Experts expect the socio-economic situation in Tajikistan to worsen against the backdrop of the war in Ukraine and sanctions against Russia. We calculated the vulnerability index of our economy to 151 countries of the world and found out that the Tajik economy is most vulnerable to Russia.

Formula of Vulnerability 

To determine the degree of vulnerability of the Tajik economy to other countries, we used a methodology developed by researchers from the S. Rajaratnam Graduate School of International Studies (RSIS) in Singapore. 

The index of vulnerability of the Tajik economy to Russia is expressed in terms of the volume of foreign currency inflow into the country according to the following formula:

Export of goods from Tajikistan to the Russian Federation + Export of services from Tajikistan to the Russian Federation +

Inflow of investments to Tajikistan from the Russian Federation + Inflow of remittances from the Russian Federation

The total amount of exports of goods of the Republic of Tajikistan + The total amount of exports of services of the Republic of Tajikistan + The total amount of investment inflows + The total amount of remittances from all countries

These indicators show the volume of foreign currency inflow into the country. On the example of Russia: the more Tajikistan exports goods and services, receives investments and remittances from Russia, the more the economy of Tajikistan depends on the economic situation in Russia. In case of suspension of exports, investments or remittances from Russia, Tajikistan loses income, foreign currency, and this is a direct indicator of the vulnerability of the economy: from one side, Tajikistan will lose income, on the other hand, the currency that will be needed to import the necessary goods. 

We used this methodology to calculate the index of vulnerability of the Tajik economy to other countries of the world in the period from 2014 to 2019. But we have excluded data on the volume of remittances to Tajikistan from the formula due to the unavailability of this indicator in open sources.

We are aware that Tajikistan economy is heavily dependent on remittances from migrants in Russian. Therefore, we separately calculated the index of the vulnerability of Tajikistan economy to the Russian Federation, taking into account the remittances of migrants for 2014 - the only year for which the necessary data are available.

Vulnerable economy of Tajikistan

Our analysis shows that the economy of Tajikistan, on average over six years, is 21.7% vulnerable to Russia. This means that 21.7% of all currency in Tajikistan, received through the export of goods, services and investments, comes from Russia. As a result, any social and economic events in Russia will greatly affect our economy and the quality of life of the Tajik people.

The TOP 5 countries to which the economy is most vulnerable according to the average for this period include China - 16.3%, Turkey is in third place - 16%, Kazakhstan is in fourth place - 10.8, Switzerland is in fifth place - 6.8 %. The volume of exports to Uzbekistan began to grow only in recent years, so Uzbekistan did not enter the top five in terms of the six-year average. 

The high vulnerability of our economy to Russia, excluding remittances from migrants, is formed through the export of services. The high performance of Kazakhstan, Turkey and Switzerland is formed due to the export of products, and China due to the volume of investments.

According to the State Committee for Investments and State Property Management of the Republic of Tajikistan, the total volume of foreign investment inflow into the Tajik economy in 2007-2021 amounted to over $11 billion, 30% of which came from China. China has invested about $3.3 billion in Tajikistan economy over this period.

Kazakhstan has always been the main market for Tajikistan raw materials - various ores and concentrates. They make up the bulk of supplies to this country, and a small part is vegetables.

Over the past two pandemic years, Switzerland has displaced Kazakhstan from the first line due to the import of Tajik precious metals. During these two years, the inflow of remittances has declined and the government had to cover the shortage of foreign exchange through the export of gold - a total of $ 1.6 billion. 

Turkey is also one of the main markets for Tajikistan products. Along with various ores and concentrates, Tajikistan also supplies primary aluminum and cotton to Turkey.

Impact of migrants remittances

If migrants' remittances are taken into account, vulnerability to the Russian economy increases by almost three to four times. Data on the total volume of transfers for 2014 is available on the website of the National Bank. The recalculation of the index taking into account these data shows a vulnerability of 78% compared to 27% without remittances from migrants from Russia during the same period.

Tajikistan is among the top three world leaders in terms of the ratio of remittances to GDP. For ten years, this ratio averaged one third of the country's GDP. The highest rate was recorded in 2013 - 49%, and the lowest rate in 2021 - 20%.

The flow of remittances by years shows that the volume of transfers depends on shocks in the Russian economy caused by economic crises and political events.

Negative forecasts

According to Asian Development Bank economists’ forecasts, the volume of remittances from Tajikistan labor migrants will almost halve in 2022.

Researchers attribute this fall to the consequences of sanctions against Russia due to the military invasion of Ukraine. The deterioration of the situation in the Russian economy will lead to a reduction in employment and will force many labor migrants to return home. The experts note that the reduction in the inflow of remittances from Russia will also lead to a significant decrease in purchasing power in Tajikistan.

The World Bank, therefore, predicts a reduction in remittances to Tajikistan this year at the level of 22%. This is due to the "decline in economic activity in Russia and the weakening of the ruble against the US dollar."

According to the Russia’s Central Bank, the volume of money transfers of individuals in 2021 from Russia to Tajikistan amounted to $1.8 billion, which is 3.4% more than compared in 2020.

Wherever the Ruble goes, Tajikistan Somoni follows

The vulnerability of the Tajik economy to Russia is also expressed through the attachment of the Tajik currency to the ruble. Any noticeable changes in the exchange rate of the ruble against world currencies affect the somoni. This is a consequence of the close trade and economic ties between the two countries: a third of Tajikistan's imports come from Russia, more than 1 million citizens of our republic work in this country, and Russia is also one of the country's two main investors.

Need new partners?

This degree of vulnerability means that any economic and political events in Russia affect the lives of Tajiks. We asked the expert what measures can help Tajikistan reduce this vulnerability.

Economist Bakhriddin Karimov shared that in addition to the reduction in remittances and falling incomes of the population, inflation is expected to accelerate against the backdrop of rising world prices for oil, grain and other goods.

“Thus,” he says, “the macroeconomic impact, given the unprecedented scale of the sanctions, will be very significant in terms of increased poverty, contraction in economic activity and a decline in budget revenues, against the backdrop of a parallel acceleration in inflation – creating a perfect storm scenario for the entire Tajikistan economy as a whole.” .

Karimov predicts the current crisis more significant and extremely dangerous for Tajikistan economy compared to previous crises in Russia, as it “will have a very long negative effect. Accordingly, the Government of Tajikistan should not consider that the crisis can simply be waited out and everything will be restored as before.”

The expert suggests that the military campaign in Ukraine may continue for a long time, as well as sanctions like those imposed against North Korea and Iran. “Neighboring countries that are economically dependent on Russia will need to look for new sources of economic growth and new external partners in order to survive in the new realities.”

The government of Tajikistan needs to radically revise all plans for economic cooperation with Russia, close the topic of joining the EAEU, which makes no sense in the new geopolitical reality, and urgently develop a real, not a paper program for diversifying the economy.

Karimov also advises creating jobs within the country to support the private sector and stimulate the domestic economy, including reducing the corruption and administrative pressure on private enterprises and entrepreneurs.

“In general, the whole strategy of dependence on migration and remittances from Russia will become completely unviable for Tajikistan when the Russian economy collapses,” he said. 

In the event of a negative scenario, this could lead to an increase in China's role not only as an economic and trade partner, but also in terms of military presence.

Editors: Altynai Mambetova, Andrey Gazin