Tajikistan overview

Urban scene in Tajikistan

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

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Current EBRD forecast for Tajikistan’s Real GDP Growth in 2016 4.5%

Current EBRD forecast for Tajikistan’s Real GDP Growth in 2017 4.1%

After increasing by a reported 6.0 per cent in 2015, officially reported growth in Tajikistan is expected to decline to 4.5 per cent in 2016, reflecting sharply lower remittances and returning migrants since 2014. A significant decline of the Tajik Somoni (35 per cent against US$ in 2015 and the first half of 2016) combined with the declining household income are contributing to sharply rising NPL levels and broader liquidity and solvency problems in the banking sector. The reported NPL level has reached 32.3 per cent of total loans at end-March 2016 (approximately 7.5 per cent of GDP) compared with 9.9 per cent of total loans at the end of 2013. The external and internal challenges, combined with difficult business environment, can be expected to continue to suppress economic activity, with growth in 2017 expected to decline to 4.1 per cent. Moreover, there is downside risk to achieving this level of growth that can arise from possible further deterioration in the banking sector and challenging fiscal position of the country. External financial support and investment from the bilateral partners and IFIs will be key to ensuring economic stability.
 

Tajikistan in the EBRD’s 2015-16 Transition Report