Press Release No. 09/39

Press Release: IMF Mission Reaches Preliminary Agreement on PRGF-Supported Program for the Republic of Tajikistan

February 18, 2009

An International Monetary Fund (IMF) mission visited Dushanbe between February 5-18, 2009 and reached agreement in principle with the Tajik authorities on an economic program that can be supported by a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF), providing support in an amount equivalent to about US$120 million. This agreement requires the approval of the IMF Executive Board, which is expected to consider the PRGF-supported program in early April.

The mission also reviewed performance under the 2008 Staff Monitored Program (SMP), and held discussions for the 2009 Article IV Consultations. Economic performance was generally strong in 2008, despite the spreading global crisis, and the SMP was completed successfully. Helped by strong macroeconomic policies and a 50 percent growth in remittances, real GDP grew by 8 percent. With buoyant revenues, the government achieved an estimated overall fiscal surplus (excluding the externally financed public investment program) of 1 percent of GDP. Inflation receded to 12 percent year-on-year in December, as international prices—especially food prices—eased.

However, the deteriorating external environment is weighing on the outlook for 2009. The global slowdown—and especially the downturn in Russia—is expected to impact Tajikistan through declining remittances and falling prices for its key exports, cotton and aluminum. As a result, the mission expects real GDP growth to slow to 3 percent in 2009. Inflation should stabilize at around the level of 12-13 percent.

Against this background, the government and the mission reached preliminary agreement on the three-year program under the PRGF. Approval of the program by the Fund's Executive Board and subsequent disbursements of financial support will depend on the authorities' implementation of macroeconomic policies and key reform measures discussed with the mission. In this context, the mission assisted the authorities with the design of the macroeconomic policy response to the global crisis. It supports the government's anti-crisis measures, which seek to maintain the fiscal objectives laid out in the 2009 budget of an overall deficit of ½ percent of GDP, and the authorities' commitment to a flexible exchange rate regime. It also welcomes the authorities' intention to speed up structural reforms, with a focus on enhancing central bank governance, raising transparency and accountability of state-owned enterprises, and strengthening the agricultural sector.