Press Release: IMF Executive Board Completes Sixth and Final Review Under the Republic of Tajikistan's PRGF Arrangement and Approves US$14.1 million Disbursement

February 7, 2006

Press Release No. 06/24

The Executive Board of the International Monetary Fund (IMF) has completed the sixth review of the Republic of Tajikistan's performance under its economic reform program supported by a three-year Poverty Reduction and Growth Facility (PRGF) arrangement. Completion of the review enables the Republic of Tajikistan to draw an amount equivalent to SDR 9.8 million (about US$14.1 million) under the arrangement.

The IMF's Executive Board approved the three-year arrangement on December 11, 2002 (see Press Release No. 02/54) for an amount equivalent to SDR 65 million (about US$93.7 million). The disbursement under the sixth review will result in the arrangement being fully drawn.

Following the Executive Board discussion on of Tajikistan, on February 6, 2006, Mr. Agustín Carstens, Deputy Managing Director and Acting Chair, stated:

"The Tajik authorities are to be commended for Tajikistan's robust economic performance in recent years, in the context of strong implementation of the PRGF-supported program. Despite the negative impact of higher energy prices and a weak cotton harvest in 2005, the authorities' macroeconomic policies, coupled with progress on structural reforms, have contributed to high economic growth, relatively low inflation, and a reduction in poverty. They have also helped to maintain a sustainable debt position.

"Looking ahead, the authorities remain committed to keeping fiscal policy consistent with the program's medium-term objectives. The focus should be on strengthening tax administration and effectively enforcing the new tax and customs codes to preserve and expand the revenue base. Any revenue overperformance resulting from higher-than-expected export prices should be transparently used to augment social expenditure, with the ultimate goal of meeting the Millennium Development Goals. The authorities' intention to further strengthen the management of monetary policy by taking steps to broaden the range of monetary instruments and developing a strategy for recapitalizing the central bank is welcome. The maintenance of a managed floating exchange rate regime, with intervention in the foreign exchange market limited to smoothing short-term exchange rate volatility, is appropriate.

"It is important that the authorities push ahead with key outstanding structural reforms. In particular, they should take steps to accelerate public sector reforms in the areas of education, health care, and civil service. Another key priority is the need to develop a market-based debt resolution strategy for the cotton sector, without recourse to budgetary support. Similarly, it will be important for the authorities to develop a consistent reform strategy for the electricity sector, which will be crucial in enhancing growth prospects in the medium term. The authorities should be commended for the recent action to remove impediments to the entry of foreign banks into Tajikistan, which is expected to enhance competition and the quality of banking services." Mr. Cartsens said.

The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in the Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments.


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