IMF Staff Completes 2017 Article IV Mission to Tajikistan

IMF News, May 30, 2017

Source details

Press Release No. 17/196; May 30, 2017.
An International Monetary Fund (IMF) mission, led by Mr. Paul Ross, visited Dushanbe from May 17−30 to conduct the 2017 Article IV consultation discussions.
End-of-Mission press releases convey preliminary findings; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
Press officer: Randa Elnagar. Phone: +1 202 623-7100. Email: MEDIA@IMF.org.

Tajikistan has implemented positive reforms in the past two years, but external shocks have:
- affected economic confidence,
- reduced buffers, and
- increased vulnerabilities.
Since late-2014, Tajikistan’s economy suffered from external shocks, which affected economic confidence, reduced fiscal space and external buffers, and increased vulnerabilities.
In 2017, with subdued external and domestic demand, fiscal consolidation and lower credit to the private sector, the IMF team projects real economic growth to slow, while the authorities project somewhat higher growth.
Strong and sustained reforms are needed to lift growth over the medium term.
The team welcomed the authorities’ intention to resume discussions on a possible IMF program and discussed steps that would demonstrate reform progress and pave the way for resumption of program negotiations.

Fiscal policy:
- Tajikistan’s 2017 budget appropriately targets a decline in the deficit.
- The authorities and the IMF team agreed that the deficit should gradually narrow over the medium term to assure debt sustainability.
- Recommendation: prepare a medium-term fiscal strategy to assure debt sustainability (noted as a concrete step to resume program negotiations).
Exchange rate and monetary policy:
- The team welcomed recent efforts to unify the official and market exchange rates.
- Recommendation: pursue a flexible exchange rate policy and supporting monetary policy—with greater sales of National Bank of Tajikistan (NBT) notes—to control inflation, restore confidence in the somoni, and help rebuild the reserves buffer.
- Recommendation: strengthen the monetary framework to anchor better inflation and exchange rate expectations.

Banking reform is critical to reduce macro-financial vulnerabilities, support economic growth, and financial inclusion.
The team supported:
- improvements made in banking regulation and supervision,
- monitoring of systemic banks’ asset quality, and
- implementing resolution plans for two systemic banks.
The team welcomed the increase in financial inclusion.
Recommendations and urged actions:
- early action to strengthen the bank resolution and emergency liquidity assistance frameworks,
- measures to assure sustainable viability of the two systemic banks,
- develop strategies to address non-performing loans and improve transparency in the banking sector.

Continued strong structural reform will create job-rich and poverty-reducing growth.
The authorities and the IMF team discussed plans to advance structural reforms including:
- fiscal reforms to improve service delivery and reduce fiscal risks,
- strengthening the monetary framework,
- improvements in the business environment to foster higher investment and job creation.

The authorities indicated they wish to resume discussions on a possible IMF-supported program.
Concrete steps needed to resume program negotiations include:
- preparing a medium-term fiscal strategy to assure debt sustainability,
- an assessment of the macroeconomic implications (on growth, exports, and debt sustainability) of large infrastructure projects,
- banking reforms.
The statement notes that steps demonstrating reform progress would pave the way for resumption of program negotiations and that careful preparation by both the Tajikistan authorities and IMF staff will be required.

IMF staff will engage closely with the Tajikistan authorities in the weeks ahead to support efforts to promote macroeconomic stability and inclusive growth, and stand ready to resume discussions on an IMF-supported program.
During the visit, the team met with:
- First Deputy Prime Minister Davlatali Said,
- Finance Minister Abdusalom Qurboniyon,
- Economy Minister Negmatullo Hikmatullozoda,
- NBT Governor Jamshed Nurmahmadzoda, and other senior officials.

IMF Staff Completes 2017 Article IV Mission to Tajikistan — Press Release No. 17/196, May 30, 2017.