In Tajikistan we focus on:
Stabilising and rebuilding trust in the banking sector so as to increase the sector’s capacity for financial intermediation as a means to facilitate access to finance and lower the high real interest rates. This is an immediate priority. To this end, the discontinuation of state-directed lending practices is a first necessary step to help address existing weaknesses. Conditional on creating a positive reform momentum, the Bank will be able to increase its operations in the banking sector including through further equity investments in banks and MFIs and through increased local currency lending, which will help reduce foreign exchange risk for local businesses.
Developing private enterprises and agribusiness. This requires improving the business environment by cutting red tape and lowering other formal and informal barriers to doing business, which are among the highest in the region. Simplifying tax policies and improving tax administration are of paramount importance to incentivise firms operating in the real economy to become more transparent. Progress with reforms in this area will create more bankable private enterprises that will be able to benefit from EBRD and local commercial bank financing. Given that 70 percent of the population gets its livelihood from agriculture, developing agribusiness enterprises is particularly crucial for ensuring inclusive growth. Establishing value chains and increasing diversification and productivity is needed to make farmers less vulnerable to international price shocks and to improve food security. The Bank’s ability to provide agricultural financing will also strongly depend on progress made with reforms in the banking sector.
Improving the availability, reliability and quality of municipal services such as water supply, solid waste, and urban transport as a necessary precondition for commercialisation of these utilities. Once the quality of municipal services improves, the willingness to pay for them will increase as well, in turn generating resources that will allow for further improvements in quality. Progress towards commercialisation and improvements in quality therefore go hand in hand. However, to address the affordability constraints of the Tajikistani population and the debt capacity constraints of the government, a high level of grant co-financing will be required.
Improving the quality of energy supply, regulation and energy efficiency, which is vital for all sectors of the economy as well as for the quality of life of Tajik citizens. The first priorities are to rehabilitate the existing infrastructure and restructure the state power utility company Barki Tojik. Progress with reforms in these areas will allow for the commercialisation of the sector and opening it up for private sector investment. Improving energy efficiency and reducing energy losses could also contribute to improving energy security. Conditional on the government’s commitment to progress with energy sector reform, the Bank will selectively finance the rehabilitation of the energy sector infrastructure and will support energy efficiency measures at Barki Tojik.
The EBRD’s latest Tajikistan strategy was adopted on 22 July 2015
Current EBRD forecast for Tajikistan’s Real GDP Growth in 2017 3.8%
Current EBRD forecast for Tajikistan’s Real GDP Growth in 2018 4.0%
Growth in Tajikistan in 2017 is projected to decline to 3.8 per cent, after reaching 6.9 per cent in 2016 according to official figures. The headline growth rate masks the fragile economic situation and the build-up of structural disruptions, such as overdependence on remittances, returning migrants since 2014 and unresolved challenges in banking sector, all of which have translated into significant pressure on the population and businesses. Growth in 2017 will be supported by a rebound in remittances inflow from Russia. The Somoni remained broadly stable in 2016 reflecting the effects of currency controls, but it started weakening again in the first quarter of 2017 depreciating by 7 per cent, leading to tighter monetary policy with the base rate being increased to 16 per cent in March 2017 compared to 11 per cent at the end of 2016.
The banking sector has been in crisis since the collapse of remittances inflows from Russia, resulting in a sharp increase in NPLs to around 42 per cent in 2016 compared to 9.9 per cent in 2013. The government has made efforts to support the banking sector via an injection of state funding and IFI financial support, but significant challenges remain. In 2018 only a modest improvement in economic performance is expected Growth is projected at around 4.0 per cent, with significant downside risks to achieving this level of growth, reflecting ongoing fiscal and financial sector challenges.