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Tajik remittance slump will weaken flawed banks

Thursday, October 20, 2016

Subject

Tajikistan's troubled banking sector.

Significance

Tajikistan's banking system has been in crisis since 2015, as problems in Russia feed through to this remittance-dependent economy. A decline in funds sent home by labour migrants has shrunk bank deposits, and the proportion of non-performing loans has risen sharply. The cash crisis is exacerbated by poor management and cronyism in financial institutions. The main banks, Tojiksodirotbank and Agroinvestbank, have restricted customer withdrawals.

Impacts

  • International financial institutions will condition assistance on reforms.
  • However, the government will balk at any reform measures liable to hurt the rich and powerful.
  • The government may seek Chinese support for the banking sector.
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