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 2018 6.1%

Current EBRD forecast for Tajikistan’s Real GDP Growth in 2019 5.0%

Headline growth of the Tajik economy continued to exceed 7 per cent in the first half of 2018 after reaching 7.1 per cent growth in 2017. Growth has been supported by higher fixed investment and a continuing recovery in remittances. Tajikistan’s foreign trade deficit widened to US$ 1.5 billion in the first nine months of 2018 from around US$ 1 billion the year before, with exports contracting by 10 per cent year-on-year and imports rising by 18 per cent year-on-year. The ensuing pressure on the somoni has led the central bank to allow the official exchange rate to depreciate marginally since April 2018 to keep it within the 2 per cent range of the parallel market rate.

In the first ten months of 2018 the somoni depreciated by around 6 per cent. With annual inflation at 5 per cent in September 2018, down from 6.8 per cent a year ago, the central bank has kept its key rate at 14.0 per cent since March 2018. Notwithstanding high GDP growth rates reported since 2010 (of at least 6 per cent), the economy faces major fiscal challenges, a deteriorating public debt, still unresolved financial sector weaknesses and significant business environment constraints. These tensions result in less favourable economic prospects in the coming years with officially reported GDP growth projected to slow to 6.1 per cent in 2018 and 5.0 per cent in 2019.

Tajikistan in the EBRD’s 2017-18 Transition Report