News Brief: IMF Completes Tajikistan Review and Approves US$18 Million Credit Tranche

January 27, 2000

The Executive Board of the International Monetary Fund (IMF) today completed the first and second reviews of the second annual arrangement under the Poverty Reduction and Growth Facility (PRGF)1 for Tajikistan. As a result, Tajikistan will be able to draw up to the equivalent of SDR13.32 (about US$18 million) from the IMF.

In commenting on the Executive Board's discussion of the review, Eduardo Aninat, Deputy Managing Director of the IMF, made the following statement:

"The Executive Board has concluded the first and second reviews of Tajikistan's second annual PRGF arrangement that was approved in early July 1999. Policy implementation under the program weakened in the summer of 1999 amid a further deterioration of the terms of trade and large reversal of private capital flows. Tajikistan has taken strong corrective measures since last September to bring the program back on track. As a result of the tight fiscal and monetary policies implemented since then, inflation has subsided and the net official international reserve position has improved.

"The recent stabilization gains need to be sustained through continued fiscal consolidation, including a further reduction of the fiscal deficit, as envisaged in the 2000 budget, and a prudent monetary policy. The authorities are encouraged to strengthen further the fiscal and monetary institutions, especially through ensuring the independence of the central bank to facilitate a better allocation of financial resources and prevent the reoccurrence of quasi-fiscal operations. Further progress in the timely collection of loans by the central bank would also help improve financial discipline in the system.

"The Tajik authorities are encouraged to intensify structural reforms to support the economic stabilization and speed up progress in the transition to a market economy. Efforts should focus in particular on accelerating the privatization of cotton ginneries and larger enterprises by improving transparency in the privatization process, and on pressing ahead with bank restructuring. These reforms, together with further progress in land reform, would help attract domestic and foreign investors and lay the foundation for sustained, private sector-led growth over the medium term.

"In view of the high incidence of poverty in Tajikistan, the authorities' intention to commence preparation of a Poverty Reduction Strategy Paper, drawing on a broad participatory process, was welcomed," Aninat said.

1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It is intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. For Tajikistan, an interim-PRSP will be worked out in the coming months, and a full-fledged PRSP is expected to be completed by summer 2000 through a participatory process with the civil society. It is understood that all policy undertakings in the interim PRSP are subject to reexamination and modification in line with the strategy that is to be elaborated in the full-fledged PRSP.

PRGF loans carry an interest rate of 0.5 percent a year, and are repayable over 10 years with a 5 ½ year grace period on principal payments.


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