{
  "title": "Tajikistan: Staff Concluding Statement of the 2021 Article IV Mission",
  "publication": "IMF News, November 5, 2021",
  "sourceUrl": "https://www.imf.org/en/news/articles/2021/11/05/mcs-tajikistan-staff-concluding-statement-of-the-2021-article-iv-mission",
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  "summary": "Real GDP growth declined to 4.5 percent in 2020 from 7.5 percent in 2019.",
  "publishDate": "2021-11-05",
  "sections": [
    {
      "heading": "Recent developments, outlook, and risks",
      "content": "- Real GDP growth declined to 4.5 percent in 2020 from 7.5 percent in 2019.\n- The economy expanded by 8.9 percent in the first nine months of 2021, driven by the industrial (including mining), agricultural, and construction sectors.\n- The current account surplus is expected to decline to 2.6 percent of GDP in 2021 as imports pick up with the recovery.\n- Inflation remains above the NBT’s target range (6±2 percent) mainly due to higher global food and fuel prices.\n- Reserves have risen to 8 months of import cover, supported by the NBT’s gold purchases from domestic producers and timely international partner support, including the IMF.\n- Monetary normalization in 2021: the refinancing rate has been raised by 250 bps in four steps, reserve requirements restored to pre-COVID levels, and exchange rate depreciation restrained.\n- Growth projections and risks:\n  - Economy estimated to grow by 7.0 percent in 2021.\n  - Growth in 2022 projected at 5.5 percent.\n  - Medium-term growth projected to settle at 4 percent with inflation declining to the NBT target range.\n  - Downside risks: uncontrolled COVID outbreaks, new lockdowns, regional security and geopolitical tensions."
    },
    {
      "heading": "Fiscal policy — findings and recommendations",
      "content": "- 2020 fiscal deficit widened by 2 percentage points to –4.4 percent of GDP due mostly to a decline in tax revenues; COVID-related expenditures were largely accommodated via expenditure reprioritization.\n- 2021 budget deficit expected to improve to –2.0 percent of GDP reflecting higher revenues and lower expenditures as COVID measures unwind.\n- Debt dynamics:\n  - Debt-to-GDP ratio rose by 7 percentage points to 51 percent in 2020 (financed by new donor disbursements and IMF support).\n  - Debt-to-GDP ratio set to fall back to 47 percent in 2021.\n  - Overall risk of debt distress remains high.\n- 2022 draft budget and fiscal stance:\n  - The 2022 draft budget implies an expansionary fiscal stance; preliminary estimates suggest the fiscal deficit will widen to around -2.5 to -2.7 percent of GDP.\n  - Authorities committed to limit the fiscal deficit to -2.5 percent of GDP in line with the draft budget; achieving this will require marked expenditure restraint.\n  - Revenue risks from the current tax-code draft (lower tax rates without base broadening and new tax expenditures) could lead to revenue losses inconsistent with RCF commitments.\n- Recommended fiscal measures:\n  - Adhere to fiscal discipline to keep debt on a downward trajectory.\n  - Implement an operational fiscal anchor limiting fiscal deficits to -2.5 percent of GDP.\n  - Phase out ineffective tax exemptions.\n  - Commit to a sustainable Roghun financing envelope.\n  - Improve spending prioritization, efficiency, and transparency.\n  - Undertake a public investment management assessment and a fiscal transparency evaluation.\n  - Use contingency measures if revenue shortfalls occur (e.g., higher mining royalties, lower non-priority capital expenditures)."
    },
    {
      "heading": "State-owned enterprises (SOEs)",
      "content": "- Complete and expedite SOE fiscal risk management reforms and resume disclosure of SOE-related risks.\n- For Barki Tojik (BT):\n  - Expedite full operational unbundling.\n  - Resume increases in electricity tariffs, accompanied by strengthened social safety nets to protect vulnerable populations.\n  - Develop a plan to clear BT’s arrears to suppliers and ensure all bank loans are current.\n  - Apply market electricity rates gradually on Tajik Aluminum Company to improve BT’s financial health."
    },
    {
      "heading": "Monetary and exchange rate policies",
      "content": "- Monetary conditions should remain restrictive given inflation and inflation expectations above the NBT target range, strong growth, surging remittance flows, excess liquidity, and volatile global food and fuel prices.\n- Interim arrangements:\n  - Continue using monetary aggregates as an interim anchor during transition to inflation targeting (IT).\n  - Move to price-based FX auctions and improve transparency on FX market transactions.\n  - Execute public-sector transactions at prevailing market rates to reduce FX shortages and facilitate elimination of exchange restrictions and multiple currency practices.\n  - Gradually increase FX flexibility to allow monetary policy to focus on inflation stabilization.\n- Commendations and governance:\n  - Mission commends the NBT’s efforts to strengthen its equity position and diversify international reserves through proactive gold sales.\n  - Ensuring the NBT Board is composed of a majority of non-executive members would help enhance governance (as noted in the Fund’s Safeguard Assessment)."
    },
    {
      "heading": "Financial sector policies",
      "content": "- Progress and vulnerabilities:\n  - NBT support measures underpinned banking system stability and spurred private credit growth during the pandemic.\n  - NBT revoked licenses of two formerly systemic banks (AIB and TSB) and commenced liquidation.\n  - Aggregate bank capital adequacy ratios have improved.\n  - Key vulnerabilities persist: elevated dollarization, high NPL ratios, and concentration risks due to legacy governance, risk management, and supervision weaknesses.\n- Bank resolution and crisis management:\n  - Complete AIB and TSB resolutions swiftly and transparently to minimize costs while protecting creditor rights.\n  - Bank liquidators assigned; appraisals of eligible collateral and creditor lists submitted to courts.\n  - Authorities should publish a detailed report on full costs of resolving the banks and who will bear them.\n  - Revise bank resolution and crisis management frameworks in line with international standards.\n- Supervision and macroprudential policy:\n  - Increase intensity and rigor of supervision as COVID measures are rolled back to avoid deterioration in system health and rising problem loans.\n  - Ensure appropriate asset classification, provisioning, and credit risk management standards.\n  - Banks unable to maintain prudent capital positions should postpone dividend payments and share buybacks.\n  - Banks with high NPLs should strengthen NPL management capabilities.\n  - Consider measures to restrict FX lending to unhedged corporate borrowers in addition to prior de-dollarization steps (e.g., higher risk weights for FX loans).\n- Governance, AML/CFT, and disclosure:\n  - Fully incorporate Beneficial Ownership (BO) and Related Party Transaction (RPT) disclosure requirements into supervision, and empower supervisors to conduct and act on shareholder suitability assessments.\n  - Enact a new AML/CFT law to strengthen the legal and supervisory framework and address correspondent banking relationship pressures.\n- Deposit Insurance Fund (DIF):\n  - DIF assets appear sufficient to cover liquidation-related payouts (approximately TJS 200 million), but resources would be significantly reduced.\n  - A backstop funding mechanism has been put in place; raising insurance premiums and revising the DIF investment strategy would help rebuild buffers over the medium term."
    },
    {
      "heading": "Policies to enhance governance, transparency, and sustainable growth",
      "content": "- Governance and anti-corruption:\n  - Authorities adopted a new anti-corruption strategy and enacted a new Anti-Corruption Law.\n  - Weaknesses in governance and transparency across the public sector persist and impede efficient resource allocation and growth.\n  - Encouraged actions:\n    - Pass the new public procurement law aligned with best international practices.\n    - Eliminate opaque direct contracting by SOEs.\n    - Implement actionable anti-corruption policies (e.g., asset declaration by public officials).\n    - Ensure assets repatriated under the new Amnesty Law are fully in line with AML/CFT principles.\n- Climate resilience and adaptation:\n  - Tajikistan is susceptible to climate change; increased intensity and frequency of droughts disproportionately impact vulnerable households.\n  - Adaptation planning should focus on priority sectors: agriculture, water, and energy to promote economic diversification, increase rural resilience, and reduce food insecurity.\n  - Raising tariffs would improve BT’s cost recovery and encourage more efficient electricity usage.\n\nSource: Tajikistan: Staff Concluding Statement of the 2021 Article IV Mission\n\n---\n\n\n References\n\n- Republic of Tajikistan and the IMF\n- IMF Policy Advice -- A Factsheet\n- Mission Concluding Statements\n- PRESS CENTER\n- Article IV\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/11/05/mcs-tajikistan-staff-concluding-statement-of-the-2021-article-iv-mission"
    }
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    "Published: November 5, 2021",
    "Real GDP growth declined to 4.5 percent in 2020 from 7.5 percent in 2019.",
    "The economy expanded by 8.9 percent in the first nine months of 2021, driven by the industrial (including mining), agricultural, and construction sectors.",
    "The current account surplus is expected to decline to 2.6 percent of GDP in 2021 as imports pick up with the recovery.",
    "Inflation remains above the NBT’s target range (6±2 percent) mainly due to higher global food and fuel prices.",
    "Reserves have risen to 8 months of import cover, supported by the NBT’s gold purchases from domestic producers and timely international partner support, including the IMF.",
    "Monetary normalization in 2021: the refinancing rate has been raised by 250 bps in four steps, reserve requirements restored to pre-COVID levels, and exchange rate depreciation restrained.",
    "Growth projections and risks:",
    "2020 fiscal deficit widened by 2 percentage points to –4.4 percent of GDP due mostly to a decline in tax revenues; COVID-related expenditures were largely accommodated via expenditure reprioritization.",
    "2021 budget deficit expected to improve to –2.0 percent of GDP reflecting higher revenues and lower expenditures as COVID measures unwind.",
    "Debt dynamics:",
    "2022 draft budget and fiscal stance:",
    "Recommended fiscal measures:",
    "Complete and expedite SOE fiscal risk management reforms and resume disclosure of SOE-related risks.",
    "For Barki Tojik (BT):",
    "Monetary conditions should remain restrictive given inflation and inflation expectations above the NBT target range, strong growth, surging remittance flows, excess liquidity, and volatile global food and fuel prices.",
    "Interim arrangements:",
    "Commendations and governance:",
    "Progress and vulnerabilities:",
    "Bank resolution and crisis management:",
    "Supervision and macroprudential policy:",
    "Governance, AML/CFT, and disclosure:",
    "Deposit Insurance Fund (DIF):",
    "Governance and anti-corruption:",
    "Climate resilience and adaptation:",
    "[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)",
    "[Mission Concluding Statements](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Article IV](https://www.imf.org/external/pubs/ft/aa/aa04.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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