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