Central Asia on edge amid ruble's struggles

By bne IntelIiNews August 22, 2023

The weak Russian ruble has brought bouts of anxiety for families in impoverished Tajikistan and Kyrgyzstan, two of the world's most remittance-dependent countries, where cash transfers from Russia typically equal more than a quarter of GDP.

The nations’ currencies have shed less than 1% of their value against the dollar since the beginning of the summer, but have recorded gains of around 14% against the ruble.

Following Russia’s invasion of Ukraine in February last year, the ruble sank to around 150 to the USD, but in subsequent weeks, the currency pulled back to far above its prewar level of around 75 to the dollar, peaking at slightly above 52 in June 2022. This helped drive record-breaking remittances for Central Asian countries. But the remittances picture for 2023 looks dicey, despite the ruble by August 22 gaining to 94/$ compared to 101/$ a week ago. What available data there are indicate that families across Central Asia are this year receiving much less from relatives abroad than they were sent last year.

The Kyrgyz central bank this month said $163.5mn was transferred to Kyrgyzstan from foreign countries in June, with transfers from Russia representing more than 90% of the sum. The figure is slightly more than half of the figure recorded in June last year and compares to June 2021’s $266.9mn, June 2020’s $277.9mn and June 2019’s $191.6mn.

On August 15, Russian business daily Vedomosti cited interviews with Uzbek diaspora leaders in assessing that a potentially massive migrant exodus from Russia could be on the cards in the very near future if the ruble doesn't start rising in value soon. It quoted an online poll of 23,000 mostly Uzbek migrants. Over half of respondents said that they were actively considering the option of leaving Russia.

In Kazakhstan, where the local currency, the tenge, is known for tracking the ruble's performance quite tightly, there was last year significant currency that last year saw the  tenge "successfully decouple" from the ruble—at least according to the economics-focused Telegram channel Tengenomika, as cited by RFE/RL. The channel noted that Russia's share of Kazakhstan's imports declined from more than 40% in 2021 to 26.7% in 2022.

In a Facebook post last week, also reported by RFE/RL, Kazakh political commentator Serik Belgibay complained that the ruble was "burying" Kazakhstan's economy and leaving the country with "two options, both bad."

"[We can] leave everything as it is. Then the cheap ruble will gradually kill domestic production. Or [we can] allow the tenge to devalue to the level of five tenge to the ruble. This would further impoverish our citizens and cause prices to rise," Belgibay fumed.

In Uzbekistan, the central bank has determined that the som currency "will be relatively stable till the end of the year and in the medium-term perspective". Some analysts find that prediction a mite too optimistic.

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