DUSHANBE, Tajikistan, July 5. Tajik somoni faces potential pressure from tightening monetary policy in the US and EU, according to the World Bank (WB), Trend reports.
The WB outlook shows that the Tajik somoni, which emerged as one of the best-performing currencies among developing countries in 2022, may now face increased pressure due to the tightening of monetary policies in the US and EU
While the somoni managed to withstand the impact of monetary policy tightening last year, thanks to higher remittances, a stronger ruble, and increased prices for Tajikistan's exports, the situation may take a turn for the worse in 2023, the WB’s analytics warn.
Both remittances and commodity prices are showing a negative outlook, which could have a strong effect on the exchange rate between the US dollar and the somoni.
The National Bank of Tajikistan follows a managed float exchange rate policy. However, Tajikistan's heavy reliance on the ruble for remittances and trade flows could lead to a decline in the current account and foreign exchange reserves.
The WB suggests that Tajikistan's authorities may consider adopting greater exchange rate flexibility to prevent the emergence of a parallel market. Gradually allowing the exchange rate to adjust in line with economic fundamentals could help mitigate potential risks.
As of July 5, the exchange rate stands at 1 USD = 10.9198 Tajik somoni, according to the National Bank of Tajikistan.
