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Tajik Audit Reveals Huge National Bank Shortfalls

Tajikistan says it needs $260 million to fund its poverty-reduction program. The Ernst & Young audit's findings could put the country's ability to secure foreign investment.
Tajikistan says it needs $260 million to fund its poverty-reduction program. The Ernst & Young audit's findings could put the country's ability to secure foreign investment.
By Farangis Najibullah
An audit has revealed that more than $1 billion of the Tajik National Bank's funds has disappeared after being siphoned off to a private investment company and a state program intended to boost the ailing agricultural sector.

According to the audit, which was conducted by the independent financial-services firm Ernst & Young and posted this week on the National Bank's website, more than $856 million went to the private investment company Credit Invest. Credit Invest, in turn, allocated multimillion-dollar loans to a number of private enterprises, including ventures run by a longtime head of the National Bank or his family members.

Murodali Alimardon led the National Bank from 1996 to 2008, before he was appointed by the Tajik president last year to be deputy prime minister in charge of the agricultural sector.

According to the audit, bank officials have failed to explain where another $220 million allocated for the development of the cotton industry has gone, and enterprises have failed prove the money has indeed been spent on relevant projects.

The audit also reveals other possible irregularities, including $800,000 used to renovate a tea house in the northern town of Istaravshan.

Even for a country where financial fraud and corruption is considered widespread, the amount is staggering -- nearly equal to Tajikistan's annual budget revenues of about $1.28 billion.

IMF Complaints

The findings also come at a time when President Emomali Rahmon has praised the country's banking sector amid a global economic crisis, and has pleaded for increased efforts to secure foreign investment.

And just a year ago, the International Monetary Fund (IMF) ordered Tajikistan to pay back $47 million it provided in loans after determining that the National Bank had misstated its financial situation in securing the loans.

Murodali Alimardon allegedly oversaw the disappearance of enormous sums during his tenure.
Future cooperation with the IMF depended on Tajikistan agreeing to three independent audits: that involving the National Bank conducted by Ernst & Young, and of the state-run aluminum plant Talco and the electricity concern Barqi Tojik.

Despite the country's commitments to facilitate the audit of the National Bank, Ernst & Young says in its report that it was not given access to all the documents needed to assess the activities of the National Bank and Credit Invest.

The firm's auditors claimed they were told that many financial records had been destroyed because they were deemed unnecessary. In one instance, important documents had been burned, and an unnamed official reportedly told the auditors that old documents were being used as toilet paper.

In another case, auditors claimed that new computer files with financial reports were created just hours before their investigation was to begin.

A Country In Need

The scandal has raised fears that international investors and donors could be scared away from working with Tajikistan, one the poorest countries in Central Asia and one whose economy heavily depends on foreign aid and remittances sent by Tajik migrant laborers working in Russia.

Shokirjon Hakimov, a politician and department head at the Tajik Institute of International Relations in Dushanbe, says the authorities must launch criminal investigations related to the findings. "Those who have mishandled public money have to be brought to justice," he says. "They have to pay back the money."

Hakimov adds that "the government has to apologize before the people. Because if that amount of money had been spent for our agricultural sector, it would greatly improve the sector by now. But these kinds of frauds have been hampering the development and the implementation of economic reform programs in our country."

The release of the audit comes at a particularly bad time for Tajikistan.

On April 14 the Finance Ministry announced that budget revenues have fallen significantly due to the global economic downturn and that Tajikistan needs over $260 million in foreign aid to cover its budget deficit.

And that could require close cooperation with the IMF, which Tajikistan has asked to help fund its poverty-reduction program over the next three years.

Alex Schimmelpfenning, IMF mission chief for Tajikistan, says that the fund is aware of the latest audit's findings and will closely monitor Tajik authorities' action plan to address the issue.

The IMF has not yet decided whether to release funding for the poverty-reduction program, a loan of "around $120 million," Schimmelpfenning says.

The Tajik authorities have "committed to doing five actions prior to the IMF's executive board considering these requests," he adds. "Most of these actions have been completed by now and we expect that the executive board will discuss Tajikistan's request very soon."

Schimmelpfenning, however, has welcomed Tajikistan's unprecedented step of publishing the audit on the bank's website.

So far there is no official reaction from Tajik officials to Ernst & Young's findings, and National Bank officials have declined to comment.

RFE/RL correspondent Heather Maher contributed to this report from Washington
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by: Scott from: Prague
April 15, 2009 18:34
That's horrible, stealing from hungry children (in the photo)A country with so much potential backstabbed by the government like that. How do those people sleep at night?

by: xalabut from: Singapore
April 16, 2009 04:00
The whole country is caught up in the webs of the corruption. Though this fraud is massive, it's just one among many, which remain undiscovered. <br />IMF should focus on institution building and good governance before it hands out large loans to unreformed institutions. How long can it keep on repairing here and there when the building should be knocked down and build anew?

by: Tajik
April 17, 2009 05:56
Alimardon is a scapegoat in this story. It is for sure that president and his son in law, Asadulozoda are involved. This is very saddening.

by: Pamirka from: London
April 28, 2009 15:42
Being away from our country we want to wake up in the morning and check the news to find out what is happening in our country, to our families, friends.. Any good news? NO! Unfortunately, every time all we read about our country is fraud, corruption, injustice,.lie etc .etc by our government the victims of which is the poor population. The news that makes you reluctant, stop of going back where your belong and enjoy life with family, the news that leaves thousands of people in poverty.. Our authorities build luxurious houses, buy luxury cars and eat whatever they want with the money that was supposed feed thousand of poor people. And yes they sleep tight and well because there are no rules in place to question them where does the money come from for you to build a “five star house” for whole generation of your family. Billions of billions is invested in Tajikistan for poverty reduction but unfortunately we remain the poorest in the Central Asia while our neighboring countries are enjoying the step towards development (with fair corruption). If I was in IMF I would have imposed strong rules and regulations when I invest in Tajikistan and required my 47 million till the last peny <br />We prefer to stay in foreign land and work where the foreign government is more concerned about us rather than returning to my country to be a victim of my OWN government <br />

by: Timo Haapanen from: Finland
April 30, 2009 07:31
What Pamirka says corresponds to my idea of the current situation. In a number of countries (not only in Tojikiston) financial aid sent or loans granted through the official way land into the pockets of corrupt authorities and their families or clans. So, other routes to support those in need should be applied; however, I am afraid any NGO trying to help would sooner or later be prevented from doing it by Rahmon's regime on some excuse or other, so the situation seems hopeless indeed. It is a big shame if a country’s citizens are treated worse by their own government than by foreign ones, a phenomenon that is, unfortunately, rather common in this world.

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