Russia’s rouble crisis poses threat to nine countries relying on remittances
Drop in rouble value not only decimating amount sent home by workers
from Caucasus and central Asia, but could lead to political unrest
Shaun Walker in Moscow and Alberto Nardelli
The Guardian, Sunday 18 January 2015 17.18 GMT
According to data projections based on World Bank figures, nine
countries that rely heavily on roubles sent home from Russia could
collectively lose more than $10bn in 2015. Photograph: Jussi
Nukari/Rex Features
Russia’s rouble crisis is posing a major threat to countries along its
southern fringe, whose economies rely heavily on billions of dollars
shipped home every year by their own citizens working within Russia.
The 50% drop in the rouble has not only decimated the value of
remittances sent home by workers from the Caucasus and central Asia,
but is discouraging migrants from staying in Russia to earn a salary
for themselves and their families. According to data projections by
the Guardian, based on World Bank figures, nine countries that rely
heavily on cash sent home from Russia for their economic buoyancy
could collectively lose more than $10bn (£6.6bn) in 2015 because of
the weak Russian currency.
“I’ve sacrificed starting a family, I’ve sacrificed any kind of normal
life to work here, and now I’m only able to send home a few hundred
dollars a month,” said Aziz, who works at a car repair plant in
northern Moscow. His regular job and some moonlighting as a cab driver
has typically earned him around £600 per month to send home to his
parents and sisters, who live in the Fergana valley in Uzbekistan. Now
he is lucky to earn half that sum. “I’m starting to think there is not
much point in staying. Life is miserable enough here anyway, the only
reason to be here was for the money. I think it could be time to go
home.”
Aziz is not the only person thinking about leaving. As the economic
situation in Russia deteriorates, authorities have also introduced a
new harsher system for obtaining work permits for migrant workers.
Currently, there are millions of citizens of former Soviet countries
working illegally in Russia.
“So far people are not leaving en masse, mainly because they are
worried they won’t be able to come back,” says Gavkhar Dzhurayeva, who
runs an organisation offering free legal support to migrant workers.
“However, lots of people are talking about it, if things don’t
improve.”
The tendency could be problematic for Russia too, which is expected to
rely on immigrant labour for the formidable building projects as the
country prepares to host the 2018 World Cup.
According to the World Bank, 21% of Armenia’s economy, 12% of
Georgia’s, 31.5% of Kyrgyzstan’s, 25% of Moldova’s, 42% of
Tajikistan’s, 5.5% of Ukraine’s, 4.5% of Lithuania’s, 2.5% of
Azerbaijan’s and 12% of Uzbekistan’s, rely on remittances.
These are some of the highest rates in the world. Of the five
countries globally whose GDP is most reliant on these payments, three
are former Soviet republics. In most of these cases money from
immigrants in Russia comprises a significant portion of these inflows.
About 40% of remittances to Armenia, Georgia, Moldova and Ukraine are
from Russia, rising to 79% for Kyrgyzstan.
Already, the sharp decline in the rouble has forced currency
devaluations in Turkmenistan this month, and speculation that
Kazakhstan’s tenge may need a further devaluation against the dollar
after a 19% move last February.
The economies of the region are strongly tied together, with Belarus
sending more than half of its exports to Russia, and the nascent
Eurasian Economic Union supposedly tying together Russia, Belarus and
Kazakhstan as a single bloc. Armenia and Kyrgyzstan have also joined.
In addition to the plummeting rouble, these countries will also have
to deal with a potentially huge shortfall in remittances, which cannot
but have an effect on GDP.
In October 2014 the World Bank estimated that remittances for the year
to the nine countries mentioned earlier would have totalled $33.3bn by
the end of 2014. Of this figure, about $19bn would have been outflows
from Russia.
At the time of the World Bank estimate, one US dollar exchanged for 40
roubles. By the end of the year, the currency had lost about 50% of
its value. If that new rate held steady throughout this year – and
remittances were otherwise unchanged – their value would drop
precipitously in 2015, to just $7.6bn.
It is also worth noting that the figures given are the official
numbers, sent via bank transfers. The real amounts, which include wads
of dollars brought home in person by migrants or given to friends to
carry, are likely to be much higher.
A weak rouble over a sustained period of time would have a minimal
impact in the Baltics, but in several other countries the effects
could be felt far more. In those countries where GDP relies so heavily
on migrants sending money back home, a prolonged currency crisis
throughout 2015 would, all other factors remaining the same,
potentially even lead to double-digit economic contraction.
Most vulnerable are the central Asian countries of Kyrgyzstan,
Tajikistan and Uzbekistan, where the ailing economies and dictatorial
political systems are in large part propped up by the money from its
nationals working in Russia.
In Uzbekistan, ageing dictator Islam Karimov said in 2013 that migrant
workers who went to Russia were “lazy” and should find a job at home,
but in reality, there is little work in Uzbekistan, where £100 per
month is considered a good salary and many towns simply have no
opportunity for work at all. Regional experts say that if the money
flow from migrant labourers dries up, rulers like Karimov would be in
serious trouble.
“If oil continues falling and the rouble continues falling, then
migrants will begin to return home,” says Daniil Kislov, who runs
fergana.ru, a central Asia news portal. “There are 2.4 million Uzbek
migrants in Russia, and those are just the official figures. These
people and their families are all surviving because of money made in
Russia. Essentially Russia has saved Uzbekistan and Tajikistan from
revolution, and if all these people return it will cause a social
explosion. Not today, but maybe in a year, or two, or five.”
From: Baghdasarian
http://www.theguardian.com/world/2015/jan/18/russia-rouble-threat-nine-countries-remittances