Declining Remittances and Food Insecurity in Tajikistan in the Wake of COVID-19



Country context

Despite the legacy of a civil war, political instability and natural disasters that have made Tajikistan one of the poorest countries in Central Asia, the country has made steady progress over recent decades in reducing poverty and growing its economy. Between 2000 and 2018, the poverty rate fell from 83 % to 27.4 %, while the economy grew at an average of 7 % per annum. [1] However, the level of job creation and private sector development has not kept pace with the growing population, making migration an economic lifeline for many people.

Around 30 % to 40 % of households in Tajikistan have at least one family member working abroad. [2, p.2] A typical ethnic Tajik migrant is a 34 year-old male who is married with five dependents. The majority of migrants have secondary education or vocational training and go to Russia (92 %) [3] and Kazakhstan to work in the construction, services and manufacturing sectors. A survey of Tajik migrants suggested that the income they earned overseas was approximately six times what they earned in Tajikistan before migration, with about half of their earnings being sent home. [4]

Remittances have become an important source of income for many low-income families who rely on it to buy food and other basic necessities. [5] In 2019, the inflow of remittances to Tajikistan amounted to around $2.5 billion, which was equivalent to around 33 % of the country’s GDP, making Tajikistan one of the most remittance-dependent countries in the world. Russia accounts for over 90 % of remittance inflows, making Tajikistan highly dependent on the economic performance of Russia. The costs of remittance transfers from Russia to Tajikistan are significantly lower than the Europe and Central Asia average of 6.48 % (Q1 2020). [6, p.9] Until 2020, the majority of transfers were made through money transfer systems (Contact, Unistream and Western Union) with transaction costs of 1–2 %. In 2020, the largest bank in Russia (Sberbank) partnered with national banks to send payments to Tajik accounts with a 1 % fee. [7]

The COVID-19 impact

The COVID-19 outbreak and associated global events resulted in economic recessions, shutdowns and currency devaluation in countries that receive Tajik labor migrants. Although remittance flows were relatively resilient to past crises, they experienced a sharp 22 % decline in the first quarter of 2020 [8], which compounded hardship for migrant family members. These flows slightly recovered in the second quarter, resulting in a total decline of 15 % in the first half of the year. [9] During the three months lockdown, the Russian government closed all non-essential businesses, including construction, services and manufacturing, and suspended all international aviation travel. These restrictions had a severe impact on migrants’ lives: an estimated 83 % lost income and were not able to return home. [10] A weakening rouble has reduced the value of remittances still coming into Tajikistan. At the same time, seasonal Tajik migrants who expected to travel for work in early spring are unable to leave their homes with no opportunities to migrate and no sources of income.

Since the start of the COVID-19 pandemic the costs of basic food items have also been rising in Tajikistan, partly driven by panic consumption and increased food insecurity. With reduced remittances, many poor households face difficulties in meeting their basic needs such as food. Domestic labor markets have sharply deteriorated, leaving limited opportunities for returning migrants and locals to find an income source in the country. [5] In rural areas, financing institutions offer limited access to loans due to the increased risk of insolvency.

COVID-19 and the resultant decline in remittances have severely affected Tajikistan’s most vulnerable population groups. Timely and appropriate mitigation measures are now necessary to address critical gaps. The United Nations Country Team has implemented socio-economic programs that have helped provide an immediate response to the pandemic, focusing on improving livelihoods and food security, supporting small and medium enterprises, and providing employment for the most vulnerable people. International Finance Institutions increased the levels of finance to help Tajikistan respond to the crisis including the World Bank financing a targeted social protection program to protect vulnerable children from health and nutrition insecurities. NGOs and private sector companies, together with the Tajik diaspora living abroad, have launched an online initiative (#MoHamdardem) to provide vulnerable people with food support.

Response measures

Despite the efforts of the international and local community, Tajikistan faces challenges in tackling the crisis and its consequences. Furthermore, the wake of the second wave of COVID-19 cases in Russia and neighboring countries indicates the risk of further health and economic deterioration in the country, leading to further income cuts, job losses, decline in remittances and increased food insecurity, creating an urgent need for support from the international community.

Among possible short-term responses, Tajikistan could offer support and incentives for migrant workers who lost their jobs in destination countries to retain their connections to those countries and look for new employment opportunities. This may include negotiating beneficial terms with the host country, such as free extensions to work permits. The implementation of such measures would help protect and stabilize the welfare of migrant workers and support them in finding new income sources and sustaining remittance flows. It would also help limit the number of migrants returning to Tajikistan, thus easing the pressure on labor markets within the country.

Another measure to help provide more resources to vulnerable families would be to subsidize financial institutions and money transfer systems, in order to temporarily eliminate fees for processing and withdrawing remittances.

Meanwhile, it is crucial to ensure that the people who are most vulnerable to the impact of declining remittances can access social insurance programs to fulfil their basic needs. Additional interventions in the form of targeted in-kind and cash transfers, and scaling up existing social protection programs, will help support the lifelines of the most vulnerable groups, reduce food insecurity, drive consumption and support the economy in these challenging times.

References:

1. The World Bank, 2020. The World Bank In Tajikistan: Overview/Economy. [online] Available at: < https://www.worldbank.org/en/country/tajikistan/overview#3 > [Accessed 16 October 2020].
2. United Nations Development Programme, 2020. Mitigating The Impact Of COVID-19 On Livelihoods In Tajikistan. [online] Available at: < https://info.undp.org/docs/pdc/Documents/TJK/TJK %20PIP_Support %20to %20livelihoods %20to %20COVID19_signed.pdf > [Accessed 16 October 2020].
3. Sputnik, 2020. About 92 % Of All Labor Migrants From Tajikistan Go To Work In The Russian Federation. [online] Available at: < https://m.tj.sputniknews.ru/russia/20180726/1026298045/russia-tajikistan-edut-trudovye-migranti.html?mobile_return=no > [Accessed 16 October 2020].
4. Lemon, E., 2019. Dependent On Remittances, Tajikistan’s Long-Term Prospects For Economic Growth And Poverty Reduction Remain Dim. [online] Migration Policy Institute. Available at: < https://www.migrationpolicy.org/article/dependent-remittances-tajikistan-prospects-dim-economic-growth > [Accessed 16 October 2020].
5. The World Bank, 2020. Economic And Social Impacts Of COVID-19: Update From Listening To Tajikistan. [online] The World Bank. Available at: < https://reliefweb.int/sites/reliefweb.int/files/resources/TajikistanL2TCOVID19Update.pdf > [Accessed 16 October 2020].
6. The World Bank Group, 2020. COVID-19 Crisis Through A Migration Lens. Migration and Development Brief 32. [online] Available at: < http://documents1.worldbank.org/curated/en/989721587512418006/pdf/COVID-19-Crisis-Through-a-Migration-Lens.pdf > [Accessed 16 October 2020].
7. Sberbank, 2020. Sberbank Has Increased The Number Of Partners Of The Transfer Ecosystem In Tajikistan. [online] Available at: < https://www.sberbank.ru/ru/press_center/all/article?newsID=00d35727-ef11–40ef-ba7f-220300763e60&blockID=1303®ionID=77&lang=ru&type=NEWS > [Accessed 16 October 2020].
8. European Bank for Reconstruction and Development, 2020. Responding To The Coronavirus Crisis: Update On Tajikistan. [online] Available at: < https://www.ebrd.com/documents/admin/tajikistan-coronavirus-policy-response-.pdf > [Accessed 16 October 2020].
9. Eurasianet, 2020. Tajikistan: Coronavirus Taking Heavy Toll On Remittances. [online] Available at: < https://eurasianet.org/tajikistan-coronavirus-taking-heavy-toll-on-remittances > [Accessed 16 October 2020].
10. Shelevakho, O., Arntz, H., 2020. Migrants In Need: COVID-19 And The Impact On Labor Migrants’ Health, Income, Food And Travel. [online] Available at: < http://www.peah.it/2020/08/8664/ > [Accessed 16 October 2020].