Tajikistan - Money

Tajikistan's choice of currency has normally been according to the will of Moscow. Even after independence in 1991, for example, it began to use the new Russian ruble. In May 1995, however, it finally created its own legal tender, the Tajik ruble (TR). At that time, the National Bank of Tajikistan set the exchange rate as TR100 to US$1. Between 1995 to 1999, consumer price inflation increased by a rate of 1,680 percent, or an average annual compound rate of 420 percent. In 1999, however, the inflation rate was 28 percent. The depreciation of the Tajik ruble throughout the years is attributable to internal and external factors that diminished confidence in the local currency. Civil unrest and political instability, continued lack of economic opportunities for the average citizen, and the government's loose monetary and fiscal policies were among internal factors. External factors include Russia's 1998 economic woes, rise of petroleum prices, fluctuations of world cotton and aluminum prices, and a region-wide drought. By January 2001, the exchange rate reached TR2,200 to US$1.

Meanwhile, the government embarked on a new currency called the somoni in October 2000 to take into account several years of high inflation. Hence, cash transactions no longer require large wads of currency. The name change "ruble" to "somoni" was also a tactical move by the government to use the currency as a symbol for Tajik nationalism. As of April 2001, the somoni was to have been the sole legal tender of the republic. At its introduction SM1 was equivalent to TR1,000. The exchange rate of the somoni is expected to reach SM2.5 to US$1 by the end of 2001.