Press Release No. 17/196

IMF Staff Completes 2017 Article IV Mission to Tajikistan

May 30, 2017

• Tajikistan has implemented positive reforms in the past two years, but external shocks have affected economic confidence, reduced buffers, and increased vulnerabilities.
• Generating inclusive, job-rich growth will require prudent macroeconomic policies and strong and sustained structural reforms.
• The team welcomed the authorities’ intention to resume discussions on a possible IMF program, and discussed steps that would demonstrate reform progress and pave the way for resumption of program negotiations.

An International Monetary Fund (IMF) mission, led by Mr. Paul Ross, visited Dushanbe from May 17−30 to conduct the 2017 Article IV consultation discussions. At the conclusion of the mission, Mr. Ross issued the following statement:

“The Tajikistan authorities and the IMF team held constructive discussions on Tajikistan’s recent economic developments, the economic outlook, and policy actions and structural reforms needed to support an inclusive growth agenda. The team commended the authorities for reforms implemented in past two years and stressed that deeper reforms are needed.

“Since late-2014, Tajikistan’s economy suffered from external shocks, which affected economic confidence, reduced fiscal space and external buffers, and increased vulnerabilities. In 2017, with subdued external and domestic demand, fiscal consolidation and lower credit to the private sector, the IMF team projects real economic growth to slow, while the authorities project somewhat higher growth. Strong and sustained reforms are needed to lift growth over the medium term.

“Tajikistan’s authorities and the IMF team agreed on the importance of generating inclusive and job-rich growth to increase incomes and reduce poverty. The authorities and the mission agreed that generating inclusive growth will require prudent macroeconomic policies to lift economic confidence in addition to strong and sustained structural reforms. Regarding macroeconomic policies, Tajikistan’s 2017 budget appropriately targets a decline in the deficit. The authorities and the IMF team agreed that the deficit should gradually narrow over the medium term to assure debt sustainability. Also, the team welcomed the recent efforts to unify the official and market exchange rates and noted that a flexible exchange rate policy and supporting monetary policy--with greater sales of National Bank of Tajikistan (NBT) notes--would control inflation, restore confidence in the somoni, and help rebuild the reserves buffer.

“Banking reform is critical to reduce macro-financial vulnerabilities, support economic growth, and financial inclusion. The team supported the improvements made in banking regulation and supervision, monitoring of systemic banks’ asset quality and implementing resolution plans for two of them. Also, it welcomed the increase in financial inclusion. Further, it urged early action to strengthen the bank resolution and emergency liquidity assistance frameworks, measures to assure sustainable viability of the two systemic banks, and to develop strategies to address non-performing loans and improve transparency in this sector.

“Continued strong structural reform will create job-rich and poverty-reducing growth. The authorities and the team discussed plans to advance other structural reforms. The discussions covered fiscal reforms to improve service delivery and reduce fiscal risks; strengthening the monetary framework to anchor better inflation and exchange rate expectations; and improvements in the business environment to foster higher investment and job creation.

“The authorities indicated they wish to resume discussions on a possible IMF-supported program. Concrete steps in key reform areas will need to be taken, building on the efforts already made by the Tajikistan authorities, to resume program negotiations. These steps include preparing a medium-term fiscal strategy to assure debt sustainability, an assessment of the macroeconomic implications (on growth, exports, and debt sustainability) of large infrastructure projects, and banking reforms. Steps that demonstrate reform progress would pave the way for resumption of program negotiations, which will need careful preparation by both the Tajikistan authorities and IMF staff.

“IMF staff looks forward to continuing its close cooperation with Tajikistan. IMF staff will engage closely with the Tajikistan authorities in the weeks ahead to support the efforts of the Government and the NBT to promote macroeconomic stability and inclusive growth, and stand ready to resume discussions on an IMF-supported program.

“During the visit, the team met with First Deputy Prime Minister Davlatali Said, Finance Minister Abdusalom Qurboniyon, Economy Minister Negmatullo Hikmatullozoda, and NBT Governor Jamshed Nurmahmadzoda, and other senior officials.”