Press Release No. 25/435

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the Third Review under the Policy Coordination Instrument (PCI) for Tajikistan on December 18, 2025, and endorsed the staff appraisal without a meeting on a lapse-of-time basis.

Tajikistan’s twenty-two-month program under the Policy Coordination Instrument (PCI) was approved in February 2024 (see Press Release No. 24/60). The PCI aims to anchor macroeconomic policies and support structural reform implementation to maintain macro-financial stability and foster more sustainable and inclusive growth. Program implementation has remained on-track, with all but one of the quantitative targets for the Third Review met.

Tajikistan’s economy has continued to perform favorably. Real GDP growth amounted to 8.2 percent in the first three quarters of 2025, while inflation remained well contained at 2.8 percent (y/y) in September. The external position has continued to benefit from strong remittance inflows that offset higher imports, leading to a further increase in the current account surplus in the first half of 2025, with gross reserves rising to about eight months’ import coverage. The fiscal outturn overperformed the program target in the first half of 2025 on the back of strong revenue collection and supported the continued decline in public debt.

The near-term outlook remains positive. The outlook remains vulnerable to weaker external conditions, particularly slower growth in major destination countries for Tajikistan’s migrant workers. Economic growth is projected at 6 percent for 2026, while inflation is expected to remain within the central bank’s target range. As inflows of remittances gradually normalize, the current account balance is projected to shift into a small deficit over the medium to long term, while gross reserves are expected to remain at comfortable levels.

Addressing structural bottlenecks remains essential for fostering stronger, more job-rich growth and strengthening resilience to external shocks. Safeguarding financial stability will require further strengthening of supervisory practices, including broader use of macroprudential tools and tighter oversight of lending standards. Fiscal policy should focus on mobilizing revenue to create space for priority social and development spending and enhancing expenditure efficiency. Sustained progress in governance, SOE oversight, and the anticorruption framework will be essential for maintaining strong and inclusive medium-term growth. Broader improvements in transparency and the business environment will also be important to support more diversified private sector–led activity and expand employment opportunities for Tajikistan’s young population.

 

Executive Board Assessment

In concluding the Third Review under the Policy Coordination Instrument for Tajikistan, Executive Directors endorsed the staff’s appraisal, as follows:

Tajikistan’s favorable macroeconomic performance has continued in 2025. Strong growth has been supported by development of the mining sector and robust aggregate demand, and inflation remains close to 3 percent (y/y). Large financial inflows have contributed to a supportive external position and comfortable levels of FX reserves, while prudent fiscal policy has resulted in low fiscal deficits and anchored a continued reduction in public debt.  

Policies should aim to build on recent progress to address structural vulnerabilities to growth and support domestic job creation. The economy has benefited from large remittance inflows in recent years, but the outlook remains vulnerable to a less favorable external environment. Broad-based governance and transparency reforms are central to improving the business climate to support more diversified private sector-led growth and increase domestic job opportunities for Tajikistan’s young and fast-growing population.

Inflation remains well-contained, but large FX inflows and strong credit growth warrant caution. Greater exchange rate flexibility and liquidity operations have helped to manage the impact of financial inflows in 2025; FX operations by the NBT should be limited only to smooth disorderly market conditions to facilitate development of the FX market and further enhance exchange rate flexibility. Meanwhile, financial stability can be further strengthened by expanding the use of macroprudential tools, monitoring lending standards more closely and aligning off-site and on-site supervision practices with international standards.

Enhanced monitoring is needed to manage risks posed by the recent introduction of EU sanctions. Large financial inflows have contributed to strong growth in bank deposits, but the volatile external environment and any reversal of recent inflows could pose challenges to the banking system. The recent introduction of EU sanctions on three domestic banks increases downside risks to the outlook. Supervisors should require more frequent and granular reporting on liquidity and capital positions of sanctioned institutions to ensure early identification of vulnerabilities. Enhanced on-site inspections should focus on evaluating the effectiveness of banks’ compliance frameworks and their adherence to sanctions-related obligations. The authorities are also advised to develop contingency plans and to expand the use of stress testing to assess system- wide risks under adverse scenarios. 

Improved revenue mobilization and spending efficiency are key to increasing fiscal space for priority social and development projects. Fiscal performance during 2025 has remained favorable and there have been encouraging results from efforts to improve tax administration through digitalization and improved compliance. Improved appraisal, selection and oversight of internally financed capital projects is crucial for enhancing the efficiency of public investment in line with the PIMA recommendations. The fiscal deficit target of 2.5 percent of GDP remains an important anchor to ensure that debt remains on a favorable medium-term trajectory. Domestic issuance through market-based auctions of government securities has continued to advance in 2025, establishing a robust secondary market for these instruments will help to expand the investor base and further deepen the market. 

Further efforts are needed to strengthen collections from several state-owned electricity consumers and bring electricity tariffs to cost recovery. There has been a welcome improvement in Barki Tojik’s payment discipline during 2025, and the roll-out of smart metering and efforts to reduce electricity theft have showed encouraging results. The collection rate from several large state-owned consumers remains low, however, and undermines the financial position of the electricity sector. Reducing quasi-fiscal losses will require greater efforts to improve collection rates for these large electricity consumers, as well as further increases to bring tariffs to cost recovery. 

Broad-based structural reforms, including further efforts to strengthen governance, are key to sustaining high growth rates over the medium-term. Reform efforts should continue to focus on improving governance and transparency of SOEs, improving the anti-corruption framework, and strengthening institutional oversight. Transparent governance and policy frameworks are key to improving the business environment and creating space for private sector-led investment to support domestic job creation and unlock the economy’s long-term potential. 

Staff support the completion of the Third Review under the PCI, which is the final review under this arrangement, notwithstanding the missed QT on targeted social assistance spending. The non-observance was minor as the QT was missed by a small margin due to revised eligibility criteria to better target vulnerable groups. Following the completion of the PCI, it is proposed that the next Article IV consultation will be conducted on the standard 12-month cycle.