News Brief: IMF Approves US$8 Million Loan for Tajikistan Under Third Annual PRGF Program

July 11, 2001

The Executive Board of the International Monetary Fund (IMF) today concluded the second review of the Republic of Tajikistan's economic program supported by the third annual arrangement under the Poverty Reduction and Growth Facility (PRGF)1. Following the completion of today's review, Tajikistan will be able to draw an amount equivalent to SDR 6 million (about US$8 million) from the IMF. The request for a waiver concerning the accumulation of new external arrears during the agreement was also approved by the Executive Board.

Tajikistan's three-year program, originally supported under ESAF, was first approved on June 24, 1998 (see Press Release No. 98/25), in an amount of SDR 96 million (about US$120 million), which was increased in December 1998 to an amount of SDR 100 million (about US$125 million), of which Tajikistan has drawn SDR 72.3 million (about US$90 million).

Following the Executive Board's discussion, Eduardo Aninat, Deputy Managing Director and Acting Chairman, said:

"Tajikistan's real GDP grew strongly during the first quarter of 2001, and inflation moderated. All but one of the quantitative performance criteria for the second review under the third annual arrangement of the PRGF were met. Nevertheless, determined policy efforts will be needed to achieve lasting growth and external debt sustainability.

"Concerning an incident of misreporting relating to a performance criterion on external arrears, Directors urged the authorities to ensure that in the future relevant information is provided to the Fund in an accurate and timely manner. Directors have granted a waiver for the nonobservance of this performance criterion.

"Tajikistan's fiscal and monetary performance during the first quarter of 2001 was favorable. To ensure that the fiscal objectives for the whole year are met, the authorities need to further develop the treasury system, improve control of expenditures, and improve the efficiency and effectiveness of both the Tax and Customs Committees. Careful monitoring of monetary developments is necessary to ensure that excessive liquidity does not threaten progress with reducing inflation. To this end, the National Bank of Tajikistan will need to intensify its efforts to collect overdue loans from the private sector and to expand its open market operations.

"The authorities have taken the welcome step of establishing an audit agency, but need to continue to make progress to improve governance and increase fiscal transparency. They also need to accelerate structural reforms in the banking and agricultural sectors. Progress in restructuring and privatizing state-owned farms is important.

"The authorities' efforts to elaborate a medium-term strategy to reduce Tajikistan's very high external debt are welcome. This strategy should be implemented without delay. Intensified efforts to conclude debt rescheduling agreements with bilateral creditors and improved debt management and monitoring will be particularly important in this regard. Further fiscal adjustment will also be essential to achieve debt sustainability.

"The authorities have continued to progress in preparing a Poverty Reduction Strategy Paper (PRSP). It will be important to ensure that the PRSP is consistent with the medium-term fiscal framework.

"The authorities' intention to accept the obligations under Article VIII sections 2, 3, and 4 of the Fund's Articles of Agreement is welcome," Mr. Aninat said.

1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was replaced by the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It was 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. At this time for the Republic of Tajikistan, pending the completion of a PRSP, a preliminary framework has been set out in an interim PRSP, and a participatory process is underway. It is understood that all policy undertakings in the interim PRSP beyond the first year are subject to reexamination and modification in line with the strategy that is to be elaborated in the PRSP. Once completed and broadly endorsed by the Executive Boards of the IMF and World Bank, the PRSP will provide the policy framework for future reviews under this PRGF arrangement. 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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