IMF Executive Board Concludes 2021 Article IV Consultation with the Republic of Tajikistan
February 18, 2022
Washington, DC: On January 21, 2021, the Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation [1] with the Republic of Tajikistan.
Tajikistan is recovering rapidly from the negative COVID-19 shock. After growing by 4.5 percent in 2020, the economy expanded by 8.9 percent in the first nine months of 2021 due to strong industrial activity and domestic demand, supported by public investment and robust remittance inflows. While the current account surplus has decline somewhat as imports pickup in line with the recovery, international reserves remain well above adequacy metrics. Inflation remains somewhat above the NBT’s target range (6±2 percent) mainly due to higher global food and fuel prices.
As prospects have brightened, the stimulus provided by more accommodative fiscal and monetary policies during the pandemic has been gradually withdrawn in 2021. Banking system stability has improved with the closure of problematic banks, supporting the flow of credit to the private sector. Along with help from international partners, COVID vaccination rates have increased, and reported infection rates have remained low.
Looking ahead, the recovery is expected to continue. Real GDP growth is projected to come in at 7.0 percent in 2021, but moderate to 5.5 percent in 2022 as the impact of pent-up demand (reflecting a rebound in remittances) and base effects fade. Over the medium term, growth is projected to stay around 4 percent of GDP with inflation falling within the NBT target range. Risks to the outlook remain tilted to the downside due to uncertainty regarding the pandemic and regional spillovers. A new wave of infections (possibly associated with the deteriorating COVID situation in some key trading partners) could undercut the recovery. Regional security and geopolitical tensions could jeopardize economic prospects. From a domestic perspective, delayed SOE reforms, limited competition, structural rigidities, and incipient financial sector vulnerabilities could also derail growth and keep inflation elevated.
Executive Board Assessment [2]
Executive Directors agreed with the thrust of the staff appraisal. They commended the Tajik authorities’ prompt policy response, which has mitigated the economic and health impact of the pandemic and underpinned a strong recovery. Given high uncertainty about the pandemic and limited fiscal space, Directors underscored that carefully calibrated policies and key structural reforms are needed to foster a more durable and sustainable recovery and safeguard macroeconomic stability.
Directors stressed the need for fiscal discipline to ensure that debt remains on a sustainable downward trajectory given the high risk of debt distress. They agreed that achieving the 2022 fiscal targets will require tight expenditure control and additional measures if revenue shortfalls emerge. Over the medium term, Directors recommended introducing an operational fiscal anchor, complemented with steps to phase out tax exemptions, broaden the tax base, and improve public spending efficiency and transparency.
Directors agreed that a restrictive monetary policy stance remains warranted given inflationary pressures. Noting the authorities’ plans to transition to an inflation targeting regime, they emphasized that this will require further reforms, including a gradual move toward exchange rate flexibility over the medium term and a further upgrade of the central bank’s governance framework.
Directors called on the authorities to continue strengthening the macroprudential policy framework and banking supervision, including by integrating beneficial ownership information into the supervisory process. They encouraged the authorities to enact the new AML/CFT law, complete the ongoing bank resolutions transparently, rebuild the buffers of the deposit insurance fund, and improve the crisis management framework.
Directors stressed the importance of prioritizing structural reforms to improve the business climate, attract investment, and support a sustainable recovery. They called for accelerating reforms across state-owned enterprises (SOEs), particularly to improve their governance and transparency, and gradually adjust electricity tariffs toward cost recovery while strengthening the social safety net to protect vulnerable populations. Directors encouraged adopting a public procurement law consistent with best international practices and implementing anti-corruption policies. They also called on the authorities to reengage with the Extractive Industries Transparency Initiative and to follow through with their adaptation strategies to enhance climate resilience. Directors noted that achieving the country’s development goals calls for higher investments in healthcare, education, and infrastructure. They took positive note of the authorities’ interest in a potential arrangement with the Fund to support their reform agenda.
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Table 1. Selected Economic Indicators, 2018–23 |
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(Quota: SDR 174 million) |
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(Population: 9.3 million; 2019) |
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(Per capita GDP: US$857; 2019) |
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(Poverty rate: 26 percent; 2019) |
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(Main exports: mineral products, aluminum, cotton) |
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2018 |
2019 |
2020 |
2021 |
2022 |
2023 |
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Est. Proj. |
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National accounts |
(Annual Percent Change, unless otherwise indicated) |
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Real GDP |
7.6 |
7.4 |
4.5 |
7.0 |
5.5 |
4.5 |
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Headline CPI inflation (end-of-period) |
5.4 |
8.0 |
9.4 |
8.2 |
7.0 |
6.5 |
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General government finances |
(Percent of GDP, unless otherwise indicated) |
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Revenue and grants |
28.2 |
26.8 |
24.6 |
25.0 |
25.6 |
25.0 |
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Tax revenue |
20.6 |
19.9 |
18.2 |
20.2 |
20.2 |
20.2 |
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Expenditure and net lending |
30.9 |
28.8 |
28.9 |
27.0 |
28.3 |
27.5 |
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Current |
16.7 |
16.7 |
16.9 |
16.5 |
17.6 |
17.6 |
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Capital |
14.2 |
12.1 |
12.0 |
10.5 |
10.7 |
9.9 |
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Overall balance (excl. PIP and stat. discrepancy) |
1.6 |
1.5 |
-2.1 |
0.3 |
0.4 |
1.8 |
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Overall balance (incl. PIP and stat. discrepancy) |
-2.7 |
-2.1 |
-4.3 |
-2.0 |
-2.7 |
-2.5 |
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Total public and publicly-guaranteed debt |
46.3 |
43.1 |
50.1 |
46.5 |
43.5 |
42.0 |
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Monetary sector |
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Broad money (12-month percent change) |
5.1 |
16.9 |
18.5 |
17.1 |
13.6 |
11.3 |
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Reserve money (12-month percent change) |
7.0 |
20.2 |
20.2 |
13.9 |
13.5 |
13.5 |
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Credit to private sector (12-month percent change) |
1.3 |
7.7 |
19.9 |
14.1 |
12.0 |
10.1 |
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Refinancing rate (in percent, eop/ latest value) |
14.8 |
12.3 |
10.8 |
... |
... |
... |
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External sector |
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Current account balance |
-4.9 |
-2.2 |
4.1 |
2.6 |
-1.0 |
-1.6 |
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Trade balance (goods) |
-24.3 |
-23.1 |
-17.6 |
-21.0 |
-25.1 |
-25.6 |
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FDI (net) |
3.2 |
2.3 |
0.4 |
1.4 |
1.4 |
1.4 |
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Total public and publicly guaranteed external debt |
37.5 |
35.5 |
43.5 |
39.1 |
38.2 |
37.2 |
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Memorandum items: |
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Nominal GDP (in millions of somoni) |
71,059 |
79,110 |
84,579 |
96,382 |
107,948 |
119,513 |
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Average exchange rate (somoni per U.S. dollar) |
9.15 |
9.53 |
10.32 |
… |
… |
… |
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Sources: Data provided by the Tajikistan authorities, and Fund staff estimates. |
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[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.
[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .
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