## IMF Executive Board Concludes 2019 Article IV Consultation with the Republic of Tajikistan

_IMF News, January 17, 2020_

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## Bibliographic details
- Published: January 17, 2020

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### Main findings on recent developments
- Reported economic activity has been strong in 2018-19.
- Inflation has picked up in the past year due to base effects and food price inflation in partner countries but remained within the National Bank of Tajikistan’s (NBT) target range.
- Weak remittances and exports and strong imports have contributed to a deterioration of the external current account.
- The real effective exchange rate has appreciated, and foreign exchange shortages have emerged.
- Fiscal policy has been expansionary with the overall 2019 deficit projected to reach 3.8 percent of GDP.
- Public and publicly guaranteed debt has been stable as the deficit has been financed from the proceeds of the 2017 Eurobond.
- Reforms to place the loss-making energy sector on a sound financial footing are underway.
- Debt vulnerabilities are rising on account of non-guaranteed borrowing by state-owned enterprises (SOE).
- The financial sector is recovering from the 2015-16 crisis, with a decline in nonperforming loans and improved profitability.
- The authorities have taken steps to strengthen bank supervision and regulation; however, two formerly-systemic banks remain insolvent and further reforms are needed to restore public confidence in banks.

### Projections and medium-term outlook
- The fiscal deficit is expected to remain high over the medium-term owing to the large Roghun hydro-power construction project, putting debt on an unsustainable path.
- Together with limited exchange rate flexibility, the fiscal deficit is expected to contribute to a weak external position, with the current account deficit over 5 percent of GDP.
- In a weak global environment, these factors are expected to weigh on confidence and growth is projected to moderate to 4 percent over the medium term.
- Inflation is expected to remain moderate.
- Downside risks include cost overruns or implementation difficulties for large infrastructure projects, delays in structural reforms (particularly in bank and SOE governance), and slower-than-expected growth in emerging markets that would reduce remittances, loans, and FDI.

### Executive Board assessment — Commendations and concerns
- Commendations:
  - Solid growth performance and poverty reduction.
  - Improvements to bank supervision and regulation.
  - Progress in further developing the monetary and macroprudential frameworks.
- Concerns:
  - Continued large external and fiscal deficits create a challenging macroeconomic outlook over the medium term.
  - Rising risk of external debt distress, suggesting heightened fiscal vulnerabilities to adverse shocks.

### Policy recommendations (Directors’ advice)
- Fiscal policy and debt:
  - Encourage further fiscal consolidation measures to put debt on a downward trend, including broadening the tax base and gradually phasing out tax incentives.
  - Prioritize and improve efficiency of public investment to create fiscal space for important infrastructure projects.
  - Step up targeted social assistance to protect vulnerable groups.
  - Avoid non-concessional borrowing and implement a comprehensive debt management strategy, with IMF technical assistance, to manage risks from large infrastructure projects and SOEs.
  - Mitigate fiscal risks from the largest SOEs through passage of the SOE law in line with IMF recommendations.
- Exchange rate and monetary policy:
  - Increase exchange rate flexibility to facilitate adjustment to shocks, help preserve external buffers, and support growth.
  - Remove the exchange restriction and improve transparency and functioning of the FX market, with attention to dollarization and inflation considerations.
  - Strengthen the monetary policy framework and transmission.
  - Continue NBT’s planned transition to inflation targeting as an appropriate medium-term goal, supported by enhancements to exchange rate flexibility and the NBT’s financial position and independence.
  - As inflationary pressures have risen in recent months, consider tighter monetary policy to mitigate possible second-round effects.
- Financial sector and governance:
  - Liquidate two formerly-systemic insolvent banks and payout insured depositors as an important priority to restore financial stability and confidence.
  - Continue efforts to strengthen bank governance and supervision, and implement AML/CFT policies to mitigate pressures on correspondent banking relationships and boost financial integrity.
  - Sustain and strongly implement structural reforms to improve the business environment, governance of core economic institutions and SOEs, rule of law, and anti-corruption policies to boost investment and inclusive growth.
  - Improve the quality and timeliness of economic data to strengthen analysis and policy making.

### Key statistics (selected indicators, 2017–22)
- Quota: SDR 174 million
- Population: 9.1 million; 2018
- Per capita GDP: US$827; 2018
- Poverty rate: 29 percent; 2017
- Main exports: mineral products, aluminum, cotton; 2018

National accounts (Annual Percent Change, unless otherwise indicated)
- Real GDP: 2017: 7.1; 2018: 7.3; 2019 (Est.): 5.5; 2020 (Proj.): 4.7; 2021 (Proj.): 4.5

Prices
- Headline CPI inflation (end-of-period): 2017: 6.7; 2018: 5.4; 2019 (Est.): 7.4; 2020 (Proj.): 6.8; 2021 (Proj.): 6.5

General government finances (Percent of GDP, unless otherwise indicated)
- Revenue and grants: 2017: 29.7; 2018: 29.1; 2019 (Est.): 26.7; 2020 (Proj.): 27.2; 2021 (Proj.): 27.1
- Tax revenue: 2017: 21.6; 2018: 21.3; 2019 (Est.): 20.1; 2020 (Proj.): 20.2
- Expenditure and net lending: 2017: 35.6; 2018: 31.9; 2019 (Est.): 30.4; 2020 (Proj.): 31.5; 2021 (Proj.): 31.4
  - Current: 2017: 17.0; 2018: 17.2; 2019 (Est.): 17.7; 2020 (Proj.): 17.9
  - Capital: 2017: 18.6; 2018: 14.6; 2019 (Est.): 12.8; 2020 (Proj.): 13.5; 2021 (Proj.): 13.6; 2022 (Proj.): 13.7
- Overall balance (excl. PIP and stat. discrepancy): 2017: -3.4; 2018: 1.6; 2019 (Est.): 0.5; 2020 (Proj.): 1.5
- Overall balance (incl. PIP and stat. discrepancy): 2017: -6.0; 2018: -2.8; 2019 (Est.): -3.8; 2020 (Proj.): -4.3
- Total public and publicly-guaranteed debt: 2017: 50.4; 2018: 47.9; 2019 (Est.): 45.2; 2020 (Proj.): 46.4; 2021 (Proj.): 47.5; 2022 (Proj.): 48.9

Monetary sector
- Broad money (12-month percent change): 2017: 21.9; 2018: 5.1; 2019 (Est.): 12.1; 2020 (Proj.): 11.8; 2021 (Proj.): 11.4
- Reserve money (12-month percent change): 2017: 21.0; 2018: 7.0; 2019 (Est.): 11.7; 2020 (Proj.): 11.6; 2021 (Proj.): 11.1
- Credit to private sector (12-month percent change): 2017: -20.2; 2018: 1.3; 2019 (Est.): 7.8; 2020 (Proj.): 9.3; 2021 (Proj.): 9.6; 2022 (Proj.): 9.8
- Refinancing rate (in percent, eop/ latest value): 2017: 16.0; 2018: 14.8; 2019: ...

External sector
- Current account balance: 2017: 2.2; 2018: -5.0; 2019 (Est.): -4.5; 2020 (Proj.): -5.2; 2021 (Proj.): -5.3
- Trade balance (goods): 2017: -21.2; 2018: -25.1; 2019 (Est.): -23.0; 2020 (Proj.): -23.3; 2021 (Proj.): -22.8
- FDI (net): 2017: 0.9; 2018: 3.3; 2019 (Est.): 3.0; 2020 (Proj.): 2.4; 2021 (Proj.): 2.1; 2022 (Proj.): 1.8
- Total public and publicly guaranteed external debt: 2017: 40.6; 2018: 38.7; 2019 (Est.): 36.8; 2020 (Proj.): 42.7

Memorandum items
- Nominal GDP (in millions of somoni): 2017: 61,093; 2018: 68,844; 2019 (Est.): 77,351; 2020 (Proj.): 86,130; 2021 (Proj.): 95,593; 2022 (Proj.): 105,622
- Average exchange rate (somoni per U.S. dollar): 2017: 8.55; 2018: 9.15; 2019: …

Sources: Data provided by the Tajikistan authorities, and Fund staff estimates.

*IMF Communications Department — January 17, 2020.*

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## References

- [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)
- [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)
- [Republic of Tajikistan and the IMF](http://www.imf.org/external/country/TJK/index.htm)
- [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [http://www.imf.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2020/01/17/pr2012-tajikistan-imf-executive-board-concludes-2019-article-iv-consultation-with-the-republic_