Central Asia’s Coming Remittance Crash

When the Russian invasion of Ukraine began in late February 2022, economists looking at initial assessments of the likely economic fallout of the war believed that remittances, particularly to Central Asia, would drop dramatically.

In the January issue of The Diplomat Magazine, we traced the path of the narrative through the war’s first year, from deep concern to surprise laced with worry. Now, as 2023 approaches its final quarter, those worries may finally be coming to fruition.

Central banks in both Kyrgyzstan and Uzbekistan recently released data on remittances for the first half of 2023. And the news isn’t good.

Concern, Resilience, and Surprise

World Bank economists writing in March and May of 2022 were distinctly pessimistic about the economic outlook in Central Asia given the region’s deep ties with Russia. For Kyrgyzstan, Tajikistan, and Uzbekistan, in particular, remittances from Russia are an important economic lifeline. Beyond the money sent back, however, migrant worker opportunities are an important pressure valve for Central Asian countries unable to generate enough jobs for their citizens.

As Russia’s economy came under pressure – from funding a war effort and being squeezed out of polite global society – it was not a bad assumption that Central Asia would feel the pain too.

One report from May 2022 warned that “remittance flows to many Central Asian countries, for which the main source is Russia, will likely fall dramatically [in 2022].”

But by the end of the year, another World Bank report remarked: “Perhaps the most unexpected turnout is evident in Europe and Central Asia, where, instead of a decline due to the Russian invasion of Ukraine, remittance flows are expected to increase by 10.3 percent in 2022 following a strong 16 percent advance in the previous year.”

This resilience came as a surprise, but was also not difficult to understand given the circumstances (as opposed to the assumption about what the circumstances would be). Russia’s economy proved more resilient than expected and sanctions not as damaging as expected. And for Central Asians, the war, if anything, generated more job opportunities in Russia, not fewer.

Central Asians rushed to take advantage. As I reported earlier this year:

In the first quarter of 2023, 350,000 Tajik citizens migrated to Russia – 100,000 more than in the same period in 2022. More than 630,000 Uzbek citizens did the same, a 72 percent increase on the 366,000 that made the journey in 2022. Nearly 173,000 Kyrgyz citizens made the journey too, among others. 

But as economic data about remittances in 2023 becomes available, it’s looking like the boom-times may be over.

The Beat Drops?

In early August, Kyrgyzstan’s National Bank reported a drop of 28.5 percent in remittances in the first six months of 2023 in comparison to the same period in 2022. Uzbekistan’s Central Bank reported a similar drop, 21.5 percent over last year’s remittances.

The National Bank of Tajikistan, which along with Kyrgyzstan is routinely ranked among the world’s most remittance-dependent economies, ceased publishing remittance data back in 2014. Russia’s Central Bank filled that information gap but stopped publishing data on international money transfers last year. Without any data from either end, it will be difficult to judge the situation in Tajikistan with any kind of rigor. But Tajikistan is unlikely to diverge sharply from the pattern set by Kyrgyzstan and Uzbekistan; if anything the situation in Tajikistan is likely worse.

Earlier assumptions by economists that remittances would plummet were perhaps mis-timed. But they weren’t necessarily wrong.

In a June press release, the World Bank noted that remittance flows in the Europe and Central Asia region grew 19 percent in 2022 on the back of record high amounts of money transfers from Russia to neighboring states, a strong ruble, and “capital migration through the relocation of Russian companies and citizens.”

But in the first four months of 2023, the volume of remittances decreased by 11.5 percent. (Editor’s Note: It’s important, for context, to remember that the World Bank lumps Europe and Central Asia together in one vast region that stretches from Moldova and Ukraine to Kyrgyzstan.) Importantly, the World Bank noted that the average cost of sending money to the region was rising. If in the fourth quarter of 2021, the average cost of sending $200 was 6.1 percent, in late 2022 it had risen to 6.4 percent. That may not seem like much, but the rubles and soms add up.

Around 80 percent of remittances received by Uzbekistan come from Russia, and that figure is 90 percent for Kyrgyzstan.

New Worries

Pairing the latest numbers from Kyrgyzstan and Uzbekistan with the booming volume of migrants noted above yields new worries, too. Not only are remittances falling, but it seems that more migrant workers have traveled to Russia.

As has been covered here and elsewhere, these people are prime targets for recruitment either into the Russian military directly or by mercenary and “volunteer” outfits. Or they may take other jobs, such as in construction or trucking, that happen to take them to occupied Ukrainian territory. If there are fewer non-war related jobs available, Central Asian migrant workers will take what jobs are available and face the possibly deadly consequences.

Catherine Putz is managing editor of The Diplomat.