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EBRD issues new Tajik strategy for 2006-2007
A new two-year strategy for
Tajikistan assessed the country’s progress towards a market economy as
clearly evident, while transition towards a multi—party democracy and
pluralism remained uneven.
Macroeconomic conditions in Tajikistan have improved during the past two
years. The economy grew by 10 per cent a year. Inflation was sharply lower.
The state budget is in near balance and the country’s poverty reduction
strategy is having a measure of success, although per capita income of $316 in
2004 still leaves Tajikistan one of the lowest-income of the Bank’s countries
of operation. Tajikistan’s external debt to GDP ratio has shrunk from 82 per
cent to 40 per cent following bilateral agreements with Russia, Pakistan and
Iran and strictly observed limits on new borrowing. Although Tajikistan made
rapid progress in small-scale privatisation and trade and price liberalisation
in a difficult environment during the 1990s, there are still enormous
challenges in moving forward. Little progress has been made in large-scale
privatisation, enterprise restructuring and governance, and market-oriented
development of infrastructure. The financial sector remains weak, despite
steady development in recent years, and does not yet offer the corporate
sector sufficient financing resources. Government capacity to introduce and
implement new laws remains weak and the functioning of domestic markets is
still impeded by informal and physical barriers.
The EBRD identifies four key areas of its new strategy: private sector
development through enterprise restructuring and large-scale privatisation,
along with improvements in the business environment; strengthening the
financial sector; and attracting investment in public infrastructure projects
especially to realise the potential of Tajikistan’s hydropower sector and
policy dialogue with the authorities geared towards improving the investment
climate and governance.
To promote the private sector, the Bank will expand its micro and small
business credit lines to SME and agricultural lending, pursue opportunities
for direct financing in services and industry, encourage foreign trade and
seek to attract outside investors. Tajikistan is one of the seven lower-income
Early Transition Countries identified by the Bank in the ETC Initiative
launched in 2004 to stimulate market activity by using a streamlined approach
to financing more and smaller projects. The Bank will make use of ETC products
to explore opportunities for direct financing in several sectors. To
strengthen banking, it will develop the existing programmes in size and
outreach, involve more financial institutions, introduce co-financing
facilities for larger local companies, invest and attract investment in the
capital of the Tajik banks, and pursue through technical assistance
capacity-building in the sector. To support critical infrastructure, the EBRD
will develop more municipal and transport projects. Along with other
international financial institutions, the Bank will also seek opportunities to
promote private-sector participation in the hydropower sector. Tajikistan’s
investment needs in infrastructure are considerable but restrictions on
sovereign borrowing constrain progress. The EBRD will therefore consider
financing non-sovereign infrastructure that produces cash flows loans to meet
debt repayments without recourse to sovereign guarantees.
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