Page 44 - BNE_magazine_11_2019

44 I Eurasia bne November 2019
Electricity flows, million kWh
Export
192.7
459.4
627.4
133.4
101.6
1,181.00
1,577.00
129.3
269.2
1,093.70
Import 18.8 29.2
Source: Tajstat, VTB Capital Research
This limited supply of foreign currency means the national bank has to “ration” the supply of FX to banks to meet domestic demand for dollars, leading to regular shortages, according to VTBC.
“We say ‘rations’, because the exchange rate, as everywhere in the region, remains controlled by the [National Bank of Tajikistan]. This precludes the FX rate from finding an equilibrium level at which the market would clear automatically, giving rise to periodic bouts of complaints, easily traceable
in media, about ‘shortages’ of foreign currency. It might be a pure coincidence, but in 2019 such outbursts have come before coupon payments on the bonds: in February and then in late summer/ early autumn,” Grishin said.
The demand for remittance-secured FX by local businesses to pay for things like imports means that only 3% of the
34.7 27 0.2 6
3.8 0.3 43.4 85.5
Net export
173.9
430.2
592.7
106.4
101.4
1,175.00
1,573.20
129
225.8
1,008.20
Foreign trade value, $mnmillion kWh
Export
8.1
17.4
23.3
4.7
3.7
26.1
42.6
3.5
10.2
29.8
Import
0.2
0.3
0.3
0.3
0.2
6
3.8
0.3
0.4
1.4
Net export
7.9
17.1
23
4.4
3.4
20.1
38.8
3.2
9.8
28.4
$2.5bn per year of inflows is available for debt servicing, according to VTBC. Now all the bond money has gone, the government has been forced to turn to the budget to pay for more work and Rogun is gobbling up an unprecedented amount of public funds.
“Under the ‘development of the fuel and energy sector’, spending on RHPP for 2019 has been approved at TJS4.1bn. This is 23% of all expected revenues (including grants), or 80% of VAT –
the largest single revenue item. It is also almost as much as total public spending on education (TJS4.4bn) or, for example, 2.5x the total public sector wage bill. To stress the point again, this is outright incomparable to any other country we cover,” says Grishin.
And the projection for 2020 is for TJS3.5bn, rising again to TJS5bn and TJS6.2bn in the next two years after that.
Now the first units of Rogun are online, Tajikistan can make some money from power exports. Exports of power have increased 10-fold in the last three years but they still only earned $28mn in the second quarter of this year. Nevertheless, the total of $80mn the government anticipates earning this year is an important contribution to servicing the debt.
Another source of cash is gold mining. Both Moody’s and S&P have pointed to the country’s significant gold deposits as a potential source of income.
However, the country’s reserves are currently “very low”, according to Moody’s. Excluding gold and SDRs, the national bank’s latest reserves number in July was $355mn – and that represented a rise from a recent nadir of $275mn
set in May, the lowest level since the Eurobond was placed back in 2017. It seems the government just sold four tonnes of gold to boost its reserves.
Tajikistan produces enough gold to be able to sell between $150mn and $200mn a year without running down the gold it holds in its reserves, according to VTBC estimates.
Add to this the $80mn from electricity exports the country is expecting to earn this year and the 3% of remittances the government can dedicate to debt servicing and the state has resources of around $355mn a year at most to spend on a debt repayment bill of $247mn due this year.
“But that doesn't leave any room for mistakes or shocks,” says Grishin.
Tajik debt repayment schedule and sources, $mn
2019
2020
2021
2022
2023
Pre-eurobond: Principal
134
136
186
194
212
Pre-eurobond: Interest
77
81 82
84 85
Eurobond: Interest
36
36
36
36
36
Total interest
113
117
118
120
121
Total debt service
247
253
304
314
333
Earmarked sources
Gold monetization (@1,000/oz)
200
150
150
150
150
Net electricity exports
80
88
97
106
117
Remittances ('working capital' effect)
75
75
75
75
75
Total estimated sources
355
313
322
331
342
Source: Company data, VTB Capital Research
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