Remittances to Central Asia are falling, but less so in ruble terms


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Remittance flows to several Central Asian countries appear to be declining precipitously in the first half of this year, raising concerns that these flows are less resilient in the Europe and Central Asia region than in other developing regions. Remittance flows in US dollar terms to Kyrgyz Republic, Armenia, and Tajikistan declined by 15 percent, 33 percent and 34 percent respectively in the first half of 2009 compared to the same period last year.
Most of remittances to these three Central Asian countries come from Russia. From a survey of central banks that we conducted last year, Russia reportedly accounts for more than four-fifth of remittance inflows in Kyrgyz Republic and Armenia, and it was the top source country for remittances to Tajikistan. Driven by increasing emigration, primarily to Russia, remittance flows more than doubled in Kyrgyz Republic and Tajikistan US dollar terms between 2006 and 2008, while personal transfers through banks in Armenia increased by some 70 percent.  

 These remittance flows from Russia tend to be denominated in rubles. Because of the financial crisis, the ruble lost 25 percent of its value in the first half of 2009 compared to its average value in the corresponding period the previous year. 
If measured in ruble terms, remittances to Kyrgyz Republic actually increased 17 percent in the first half of 2009 on a year-on-year basis! In Armenia, the year-on-year fall was only 8 percent, and in Tajikistan by 10 percent (see chart 1). Only in Tajikistan, the decline on a year-on-year basis appears to be steep because of the unusually high level in 2008, when remittances surged “abnormally”. Also the high degree of seasonality tends to overstate the extent of the decline. As chart 2 shows, remittances are recovering, following a similar trend in 2007. 

Going forward, we expect remittances to be resilient relative to other flows such as FDI and private portfolio flows. We expect remittances to the Europe and Central Asia region to fall by 15 percent in US dollar terms in 2009, and recover by 3 percent in 2010 (see Migration and Development Brief 10).

Chart 1
Chart 2A
Chart 2B
Chart 2C



Sanket Mohapatra

Associate Professor, IIM Ahmedabad

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Aleksandr V. Gevorkyan, Ph.D.
October 15, 2009


Thanks for an interesting report. Counted and uncounted remittances [via private/family transfers] are an important, yet probably most unstable and unsustainable, source of income for large numbers of households in those three countries.

Seasonality is important. Also very telling is the fact that most migrants work in the construction sector, which typically booms around summer/early fall but which has practically come to halt in the host economies due to the crisis.

Waiting to see what the actual estimates are going to be for 2009.

Here's a link to a brief overview of situation in Armenia from last spring - still very much relevant [with specifics on migration trends and remittances].

Clearly, rapid growth in remittances in terms of volumes and frequency calls attention to home economy's development and economic reform...a policy approach paramount in all developing/transitioning economies.

Aleksandr V. Gevorkyan, Ph.D.

Andrew Gaboury
October 19, 2009

It certainly will not help the states that rely on remittances that the economic crisis is preventing them from flowing. When the economy contracts in the sender state, the worst off is always those in the receiver state. This is especially troublesome in the cases of Kyrgyzstan and Tajikistan where there have been rumblings of increased Islamic fundamentalist activities. It is not too hard to imagine that decreased revenue reaching marginal households could result in greater extremist recruiting. This does not bode well for Central Asia in general or these states in particular.