TAJIKISTAN’S NEW CURRENCY STILL VULNERABLE.

With the IMF’s approval, the Tajik authorities recently introduced a new national currency, the somoni. Tajik rubles are now exchangeable for somoni for a five-month period which began on October 30, 2000, at a rate of 1,000 rubles for one somoni. The currency can be exchanged at any Sberbank branch. According to the National Bank of Tajikistan (NBT), the exchange is being conducted gradually to prevent panic and avoid hurting the economy. The population held accounts of approximately 60 billion Tajik rubles as of October 2000. Enough of the new currency has been printed to maintain liquidity on the domestic market. Preparations to introduce the new currency were initiated in September 1999 (Russian agencies, October 29, 2000).

The Tajik currency has been under heavy pressure since the August 1998 Russian financial crisis. From January through October 2000, the official exchange rate fell from 1,436 to 2,200 Tajik rubles per dollar. In 1999, the Tajik ruble fell from 998 per dollar in January to 1,436 in December, depreciating by 21.7 percent for the year in effective terms. The NBT hasn’t been able to keep the somoni much more stable than the ruble as the currency depreciated to 2.35 to the dollar in early February from the new currency’s introduction at 2.20 to the dollar at the end of October 2000 (Russian agencies, February 11, 2001).

Because of the structure of Tajikistan’s exports and imports, the Tajik currency depends heavily on the economic performance of other CIS countries (especially Uzbekistan and Russia) and on world prices for commodities such as aluminum and cotton. IMF and World Bank loans will continue to be important sources of support to help stabilize the somoni, but the exchange rate is likely to remain quite vulnerable to external shocks for many years to come. The central bank will continue to intervene in order to stabilize the currency, but its ability to defend the somoni is limited by the modest size of its foreign exchange reserves. The somoni is projected to continue to depreciate in nominal terms in the future. The exchange rate is likely to track inflation fairly closely in the medium-to-long term (PlanEcon Review and Outlook for the Former Soviet Republics, October 2000).

MOSCOW AND DUSHANBE LOOK FOR TERRORISTS IN THE WRONG PLACE.