Tajikistan: Staff Concluding Statement for the 2025 Article IV Mission
IMF News, May 2, 2025
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- Published: May 2, 2025
Economic developments, outlook, and risks
- Real GDP increased 8.4 percent in 2024, marking the fourth consecutive year of growth above 8 percent, driven by mining, manufacturing, agriculture, public and private investment.
- Current account surplus of 6.2 percent of GDP in 2024.
- FX reserves rose from $3.6 billion at end-2023 to $4.7 billion at the end of February 2025, amounting to 7 months import coverage.
- Twelve-month inflation stood at 3.7 percent in February, within the NBT’s updated target range of 5 percent (±2 percent) for 2025; price stability reflected stable imported food and fuel prices and an appreciation of the somoni.
- Reserve money growth was 32 percent (y/y) in February, moderated since mid-2024 but boosted by the NBT’s gold purchases.
- Banks’ NPL ratio declined to 7.0 percent in February amid balance sheet clean-up largely via write-offs of legacy NPLs.
- Credit to the private sector grew at 29 percent (y/y) in February, driven by household loans in local currency and new retail lending products.
- Medium-term projections and key risks:
- Real GDP projected to increase by 7 percent in 2025.
- Twelve-month inflation (y/y) projected to remain close to the mid-point of the NBT’s target range in 2025 and 2026.
- Current account surplus expected to narrow in 2025 as financial inflows stabilize; FX reserves projected to remain at comfortable levels.
- Risks tilted to the downside: potential pronounced decline in financial inflows (remittances), slowdown in key trading partners, more frequent/severe natural disasters, and heightened security risks.
- Upside: continued strength in gold prices and rising demand for rare earth metals could attract investment in mining.
Fiscal policy
- Fiscal outcome in 2024: fiscal surplus of 0.3 percent.
- Revenue performance supported by stable revenue growth despite VAT reduction from 15 to 14 percent.
- 2025 budget envisages a fiscal deficit of up to 2.5 percent of GDP, conditional on available financing.
- Public debt declined to 25 percent of GDP at the end of 2024; public debt assessed as sustainable but at high risk of distress due to large debt service obligations during 2025-2027; the first semi-annual Eurobond repayment was completed as planned in March.
- Key fiscal policy priorities and measures:
- Continue to expand the domestic debt market; MOF launched market-based auctions of government securities in 2024.
- Maintain fiscal deficit target of 2.5 percent of GDP as an anchor to keep debt on favorable medium-term trajectory.
- Build fiscal buffers and prepare contingency plans for spending reprioritization to protect social assistance and other critical spending.
- Improve revenue mobilization and spending efficiency:
- Medium-Term Revenue Plan (MTRP) aims to raise total revenues by at least 2 percentage points to 26 percent of GDP in 2026 through tax policy, tax administration and SOE reform measures.
- Expansion of digitalization of payments and discontinuation of tax exemptions for several large investment projects in 2024.
- Time-bound action plan to streamline tax exemptions and customs preferences.
- Strengthen appraisal, selection and oversight of internally financed capital projects to enhance public investment efficiency.
- Strengthen SOE governance and oversight:
- MOF expanded financial monitoring coverage from 27 SOEs to 77 entities with state participation.
- Amendments to SOE board composition regulations to ensure transparent and competitive appointments.
- Expanded scope of the annual fiscal risk statement to cover SOE profitability, leverage, and budget allocations.
- Publication of an updated SOE list and completion of sectorization exercise to improve monitoring.
- Electricity sector reforms required:
- Low collection rates, high technical and commercial losses, and tariffs below cost recovery led Barki Tojik to accumulate sizable arrears.
- Measures needed: improve collection rates for largest consumers, roll-out smart metering, increase penalties for electricity theft, and strengthen cost controls.
- Electricity tariff was increased by about 15 percent in April 2025; further annual tariff adjustments envisaged to reach cost recovery by 2027.
Monetary, exchange rate, and financial sector policies
- NBT policy and inflation framework:
- NBT lowered its inflation target from 6 to 5 percent (±2 percent) for 2025.
- Policy rate lowered by 25 basis points to 8.75 percent in February 2025.
- Real policy rate is still relatively high at about 5 percent (based on realized inflation).
- Monetary policy should remain data-driven and vigilant to potential upward demand pressure from strong credit growth and robust financial inflows.
- Proactive liquidity management is essential to moderate the impact of the NBT’s gold purchases and FX interventions on the money supply.
- Exchange rate and FX market developments:
- NBT measures to modernize the local FX market: ending auctions of inward transfers; improving mechanism for public sector FX transactions; enhancing dissemination of FX rate information; introducing price-based auctions for FX interventions to facilitate price discovery.
- Recommendation: limit FX operations to avoiding disorderly market conditions to facilitate FX market development and greater exchange rate flexibility.
- Financial sector stability and supervision:
- Banking system strengthened after resolution of two troubled banks but remains exposed to volatile external environment and possible reversal of inflows.
- Strong household lending warrants careful macroprudential oversight to ensure prudent lending standards.
- Close monitoring needed of maturity mismatches and funding- and asset-side concentration risk.
- Planned introduction of macroprudential tools and forward-looking stress tests is essential to manage risks from strong credit growth.
Structural reforms and governance
- Reform objectives: improve public sector efficiency; foster financial and private sector development; promote an enabling investment climate for private sector-led growth.
- Governance, transparency, and financial safety nets:
- Transparent governance and policy frameworks and robust financial safety nets are key to strengthening trust in public institutions and macro-financial stability.
- Transparent corporate ownership is critical to an enabling business climate and prudent AML-CFT standards.
- Data and statistics:
- Authorities have started publishing fiscal statistics in line with GFS standards and broadened SOE coverage.
- Further steps: compile quarterly demand-side GDP data and expand use of GFS-based fiscal data to strengthen data quality.
Policy dialogue and next steps
- Discussions on policies to complete the second review under the Policy Coordination Instrument (PCI) are well advanced and will continue following this mission.
- The mission expressed appreciation for the Tajik authorities’ hospitality, close collaboration, and constructive discussions.
IMF mission led by Mr. Matthew Gaertner; mission held April 2-15, 2025 in Dushanbe. Statement issued May 2, 2025.