TALCO thrives on Tajik govt's subsidies and debt write-offs

Tajikistan has been in discussions with the International Monetary Fund (IMF) for months on a bailout amounting to more than $500 million. According to the latest Reuters reports, Tajikistan has sought $100 million in loans from the European bank for Reconstruction and Development. The government has taken resort to a number of strategies and revised regulations in order to rejuvenate the economy by generating revenues internally. Dushanbe, the capital city of Tajikistan, has agreed to raise the price of electricity by 16 percent starting this November. The company that has benefited the most from state electricity subsidies and routine debt writes-offs is TALCO, the country’s national aluminium operation.

In fact, TALCO is Dushanbe’s largest source of revenue at the moment, “It generates 33 percent of the country’s gross domestic product, 48 percent of its export revenues, and 75.3 percent of its foreign currency reserves,” according to government spokespersons. But presently, it is being faced by a number of challenges.

Aluminium production in Tajikistan has fallen, even as the state has gone out of its way to prop up the industry- first with subsidized electricity and then with the writing off of millions in debt. According to an Asia-Plus report, in 2009, 50.9 million somoni in electricity debt was written off by government decree. In 2009, TALCO disputed that it had debt issues but did acknowledge that the government had, in 2005, written off 60 million somoni of the more than 96 million somoni it owed from 1996 to 2004. Asia-Plus also notes subsequent electricity debt write-offs: 143.7 million somoni (2011), 67 million somoni (2014) and 261.6 million somoni (2016).

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Bearing in mind that according to the Finance Ministry TALCO presently consumes 30 percent of Tajikistan’s electricity, its payment delinquency is a huge deal. No wonder, the phase out of electricity subsidies would target “companies such as TALCO.”

TALCO is running at losses quarter after quarter now, aluminium prices and production are falling, and the company has an established history of being unable to pay its debts even with subsidized prices. Government pledges to pursue serious financial and banking sector reform are yet to show the desired results.