Tag Archives: Tajikistan

Tajikistan prepares $490m rescue plan for failing banks

DEC. 21 2016 (The Conway Bulletin) — Tajikistan’s government said it would spend $490m, around a fifth of its total budget, on rescuing its banking sector from collapse.

It will pump the cash mainly into Tajikistan’s two biggest lenders, Agroinvestbank and Tojiksodirot- bank, to boost their liquidity and protect them from bankruptcy.

Both banks have neared collapse this year, only being saved by previous government bailouts. Earlier this month, Tojiksodirotbank was taken out of administration. It had been run by Central Bank officials since May.

Two smaller banks, Tajprombank and Fononbank, will also receive funds.

Abdusalom Kurbanov, the Tajik finance minister, said the government had no choice but to intervene heavily to save the banks.

“This decision is aimed at the sustainable development of the banking system, the preservation of public confidence in the banks and the return of deposits,” media quoted him as saying.

Tajikistan is the most remittance- dependent country in the world and a recession in Russia has sucked its economy dry. Its somoni currency has also fallen apart over the past couple of years as the US dollar strengthens and low commodity prices continue to undermine confidence in Emerging Markets.

Earlier this year, a run on the banks in Tajikistan betrayed just how nervous people had become over the stability of the banks. Many ATMs ran out of cash.

Tajikistan has asked for advice from both the European Bank for Reconstruction and Development (EBRD) and the IMF, although it has yet to take any financial aid. This is probably because, despite a handful of missions to Dushanbe, the IMF and Tajikistan couldn’t agree on a set of conditions to guarantee the loan.

On a visit to Central Asia in October, Juha Kahkonen, IMF deputy director for the Middle East and Central Asia, said that it had moved closer to agreeing conditions for a loan. It also described the state of the Tajik banking sector as dire.

“Discussions will continue in the coming weeks and we hope the programme can be agreed in the coming months,” he told Reuters on a trip to Almaty.

But he also said: “Their [Tajik banks] lending practices have not been very sound. Non-performing loans are about half of total loans.”

Central Bank data showed that the share of non-performing loans had risen to 58.7% of the banks’ loan portfolios from 37.8% in September.

Banking systems across the region are creaking. A Handful of smaller banks in Azerbaijan have gone bankrupt and several are under pressure in Kazakhstan. The region’s financial system has been fragile for years. After the 2008/9 Global Financial Crisis, Kazakh banks were left with one of the world’s biggest bad debt ratios, forcing the government to pump billions of dollars into the system.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Uzbekistan develops ties with Pakistan

DEC. 22 2016 (The Conway Bulletin) — On a trip to Pakistan, Uzbekistan’s deputy PM Ulugbek Rozukulov agreed with Pakistani business minister Khurram Dastgir Khan to set up a joint business council to improve ties between the two countries. Since former president Islam Karimov died in September, Uzbekistan has worked to improve relations with its neighbours. Pakistan has also invested more time into developing ties in the Central Asia region. It is part of both the CASA-1000 project to import electricity from Tajikistan and Kyrgyzstan and also part of the TAPI gas pipeline project to import gas from Turkmenistan.

ENDS

(News report from Issue No. 310, published on Dec. 23 2016)

Tajikistan’s TSB bank re-starts normal activities after state rescue

DEC. 14 2016 (The Conway Bulletin) — Tajikistan’s Central Bank said that Tojiksodirotbank (TSB), the country’s troubled second-largest lender, has completed its temporary administration period and will now resume banking activities.

The Central Bank intervened in TSB in May, saving the bank from bankruptcy. It cut staff numbers and injected 2b somoni ($254m) into the bank, becoming an 80% shareholder. Sources cited by the Avesta news agency also said the government had injected 1.2b somoni ($152m) into Agroinvestbank and hundreds of millions of somoni into Fononbank and Tochprombank to save them from going bankrupt too.

These banks had suffered a liquidity shortage triggered by a fall in the value of the somoni and a steep rise in bad loans. Savers and government employees, who received salaries through banks were unable to access their funds.

Now, TSB said it will soon resume regular banking activity.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)f

Tajikistan sells fertiliser producer to China

DEC. 14 2016 (The Conway Bulletin) — The Tajik parliament ratified an earlier agreement on the sale of Tajik Azot, a fertiliser producer, to China’s Henan Zhong Holding. The Chinese side, which will hold a 51% stake, pledged a $360m investment to modernise the plant. The Tajik government will retain 30% of the profits. In 2014, the government seized Tajik Azot, previously owned by Ukrainian businessman Dmitro Firtash, after Firtash was arrested in Vienna. China has extended its influence over Tajik business this year.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)f

China completes power plant refit in Tajikistan

DEC. 9 2016 (The Conway Bulletin) — China completed the $350m refit of a power plant outside Dushanbe that is considered vital to generating electricity for Tajikistan’s capital city. The refit of the power station highlights just how powerful China’s has become in Tajikistan. It has replaced Russia as the mainstay of the economy. Electricity is important in Tajikistan because its cities suffer from blackouts throughout the year.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Tajik President visits Sri Lanka and India

DEC. 12/13 2016 (The Conway Bulletin) — Tajik President Emomali Rakhmon travelled to India and Sri Lanka to drum up political and economic support. India has redeveloped the Ayni airbase near Dushanbe and there has been on-off talk of the Indian air force taking over running of the base.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)f

Tajik President flies to India for 5-day visit

DEC. 16 2016 (The Conway Bulletin) — >> Why is Tajik president Emomali Rakhmon in India? Is this just another meet and greet trip or something more significant?

>> It’s a five day trip starting on Dec. 14, so the length gives away some of the importance. He’s timed it nicely if he wanted to watch the final cricket test match between India and England down in Chennai, but I don’t think that’s why he’s there. Instead Rakhmon and Indian PM Narendra Modi will hold talks aimed at boosting bilateral relations. For India, Tajikistan has been groomed to be something of a springboard into Central Asia. For Tajikistan, India is a potential major investor.

>> I can understand why Tajikistan wants India as an investor, it must need a counterbalance to China’s growing influence and also to Russia, but why does India need to be in Central Asia?

>> India has been late getting in on the act in Central Asia. Whereas China, its great Asian rival, has developed now fairly substantial political and business ties, India has appeared flat-footed. Central Asia is an energy and mineral rich region virtually on its door- step but India simply hasn’t been able to develop any major footholds. Take the energy sector. India needs more energy supplies, so this is important to Delhi. When ConocoPhillips wanted to sell its 8.4% stake in the Kashagan oil project in the Kazakh sector of the Caspian Sea in 2012, it negotiated a deal with India’s state-owned ONGC. This was to be ONGC’s chance to buy into one of the most highly prized pieces of energy real estate in the world. It didn’t work out, though, as Kazakhstan exercised an option that it had on the field and pushed the stake towards China. China’s CNPC ended up buying it for $5b in 2013. India was left looking impotent.

>> That’s certainly a major snub, especially if India has already agreed the deal. What has India done since then to get back into the Central Asian region?

>> It’s been busy. Modi toured all five Central Asian states in 2015. It was a whirlwind tour to each of the region’s capitals and was generally considered a diplomatic success. And India has develop some major projects since losing out on the Kashagan stake. The biggest of these is the TAPI gas pipeline running from Turkmenistan, across Afghanistan to Pakistan and India. It’s an ambitious multi-billion-dollar project that will change the dynamic of the region. Suddenly a major infrastructure project is flowing north-south rather than west-east.

>> So where does Tajikistan fit into all this?

>> India’s interest in Tajikistan is more strategic than obviously economic. In 2003, India upgraded the Ayni airbase outside Dushanbe. The theory was, back then, than it was going to station its air force at the airbase but this never came about. When Modi was in Tajikistan last year he visited the base but no deals were agreed, at least publicly. Earlier this year, the members of the influential China and Russia led Shanghai Cooperation Organisation voted in India and Pakistan as members. Tajikistan has been an important ally for India in helping it secure this.

>> Right. What else is likely to come out of Rakhmon’s visit to India this week?

>> It’s difficult to say for sure. This is Rakhmon’s sixth trip to India but his first since 2012. Indian media have speculated that there will be an upgrade of Indian-Tajik relations and that there could be some movement over the Ayni airbase but a pre-visit statement from the Indian ministry for external affairs was tight-lipped.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

China dominates Tajik economy

DEC. 13 2016 (The Conway Bulletin) — Tajik media quoted an unnamed source in the state’s statistics committee as saying that foreign direct investment had risen sharply in the third quarter of the year, mainly due to heavy infrastructure investments by China. The source said that China made up around two thirds of the investments, highlighting just how influential it has become over Tajikistan.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)

Tajik Banks

DEC. 16 2016 (The Conway Bulletin) — News that Tojiksodirotbank had resumed banking activities might have been a relief for its many customers, but it’s still keeping the Central Bank’s officials on the edge of their seats.

Injecting around $500m, as it did to save Tojiksodirotbank from going bankrupt, into the banking system was not a joke for the Tajik government. It is struggling to keep its somoni currency afloat against a strengthening US dollar and has faced a severe downturn in remittances from migrant workers, an important part of Tajikistan’s economy.

Tajikistan is one of the world’s most remittance-dependent countries. Transfers from workers abroad accounted for around half of the country’s GDP a few years ago.

Now, the picture might be different. The Central Bank has blamed the liquidity crisis in the banking sector on the shrinking remittances, projected to decrease again this year. In two years, between 2014-2015, remittances had fallen by 47% from $3.9b.

The combination of these events put increasingly pressure on the banking sector, which risked default earlier this year. The government intervention seems to have plugged the main hole, but the crisis is far from over.

With the bailout, the government inherited the banks’ shaky credit portfolio. For regular people, the pressure on the economy has made it increasingly difficult to pay back their debt. In addition, several state-owned companies that had borrowed heavily in previous years have started to show signs of insolvency.

The government knows well enough that it is simply not in a position to bail out its entire economy.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)f

Russian police arrests Tajik men for plotting attack

DEC. 12 2016 (The Conway Bulletin) — Police in Moscow said that they had arrested citizens of Moldova and Tajikistan who had been planning a series of attacks. Security services said that the men were linked to the radical IS group and had been acting under the orders of a commander based in Turkey. Intelligence agencies worry that Central Asia has become a key recruiting ground for IS.

ENDS

(News report from Issue No. 309, published on Dec. 16 2016)