Press Release No. 20/292

IMF Staff Completes Virtual Visit to Tajikistan

September 14, 2020

• The COVID-19 pandemic’s health impact has been well-contained, but it has created challenges for economic activity, remittances, and the external position.
• To address the economic impact of the pandemic, the government has implemented temporary tax relief measures and is expanding health and social spending to support poor and vulnerable groups.
• The government has committed to publish quarterly reports on COVID-related health and social spending to further strengthen good governance. Over the medium term, policies to achieve fiscal and external consolidation remain important to ensure macroeconomic stability.

Washington, DC: An International Monetary Fund (IMF) mission led by Ms. Padamja Khandelwal visited Tajikistan virtually from August 18 to September 3, 2020, to hold discussions on macroeconomic developments, the government’s policy response to the coronavirus shock, and policies needed to maintain macroeconomic stability and build the foundations for strong, sustainable, and inclusive growth.

At the end of the visit, Ms. Khandelwal issued the following statement: “Tajikistan is experiencing severe effects from the COVID-19 pandemic. The health impact of the pandemic has been well-contained, but trade and transportation challenges with key trading partners have affected economic activity and remittances. The external position has deteriorated. On the fiscal side, revenues have dropped sharply, posing challenges for the implementation of the revised budget for 2020.

The fiscal measures to alleviate the impact of the pandemic are welcome. The revised budget incorporates higher allocations for health and social spending and cuts to lower-priority spending. Support from international partners has been mobilized. The authorities have implemented temporary tax relief measures, and the Targeted Social Assistance program has been expanded nationwide. One-off social transfers to vulnerable households and financial support to SMEs are also underway. Health and social spending are expected to be further stepped up in the second half of the year to alleviate the poverty and social impact of the pandemic. In this regard, the authorities’ commitment to publish quarterly reports on COVID-related health and social spending is strongly welcomed. To further strengthen good governance practices, transparency of borrowing by state-owned enterprises also needs to be enhanced.

The National Bank of Tajikistan (NBT) has also taken several measures to support economic activity and financial stability, including easing reserve requirements and lowering the policy rate. While these measures are welcome, ensuring strong supervision will be important to maintain confidence in bank balance sheets. An effective fiscal backstop for the Deposit Insurance Fund is recommended and the two formerly systemic and insolvent banks need to be liquidated. Foreign exchange shortages also need to be addressed.

Over the medium-term, policies to achieve fiscal and external consolidation, in line with the Rapid Credit Facility (RCF) commitments, remain important to ensure macroeconomic stability. Addressing the large decline in revenues in 2020 will be essential to build fiscal space for needed spending on health, education, and infrastructure. The mission welcomes the authorities’ commitment to tax reform and urges a gradual and phased revision of the tax code to support the business environment and fiscal consolidation. Greater exchange rate flexibility is needed to strengthen the credibility of the monetary policy framework.

During the virtual staff visit, the team met with First Deputy Prime Minister D. Said, Chairman of the National Bank of Tajikistan, J. Nurmahmadzoda, Minister of Finance F. Qahhorzoda, Minister of Economy Development and Trade Z. Zavqizoda and other senior officials. The mission also virtually met with representatives of the banking sector and the development partner community. The mission would like to thank the authorities for their close cooperation and candid discussions.”