Public Information Notice: IMF Concludes Article IV Consultation with the Republic of Tajikistan

April 24, 2001

Public Information Notices (PINs) form part of the IMF's efforts to promote transparency of the IMF's views and analysis of economic developments and policies. With the consent of the country (or countries) concerned, PINs are issued after Executive Board discussions of Article IV consultations with member countries, of its surveillance of developments at the regional level, of post-program monitoring, and of ex post assessments of member countries with longer-term program engagements. PINs are also issued after Executive Board discussions of general policy matters, unless otherwise decided by the Executive Board in a particular case.

On April 12, 2001, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with the Republic of Tajikistan.1


Tajikistan's real GDP growth accelerated to 8.3 percent during 2000, compared with 3.7 percent in 1999. This growth was based largely on strong agricultural and industrial production, and occurred despite a drought that hampered both electricity generation and the output of non-irrigated crops (mainly grain), and disruptions in regional trade. Efforts to stabilize the macroeconomic situation were hindered by a surge in inflation in the latter part of the year, due to slippages in monetary policy, external factors, and the uncertainty surrounding the introduction of the new currency, the somoni.2 The current account deteriorated during 2000, largely because of strong domestic demand, the drought, and higher petroleum prices.

More recently, there have been signs that efforts to stabilize the economy are paying off. Inflation moderated, with consumer prices rising by 5 percent during the first quarter of this year, compared with 17 percent in the last three months of 2000. At the same time, the nominal exchange rate has remained broadly stable since last November and the spread between the official and curb market levels have decreased slightly.

With regard to structural reform, progress was uneven during the past year. On the one hand, progress was achieved in improving tax administration and with extending the coverage of the treasury system; both important measures, given the need for fiscal consolidation. On the other hand, the privatization and restructuring of agricultural enterprises slowed significantly in the second half of 2000. Moreover, while there was some progress in dealing with the problems in the banking sector, however, the banking sector remains weak, especially as regard compliance with minimum capital requirements.

Recently, the authorities established an auditing agency, issued its interim charter, and appointed an Auditor General. The authorities are currently preparing draft legislation that will define the responsibilities and authority of the auditing agency, including a provision to disseminate the agency's findings to the public and parliament.

Tajikistan became a member of the Fund in 1993, and since then has had a number of Fund-supported programs. A three-year Poverty Reduction and Growth Facility (PRGF) arrangement was approved on June 24, 1998, in support of the authorities macroeconomic and structural adjustment program. In October 2000 the second year of the PRGF was approved by the Fund's Executive Board, and on April 12, 2000, the first (quarterly) review of that program was completed.

Executive Board Assessment

Directors welcomed the strong GDP growth in 2000, despite the drought and an increase in world petroleum prices. However, they noted that significant policy slippages had moved the Fund-supported program off track, and led to inflation being significantly higher than expected in 2000. Directors, however, were encouraged by the authorities corrective efforts which brought the program back on track. Directors were especially concerned about Tajikistan's heavy external debt and its difficult economic and financial outlook. They stressed the urgent need for consistent implementation of prudent fiscal and monetary policies, as well as for an acceleration of structural reforms so as to promote macroeconomic stability and sustainable economic growth, and to reduce poverty.

Directors commended the authorities for their expenditure restraint and the resulting strong fiscal performance in the fourth quarter of 2000 and urged them to continue this restraint without accumulating expenditure arrears. They also stressed that the efficiency and equity of tax administration needs to be improved to increase revenue collection as a share of GDP. Further development of the treasury would also strengthen expenditure control, and promote accountability.

Directors noted the importance of enhancing the transparency of the budget process and welcomed the establishment of the auditing agency and encouraged the authorities to make the agency fully operational as soon as possible.

Directors encouraged the authorities to maintain a prudent monetary stance, to stabilize prices, and restore confidence in the currency. To this end, they urged the authorities to adhere strictly to program targets and to employ a broader mix of monetary policy instruments to control inflation, including, in particular greater, reliance on sales of Treasury bills and NBT notes. They urged the National Bank of Tajikistan (NBT) to ensure that interest rates are positive in real terms. In commending the authorities for not having recourse to directed credits, Directors called for strengthening the independence of the Central Bank in order to minimize such pressures on the NBT.

Directors commended the authorities for their progress with privatization and urged them to begin privatizing the remaining large public enterprises. However, they regretted the uneven implementation of structural reforms. While noting progress with restructuring the four largest commercial banks, improving bank supervision, and removing distortions that compromised the operating environment for banks, they stressed that these measures constituted preliminary steps and should be extended and intensified. Directors also urged the authorities to intensify agricultural reforms, improve the general business environment, and strengthen governance.

Directors noted with concern the severity of Tajikistan's external debt problems and the challenges it poses for macroeconomic policies. They encouraged the authorities to intensify their efforts to resolve outstanding bilateral debt issues, and to develop an appropriate strategy for managing the external debt. To warrant international support, the main tenets should be consistent implementation of an ambitious stabilization and structural reform program over the next several years aimed at promoting sustainable economic growth while alleviating poverty. Directors pointed out that fiscal consolidation, the use of privatization proceeds to reduce debt, and renegotiation of nonconcessional bilateral loans should be key elements of this strategy. They look forward also to the May meeting of the Consultative Group. Directors noted that the authorities' adjustment efforts might need to be supported by debt restructuring, and grants or loans on highly concessional terms from the international community. In this respect, all future public sector borrowing should be on concessional terms and the authorities should seek to reschedule all recent nonconcessional loans on more favorable terms.

Tajikistan: Selected Economic Indicators

  1997 1998 1999 2000

(Annual percentage change)
Production and prices        
Real GDP 1.7 5.3 3.7 8.3
CPI (e.o.p.) 163.6 2.7 31.3 60.6
Monetary indicators        
Reserve money 193.5 4.9 20.0 45.4
Somoni broad money 117.2 14.8 29.2 48.6
Velocity 1/ 18.9 21.1 22.4 22.3
(In percent of GDP)
General government        
Revenue 13.7 12.0 13.5 13.6
Expenditure 17.0 15.8 16.6 14.2
Cash balance 2/ -3.3 -3.8 -3.1 -0.6
(Somoni per U.S. dollar, e.o.p.)
Exchange rate        
Official 0.75 0.98 1.44 2.20
Curb market 0.82 1.19 1.67 2.52
(In millions of U.S. dollars, unless otherwise specified)
External sector        
Exports of goods 746 586 666 792
Imports of goods -806 -725 -693 -839
Current account -61 -120 -36 -61
In percent of GDP -6.0 -9.2 -3.4 -6.4
Gross international reserves 30 65 58 87
In months of imports 3/ 0.6 1.5 1.7 2.4

Sources: Tajik authorities; and IMF staff estimates.

1/ Nominal GDP divided by average somoni broad money.
2/ Includes grants.
3/ Imports of goods and services excluding alumina and electricity.

1 Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board. At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. This PIN summarizes the views of the Executive Board as expressed during the April 12, 2001 Executive Board discussion based on the staff report.

2 On October 30, 2000, the Somoni (Sm) replaced the Tajik Ruble (TR) at an exchange rate of SM1= TR 1,000.


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