6% against the somoni. On that day almost all exchange offices suspended their operations. Since, the rate has started to increase again. Experts predict that this was not the last fluctuation of the Tajik national currency, claiming that in June, the value of the somoni will again fall considerably. Yusuf Zainidinov, an expert at the Institute of Economic Research in Dushanbe, predicts that in the next few months the national currency will continue to depreciate.

Experts explain the depreciation of the somoni by a sharp decrease in the country’s currency earnings. The main sources of the country’s income – export of cotton and aluminum – declined by 60-70% and currency remittances by labor migrants shrunk by 30%. Furthermore, experts explain the sudden surge of the somoni by the fact that the National Bank of Tajikistan intervened in May and spent about US$2 million in an effort to stop the depreciation, managing to prevent it only for a week. According to the experts, this was a temporary stabilization of the somoni. Now, the Bank has no means to keep the somoni at an acceptable exchange rate. The gold and foreign currency reserves of National Bank are only about US$183 million. The debt burden is more than US$1 billion and constitutes about 30% of Tajikistan’s GDP. Moreover, according to the State Committee on Statistics, the country’s import volume is three times higher than the export volume.

Experts predict social and political shocks in next few months. The depreciation of the somoni causes a boom in prices for import goods. For instance, despite the summer season, the prices on agricultural products have already increased by 20-30%. Gas prices went up by 20% in only two weeks. Thus, the depreciation of the somoni causes economic worries among ordinary citizens and business. Small and medium-size enterprises seem to be the most affected by this crisis. For instance, the two biggest markets in Dushanbe were closed.

Nevertheless, state officials keep saying that the national economy will avoid a considerable financial crisis. Tajikistan’s Minister of Economic Development Gulomjon Bobozoda even finds positive effects of the depreciation. He claims that due to the depreciation of the national currency, imports become less profitable as currency risks and costs increase. Such a situation contributes to the development of domestic production. Thus, according to the minister, the depreciation will result in “more working places, taxes and budget increases”. The head of the National Bank Sharif Rahimzoda explains the depreciation as “a compulsory measure” to adjust the somoni to the falling currencies of its main trading partners Russia and Kazakhstan, which experienced a depreciation of their national currencies of up to 25-30% from last autumn. During a press conference, the head of National Bank promised that the depreciation appeared to top out at 4.6 somoni to the US$ and will be held at this rate. 

Taking into account the limited financial reserves of the National Bank, experts doubt the Bank’s capability to impact the national currency’s situation. Experts alert that without urgent measures to develop domestic production, the country will experience social tensions. Independent expert Khojimukhammad Umarov claims that it is almost impossible to saturate the market with domestic production in the short term. He says that measures had to be taken by the Government in advance. Professor Umarov argues that the prices on consumer products will continue to increase, providing for a worsened social and economic situation in the country.

All in all, the situation shows that depreciation of the national currency cannot be an adequate measure to support domestic production as some state officials claim. On the contrary, according to experts, the depreciation of the somoni brings considerable losses to small and medium enterprises and ordinary consumers as the prices on import goods increase. Experts warn that only structural reforms and stimulation of domestic production can improve the economy and strengthen the national currency. Therefore, the current national currency crisis is yet another sign of the economically unsound policies of the government.