Transition to a Market Economy

Tajikistan Table of Contents

In the last years of the Soviet system, Tajikistan followed the rest of the union in beginning a transition from the conventional Soviet centralized command system to a market economy. Early in 1991, the Dushanbe government legalized the leasing and privatization of state enterprises (excluding industries deemed critical for national security). However, the transition met firm resistance from individuals who still held positions that gave them access to economic power and technological know-how; political figures with ideological objections to market reforms also voiced opposition. Such influential people insisted that the previous system could be made efficient if Tajikistanis were urged to work harder. This view was made popular by the sharp price increases that followed price decontrol in the initial reform stage. Citizens' hardships, fear, and anger resulting from the initial economic shock greatly slowed the transition to a market economy. For instance, in the first year of independence, only four private farms were established.

The regime of Imomali Rahmonov, who came to power in December 1992, showed little interest in continuing the limited market reforms of 1991 and 1992. At the same time, the new regime declared its support for private enterprise on a small or moderate scale, expressing the hope that foreign investment would help revive the country's shattered economy. By the mid-1990s, about half of all small businesses, especially those in the service sector, were privately owned. In November 1995, the legislature approved a reform plan for the period 1995-2000, but the plan included no specific steps toward the general goals of privatization and the fostering of foreign and domestic investment.

In 1992 Tajikistan acquired its first commercial bank, the Tajikbankbusiness. Established primarily to invest in the republic's economy, the state-owned bank assumed the functions of the former Soviet State Bank (Gosbank); it also sought to develop links with the United States, Iran, China, Pakistan, Saudi Arabia, and Britain, among other countries. After the dissolution of the Soviet Union, Tajikistan continued to use the old Soviet ruble until Russia replaced that currency with the Russian ruble in 1994. At that time, Tajikistan joined the Russian ruble zone (see Glossary), a move that worked against Tajikistani interests. Russia did not send as many rubles as promised, and many of the new rubles that were sent quickly left Tajikistan as inhabitants bought commodities from other Soviet successor states, especially Uzbekistan and Russia. Thus handicapped, the cash economy often gave way to barter and promissory notes. As a result, the Dushanbe government decided to leave the ruble zone by introducing the Tajikistani ruble in 1995. At the time of its introduction, the new currency had an exchange rate of fifty per US$1, but its value slipped drastically through 1995, reaching 284 per US$1 in January 1996.

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Source: U.S. Library of Congress