Press Release No. 09/324

Press Release: IMF Announces Staff-Level Agreement with Tajikistan on First Review under PRGF Arrangement

September 24, 2009

An International Monetary Fund (IMF) team, led by Mr. Axel Schimmelpfennig, visited Dushanbe September 14-24 to conduct the first review under a three-year, SDR 78.3 million (about US$116 million) Poverty Reduction and Growth Facility arrangement with Tajikistan (see Press Release 09/136).

The mission reached agreement on a set of macroeconomic policies, with a view to enable the IMF Executive Board to consider the completion of the first review, following completion of the annual external audit of the National Bank of Tajikistan (NBT). The completion of the first review will enable the country to draw an amount equivalent to SDR 19.6 million (about US$28 million). This would bring the total disbursement so far to SDR 45.7 (about US$66 million). The audit of the NBT is normal practice, allowing the IMF to safeguard its funds, and to further improve the governance of the NBT.

At the conclusion of the visit, Mr. Schimmelpfennig made the following statement:

“Tajikistan has been severely affected by the global economic crisis, mainly through a decline in remittances of around 35 percent in 2009 so far, but also through a fall in demand for the country’s key exports, aluminum, and cotton. We project real GDP growth to slow sharply from 8 percent in 2008 to only 2 percent in 2009, and households relying on remittances as a main source of income face hard times. With the global economy expected to recover, Tajikistan should also achieve moderately higher growth in 2010 of around 5 percent, but this will not be enough to reverse the 2009 decline in real per capita disposable incomes. Inflation has come down significantly this year so far, mainly reflecting the decline in international commodity prices, and is expected to remain much lower than in 2008.

“The government and the NBT broadly met their policy objectives for end-June 2009. In particular, both the fiscal deficit target—despite revenue shortfalls—and the target for net international reserves of the NBT were met. Moreover, the government was able to raise social spending broadly as envisaged. At the same time, some pension arrears arose, and the government has committed to settle these by November of this year.

“The IMF team was also briefed on the good progress on structural reforms. Most notably, the resolution strategy for the cotton debt has been adopted, and now needs swift and determined implementation. For the remainder of the year, meeting the fiscal deficit target will require strict expenditure control, while continuing to raise social spending and staying current on pension and wage payments.

“The Tajik authorities and the IMF mission also discussed economic prospects and appropriate fiscal and monetary policies for 2010. Despite some improvement in the global economy, the external climate for Tajikistan remains difficult, and macroeconomic policies will need to be set with a view to maintaining balance of payments sustainability, while continuing to increase social spending. In the area of structural reforms, the authorities intend to maintain their focus on NBT governance and financial transparency of the largest state-owned enterprises.”