Press Release No. 05/63

Press Release: IMF Executive Board Completes Fourth Review Under the Republic of Tajikistan's Three-Year PRGF Arrangement and Approves US$15.1 million Disbursement

March 21, 2005

The Executive Board of the International Monetary Fund (IMF) has completed the fourth 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$15.1 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$99.9 million). Drawing the amount made available by completion of this fourth review will bring total disbursements under the arrangement to SDR 45.4 million (about US$69.8 million).

Following the discussion of the Executive Board on Friday March 18, 2005, Mr. Agustín Carstens, Deputy Managing Director and Acting Chair, stated:

"Tajikistan's performance under the Poverty Reduction and Growth Facility (PRGF) arrangement has continued to be satisfactory. Real GDP growth has remained robust and inflation has fallen significantly as a result of improved program implementation and a favorable economic environment. In addition, indicators suggest that there has been a further reduction in poverty levels.

"Assisted by a fiscal surplus, the central bank strengthened monetary management in 2004, which contributed to the marked reduction in inflation. In 2005, the central bank will seek to broaden the range of its monetary instruments to further enhance control over base money. The managed float exchange rate system currently in place will be maintained.

"The budget for 2005 is consistent with a prudent fiscal stance. On the revenue side, implementation of the new tax and customs codes and stronger compliance by the state-owned enterprises in the aluminum and energy sectors with tax and utility payments are expected to boost revenue. Regarding expenditure, the fiscal program envisages a significant increase in the wage bill aimed at retaining qualified personnel and stemming the deterioration in the provision of public services. This will be accompanied by reforms in public administration and education and health care to improve the efficiency of expenditure.

"The recent debt agreements significantly reduced Tajikistan's medium-term external debt burden and allow for increased flexibility in the public investment program. Looking ahead, new borrowing will be closely monitored and properly prioritized.

"The central bank has made progress in strengthening the implementation of bank supervision regulations. The measures envisaged in the program for 2005 to enhance competition in the banking sector, including from foreign banks, are expected to have a positive impact on financial intermediation and the provision of financial services," Mr. Carstens stated.

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 a 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.