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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.
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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    Farangis Najibullah

    Farangis Najibullah is a senior correspondent for RFE/RL who has reported on a wide range of topics from Central Asia, including the impact of Russia’s invasion of Ukraine on the region. She has extensively covered efforts by Central Asian states to repatriate and reintegrate their citizens who joined Islamic State in Syria and Iraq.

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