Tajikistan’s central bank has cut reserve requirement rates for local lenders to free up additional liquidity in response to the global economic upheaval triggered by the coronavirus (COVID-19) pandemic.

Reserve requirement rates have been cut to 1%, down from 3%, for liabilities denominated in the Tajikistani somoni (TJS) and to 5%, down from 9%, for foreign currency liabilities until the end of 2020.

The national lender noted that the pandemic could place further pressure on the Tajik economy by disrupting foreign trade. The move will free up extra liquidity and make it available to local businesses, it noted. Tajikistan has closed its borders and reported zero coronavirus cases on its territory so far, though this might be due to a lack of testing capacity available in Central Asia’s poorest country. 

The ex-Soviet nation’s economy is heavily reliant on remittances sent home by Tajik migrants working abroad. The vast majority of them, numbering in the hundreds of thousands, work in Russia, where the economy has been harmed by falling oil prices, quarantines have left many migrants without sources of income and the shutdown of Russian borders will keep Tajiks from being able to enter the country. 

April main month to leave for Russia

April is seasonally the main month for Tajik migrants to leave their country to seek work in Russia. Now Tajiks find themselves stuck at home with their savings from last year depleting. Many are hoping that Russia will not extend the border lockdown after April 30, but the worsening pandemic situation there does not look favourable for Tajiks.

Groups of men are reportedly gathering in the “workers' market” in Tajik capital Dushanbe's Sultoni Kabir bazaar, where they wait for customers to hire them for temporary jobs.

During the first 11 months of 2019, Tajik labour immigrants working in Russia sent home $2.49bn, up by 7% from the same period in 2018. Tajik remittances from Russia fell by 8% y/y to $2.3bn in 2018, despite general Russian economic stabilisation. In 2017, remittances recovered from a decline to $1.9bn in 2016, which was caused by Russian economic difficulties.

Total remittances from labour migrants abroad account for over 75% of all incomes flowing to Tajikistan’s population. Remittances also account for around a third of GDP in Tajikistan, making the country one of the world's most remittance-dependent.

The World Bank has previously said that approximately 40% of Tajikistan's youth is unemployed. The only other employment opportunities available for most Tajiks apart from migrant work are concentrated in the country’s agricultural sector.

The Tajik central bank raised its refinancing rate to 12.75% in February, hiking it by 50bp. The regulator cut the rate by a total of 175 basis points to 12.25% during 2019.