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 2019 5.0%

Current EBRD forecast for Tajikistan’s Real GDP Growth in 2020 4.5%

The Tajik economy has continued to grow rapidly in the past year. Real GDP growth reached 7.3 per cent growth in 2018, according to official data. Growth was driven by fixed investment (primarily due to public expenditure in the energy sector), which increased by 7.8 per cent year-on-year. Private consumption, aided by growing remittances and increases in public sector wages and pensions, also supported the expansion. However, exports declined by 10 per cent year-on-year in US dollar terms, while imports rose by 14 per cent, pushing the current account into deficit in the first three quarters of 2018 from a surplus a year earlier.
The significant growth in imports largely reflects the purchase of equipment for the construction of the Roghun hydropower plant (HPP). The somoni depreciated by 7 per cent in 2018. Inflation decelerated to 5.4 per cent in December 2018 from 6.7 per cent in December 2017, but started rising again in early 2019. To contain inflation, the central bank raised the policy rate from 14.0 per cent to 14.75 per cent in February 2019. The fiscal deficit narrowed in 2017 and 2018 but significant fiscal pressures remain, related mainly to financing the Roghun HPP and contingent liability risks from the banking sector and state-owned enterprises.
Fiscal challenges, combined with a difficult business environment, are likely to continue to weigh on economic activity. However, growth in 2019 and 2020 is expected at 5.0 per cent and 4.5 per cent, respectively, driven by remittances, electricity exports from the Roghun HPP and improving bilateral ties with Uzbekistan. An agreement on an IMF programme, which is currently under negotiation, would support economic stability by enabling banking sector resolution, building fiscal and external buffers and improving the investment climate.

Tajikistan in the EBRD’s 2018-19 Transition Report