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Remittances to Tajikistan and COVID-19


Tajikistan is a landlocked country within Central Asia and the poorest Central Asian country to emerge from the collapse of the Soviet Union. In 2019, Tajikistan had a national poverty rate of more than 26% and an extreme poverty rate of 11%. To reduce poverty at home, young Tajik men in particular travel abroad to countries such as Russia to work and send their earnings home to their families. In 30%-40% of households in Tajikistan, at least one member works abroad and sends funds home. As a result, the country’s economy has become heavily dependent on the money its migrant workers bring in. Remittances to Tajikistan in 2017 were equivalent to nearly 35% of the country’s gross domestic product (GDP). Now, with the spread of COVID-19, the economy is struggling to recover from restricted travel abroad.

Remittances in the Short Term

Remittances to Tajikistan are a major source of revenue for the country. Yet, they have both positive and negative economic implications. Remittances are often beneficial in the short term as a lifeline to the poor. They essentially provide the means by which the poor can purchase basic goods and services to lift themselves out of poverty. Moreover, more than 80% of remittances to Tajikistan go toward essentials like food, clothing and shelter. Still, the lack of economic opportunity at home leaves little room for the Tajik people, particularly those in rural areas, to thrive independently.

Remittances in the Long Term

Economic dependence on remittances to Tajikistan opens up the country to risk in the long term. Tajikistan’s economy so heavily intertwines with Russia’s that it leaves itself at the mercy and political goodwill of Russia. Additionally, the dependency also exposes Tajikistan’s economy to external shocks from Russia’s economy. While Russia may recover from these shocks, Tajikistan itself may not. Furthermore, Tajikistan’s dependence on remittances reduces the incentive for the Tajik government to create programs that help develop the country’s own domestic economy.

Remittances in the Pandemic

During the peak of the COVID-19 pandemic, the Russian imposed lockdown caused the Tajik economy to suffer. Now, Tajikistan is slowly trying to recover from those economic damages. Russia’s lockdown meant that Tajik laborers in Russia suffered a decrease in work opportunities and thus, a fall in income. In addition, it also restricted Tajik migrants from traveling to Russia to work and earn the money they need to support their families. In the spring of 2020, President Emomali sought financial aid from the International Monetary Fund (IMF) because remittances to Tajikistan from Russia declined by 50%.

The faltering economy hit the poor in Tajikistan especially hard. The World Bank has reported that around 40% of Tajikistan’s population reduced the consumption of food during the peak of the pandemic and that the fall in the value of remittances could push the poverty rate even higher. However, the international community and the Tajik government are working to mitigate the impact of COVID-19 on the state of migrant workers.

Solutions

USAID and the World Bank are a few organizations working to help get Tajikistan’s economy back on track. USAID began providing assistance to Tajikistan in 1992, and its work continues today. To help build Tajikistan’s domestic economy and decrease its dependence on remittances, USAID is supporting the expansion of the private sector in a variety of ways. For example, USAID supplied technical assistance to 7,906 individuals and generated 2,409 jobs in the dairy and horticulture practices.

In April 2020, the World Bank also approved a grant of $11.3 million for the Tajikistan Emergency COVID-19 Project to provide aid. This will go toward providing emergency cash assistance to poor households and strengthening the country’s healthcare capacity.

The Tajik government is also working to ameliorate the economic fallout from COVID-19. For example, the government offered a number of targeted social assistance programs, deferred tax collections and relaxed monetary policy. Deferring tax payments provided households and firms with the additional support they needed to finance temporary disruptions in cash flow. Additionally, the government’s targeted social assistance programs increased public sector wages and pensions by 10%-15%. Still, the government is doing little to diversify the Tajik economy to avoid economic disaster in the future. It needs to implement domestic economic policies that encourage private sector development. Additionally, policies that help maintain a stable environment for that private sector activity are necessary. These solutions would help businesses thrive in Tajikistan and decrease their dependence on remittances.

Looking Forward

The COVID-19 pandemic changed Tajikistan’s economy and the lives of the Tajik poor. However, the country should still be able to rebound. The Asian Development Bank predicts that Tajikistan’s GDP growth rate may reach 5% by the end of 2021 from a pre-pandemic growth rate of 7.5%. Thus, Tajikistan may still reach the target it set in its National Development Strategy up to 2030. The strategy sets a target of increasing domestic incomes by up to 3.5 times by 2030 and reducing poverty in half. Should the Tajik government grant the private sector more opportunities to invest, create jobs, and thus, contribute to the economy, it may very well attain this goal.

– Savannah Algu
Photo: Unsplash