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 6.5%
Current EBRD forecast for Tajikistan’s Real GDP Growth in 2018 5.0%
According to the official figures, real GDP grew by 6.8 per cent in Tajikistan in the first nine months of 2017 year-on-year, after 6.9 per cent in 2016. The strong headline growth is however in stark contrast with the difficult situation in the banking sector and rising fiscal and currency pressures. The banking sector remains in a challenging state, with overdue and non-performing loans, mostly concentrated in the two largest banks, at around 50 per cent as of June 2017.
Fiscal risks, stemming from the government's need to shore up the banking system, are substantial. Remittances from Russia have recovered in the first half of 2017, rising by 22.4 per cent in US dollar terms in year-on-year in this period, which will support household consumption. The Tajik somoni came under pressure in 2017, depreciating by 10.5 per cent in the first nine months of the year, prompting the central bank to increase the monetary policy rate to 16 per cent in March 2017. Officially reported real GDP growth is expected to reach 6.5 per cent in 2017 year-on-year, decelerating to 5 per cent in 2018. These forecasts reflect the significant downside risks, given the possibility of further banking sector turbulences and the difficult fiscal position of the country.