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CORONA VIRUS - The situation in Tajikistan

1. General situation

After weeks of denials and apparent Government coverups, on April 30 authorities confirmed the first 15 cases of COVID-19 in two geographically distant regions. The announcement of first COVID-19 cases in Tajikistan came immediately ahead of a visit by a World Health Organization (WHO) team to the country. 

The accuracy of the information the state now provides about its case load and efforts should be heavily scrutinized. Those numbers will now appear across countless tracking dashboards, and likely some of the focus on the country — as an outlier with shockingly no COVID-19 cases — will fade. But even if the spotlight moves on from Tajikistan, the reality is that Dushanbe is facing a massive public health crisis. 

President Emomali Rahmon pledged on May 1 to double salaries for health workers over a three-month period. That means nurses earning around 45 USD per month will take home 90 USD if they are involved in the front-line battle against COVID-19. Doctors, meanwhile, typically make about 120 USD per month. It is unclear whether any compensation is envisioned for health workers who fall sick or even die with COVID-19.

Dozens of millions of dollars have come from the international community to help Tajikistan overcome the crisis. The European Union alone has provided at least 52,2 million EUR (USD 57 million) for short- and long-term COVID-19 support to be provided through partners like the World Health Organization, UNICEF, and German development agency GIZ.

Millions of dollars’ worth of other emergency support has come, in either money, logistical guidance or in-kind aid, such as PPE, thermometers and even food, from the World Bank, the United States, China, Russia, Kazakhstan, Uzbekistan, Switzerland, and the Asian Development Bank.

2. Preventive measures

Tajikistan closed its borders on March 24 (at least at official checkpoints; its borders are notoriously porous).

Due to a coronavirus outbreak, Tajikistan suspended flights from Somon Air and China Southern Airlines to China, as well as flights to Iran and Afghanistan. A headquarters has been set up at the Tajik Ministry of Education and Science to provide information on preventing the spread of coronavirus. According to the work plan, all educational institutions must comply with hygiene standards in their institutions and use anti-virus materials, including masks.

Due to the new type of coronavirus COVID-19 spread in Korea, Iran, Italy, Afghanistan and Japan, as well as the ongoing epidemic in China, the Ministry of Foreign Affairs of the Republic of Tajikistan recommends Tajik citizens to temporarily refrain from traveling to the above countries. Also, Tajikistan decided to temporarily stop the import of any food from China to avoid the entry of coronavirus into the country.

Tajik authorities report that passengers arriving from China, Japan, Korea, Vietnam, Singapore, Australia, Malaysia, Cambodia, the Philippines, Thailand, Nepal, Sri Lanka, India, Finland, Italy, Britain, Spain, Sweden, Belgium, Israel , Austria, Croatia, Switzerland, USA, Canada, UAE, Egypt, Iran, Lebanon, Kuwait, Bahrain, Oman, Afghanistan, Iraq and Algeria countries will be quarantined for 14 days. The Tajik Civil Aviation Agency has recommended suspending the sale of airline tickets to people departing from China, Iran, Afghanistan, South Korea and Italy to Tajikistan.

At the end of April, Tajik authorities began to issue orders for more strict preventative actions, including the closure of schools (but not universities) and banning of large gatherings (but leaving markets open). And over the weekend, the Tajik football league — which was among the few global sports outfits playing games — suspended its season through May 10.

Now it is mandatory for Tajiks to wear masks in public.

All kindergartens and schools were closed for an unscheduled vacation between 27 April and 10 May 2020.

No quarantine was introduced; only non-food markets and non-production services were temporarily closed. Pro-government experts said that the state’s financial capabilities are limited, and therefore the government cannot quarantine like other countries.

All public events, including sports events, public meetings, cinema showings and theatre performances, have been temporarily banned throughout the country. Other public services (markets, public transport, banks and etc.) across the country are functioning in regular mode.

Authorities of major cities, including Dushanbe and Khujand carry out the mass disinfection of the streets, bus stops, park benches and apartment blocks with chlorine. The work is mainly conducted during the evening and night.

Three border crossing points with Uzbekistan and another three with Kyrgyzstan are open for international cargo. International trucks are unloaded in the terminal zone and goods are loaded onto local trucks. Drivers who enter Tajikistan are placed in 14-day quarantine in districts hospitals.

Tickets for charter flights from Russian cities to Tajikistan went on free sale on November 16.  The Standing Committee on COVID-19 Response reportedly made such a decision following proposal from the Ministry of Foreign Affairs (MFA). Charter flights will be operated by Somon Air from Russian cities of Moscow, St Petersburg, Kazan, Ufa, Krasnodar, Yekaterinburg, Krasnoyarsk, Irkutsk, Novosibirsk and Surgut. Compatriots returning home must hold a certificate of a negative COVID-19 test according to PCR method, made no earlier than 96 hours (4 days) prior to arrival in Tajikistan. Recall, air traffic between Tajikistan and Russia has been suspended since March 20, 2020. Tajik authorities have suspended all international flights.  Tajikistan closed all its airports at midnight on March 19-20 due to the coronavirus concerns.  Only charters flights to repatriate Tajik nationals stranded in foreign countries due to the coronavirus crisis have been operated so far.

3. Economy

a. Economic impact

The global health crisis has had a significant impact on a number of Tajikistan’s key economic drivers, with real GDP growth projected to fall to 1.6% in 2020, down from just under 7% in 2019. The most significant impacts on the country’s economy have come through trade disruptions, lower migrant remittances and a concomitant slump in domestic consumption, and lower commodity prices for many of the country’s main exports. One immediate consequence of the slowdown is a possible reversal of much of the progress in reducing the national poverty rate, which in 2019 had fallen to 26.3% of the population. In 2020, the World Food Program estimated that some 47% of Tajiks were living on less than USD 1.33 per day, with a third of the population suffering from malnutrition. The disruptive impact of the pandemic on supply chains and business has led to significant food price increases, creating a difficult situation for many households in what is already the region’s poorest country in per capita terms.

The impact on the country’s labor market has also been substantial. A large informal sector, with only 13% of the workforce formally employed by the private sector in 2017, and the significant number of labor migrants working abroad have created additional challenges in administering support to those that need it most, whilst building pressure on local labor markets. Given the high rates of informality, it is disappointing if not surprising that the World Bank calculated that only 5% of households received government aid as of August 2020. The estimated 500 000 Tajik migrants working in Russia in 2019 generated remittance inflows equivalent to around one-third of GDP; in March 2020, inflows were 50% lower than in March 2019.

This significant collapse in remittance payments has not only led to lower levels of consumption and growth, but it may also have serious implications for the country’s current account balance. More worryingly, the fall risks squeezing the most vulnerable at time where they are most at risk – according to the World Bank, two out of five households had reduced their food consumption during the peak of the pandemic. The deteriorating economic situation is likely to have a significant impact on public finances. Public debt is projected to increase to 51% GDP in 2020 from 45.2% in 2019, with the fiscal deficit growing to 2.3% GDP. Despite these constraints, the government has moved ahead with promised public sector wage and pension increase, though forecast inflation in 2020 of 10% is likely offset them to a significant extent.

Lower public investment, reduced remittances, and weak foreign direct investments resulting from the COVID-19 outbreak are projected to slow down Tajikistan’s economic growth in 2020 and 2021, according to a new Asian Development Bank (ADB) report. In its Asian Development Outlook (ADO 2020), ADB forecasts (as of 16 March 2020) Tajikistan’s gross domestic product growth to drop to 5.5% in 2020 and to 5.0% in 2021, from the 7.5% economic growth rate recorded in 2019.

Inflation, which stood at 8% last year, is projected to remain under 10% in 2020. The forecast rests on expected exchange rate flexibility, external currency pressures from ruble depreciation, potential supply shocks, and possibly faster monetary expansion during an election year, along with expected increases in public salaries and higher electricity tariffs. Inflation is expected at 8.0% in 2021 with slower growth in demand.

The overall volume of cash transfers from Russia decreased between 30% and 35% in March compared to last year, according to two of the major payment systems. It should be noted that Tajikistan is among the most remittance-dependent country in the world. Tajik workers in Russia send home billions of dollars per year, equivalent to about 30% of GDP. 

b. Trade barriers

The export of certain food products such as grains, beans, wheat, flour, rice, eggs, potatoes and meat are prohibited.

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c. Measures for economic relaunch

Despite acknowledging the threat of the pandemic to the country’s economy rather late, the government has now undertaken a range of measures to support the private sector and households. The government continues to implement an Action Plan to reduce the impact of external risks to the national economy. The program of support has so far focused on providing food security and price stability of staple goods, ensuring timely delivery of social assistance and supporting vulnerable segments of the population. At the same time, the government has also provided a number of non-monetary support to the private sector and households, with a number of tax benefits to SMEs, postponement of non-tax audits of businesses and attracting financial assistance from IFIs. The government has also postponed a number of anticipated changes, such as the increase in utility tariffs, whilst instructing commercial banks to restructure loans and drop penalties for missed payments.

The Action Plan to prevent and reduce the impact of potential external risks on the national economy focuses on:

  • providing consumer markets with an abundance of essential products, including flour, butter, meat, sugar, eggs, vegetables, increasing their production and stocks, and preventing price increases.
  • ensuring the timely fulfillment of social obligations of the state, support of vulnerable segments of the population
  • providing tax incentives to small and medium-sized businesses, reducing and postponing non-tax audits
  • and attracting financial assistance from international financial organizations.

Business support measures introduced by the Government of Tajikistan are in line with the Decree of the President of the Republic of Tajikistan ‘On Countering the Socio-Economic Impact of COVID-19 Outbreak on the Republic of Tajikistan’ (#1544 dated June 5, 2020) and the Country Preparedness and Response Plan (CPRP) prepared by the Republican Task Force and endorsed by the Prime Minister. The full package of business support measures is estimated to cost approximately USD 160 million in line with the CPRP and is intended to support MSMEs and employment through temporary tax concessions and relief to domestic producers and entrepreneurs. According to June 2020 estimates of the Ministry of Finance, these measures are estimated to cost more than 600 million somoni in forgone tax revenue.

Specifically, amended annual budget legislation introduces the following measures to support MSMEs:

  • Tax holidays and fee waiver for late submission of tax declarations for businesses in the tourism and hospitality sector, recreational and sports centers, sanatoriums, food places, international passenger transport and air navigation (from April 1, 2020 until September 1, 2020).
  • Tax exemption for individual entrepreneurs operating under a patent in local markets (bazaars), trading centers, shopping malls and consumer service points, including beauty salons, fashion houses, hairdressers and sewing workshops (from May 1, 2020 until August 1, 2020).
  • Exemption of businesses which import disinfectants, medical supplies and personal protective equipment, other medical equipment and instruments for equipping medical laboratories, and other supplies required for COVID-19 testing from value added taxes (VAT), excises and customs duties (from July 1, 2020 until September 1, 2020).
  • Exemption of medical facilities, hotels and sanatoriums, which are hosting, diagnosing and/or treating COVID-19 patients free of charge from corporate income tax (CIT), value added taxes (VAT), and automobile road user tax (from July 1, 2020 until December 31, 2020).

The Tax Committee under the Government of the Republic of Tajikistan has also introduced moratorium on tax and audit inspections of businesses. In the meantime, the Tax Committee and the Ministry of Finance are also drafting the amended Tax Code of the Republic of Tajikistan, which is meant to provide further ‘breathing space’ for businesses which have been affected by the coronavirus pandemic.

Through the state-owned Entrepreneurship Support Fund (ESF)164 under the Ministry of Finance, the government is disbursing concessional loans to struggling MSMEs in need of urgent financing as a result of COVID-19, including businesses which produce and/or import food and medical products.

d. Economic outlook

The global health crisis has had a significant impact on a number of Tajikistan’s key economic drivers, with real GDP growth projected to fall to 1.6% in 2020, down from just under 7% in 2019.

Public debt is projected to increase to 51% GDP in 2020 from 45.2% in 2019, with the fiscal deficit growing to 2.3% GDP.

4. Useful links

5. Dossier Coronavirus

Het coronavirus heeft een wereldwijde impact, niet alleen op de gezondheid maar ook op de economie. Ook uw export kan hiervan gevolgen of zelfs hinder ondervinden.

FIT monitort de risico's dagelijks en ons buitenlands netwerk informeert u over alle implicaties voor Vlaamse exporteurs op hun internationale activiteiten.

In het dossier Coronavirus vindt u een aantal nuttige tips, adviezen en inzichten in de economische impact van de verspreiding van het virus op internationaal ondernemen.

Met vragen over internationaal ondernemen in tijden van Corona, kan u terecht bij exportadvies-corona@fitagency.be.

19 november 2020