Journal Issue

Republic of Tajikistan: Third Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waiver of Nonobservance of a Performance Criterion and Request for Modification of a Performance Criterion—Informational Annex

International Monetary Fund
Published Date:
December 2010
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Annex I. Tajikistan: Relations with the Fund

(As of September 30, 2010)

I. Membership Status: Joined April 27, 1993; Article VIII

II. General Resources Account:

SDR million% Quota
Fund holdings of currency87.00100.00
Reserve position in Fund0.000.00

III. SDR Department

SDR million% Allocation
Net cumulative allocation82.08100

IV. Outstanding Purchases and Loans

SDR million% Quota
ECF Arrangements52.2260.02

V. Latest Financial Arrangements

ApprovalExpirationAmount ApprovedAmount Drawn
TypeDateDate(SDR million)(SDR million)
ECF12Apr 21, 2009Apr 20, 2012104.4052.22
ECFDec 11, 2002Feb 10, 200665.0065.00
ECFJun 24, 1998Dec 24, 2001100.3078.28

VI. Projected Payments to Fund13

(SDR Million; based on existing use of resources and present holdings of SDRs):


Not Applicable.

VII. Implementation of HIPC Initiative

VIII. Implementation of Multilateral Debt Relief Initiative (MDRI):

I. MDRI-eligible debt (SDR Million)1469.31
Financed by: MDRI Trust69.31
Remaining HIPC resources--
II. Debt Relief by Facility (SDR Million)
Eligible Debt
Delivery DateGRAPRGTTotal
January 2006N/A69.3169.31

IX. Safeguards Assessment

An update safeguards assessment of the NBT (conducted in December 2009) noted that initial steps have been taken to address the risks identified by the special audit on cotton sector financing. However, considerable safeguards risks at the NBT remain. Both the accounting and the organizational structures are still fragmented, with no oversight over external and internal audits. Internal audit is weak and needs to increase coverage of core functions.

To address these issues, the NBT has implemented a number of initial steps: audited financial statements for end-April 2009 and end-December 2009 were published on the NBT website; an external auditor was reappointed for a multi year term starting from FY 2010; NIR reviews at test dates are being conducted every six months; and the internal audit of core functions was recently outsourced.

X. Exchange Rate Arrangements

Since June 2009, the exchange rate regime is classified as stabilized. The official exchange rate is based on all interbank transactions in foreign exchange. It is calculated and announced daily.

With effect from December 9, 2004, the Republic of Tajikistan accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Articles of Agreement. The Republic of Tajikistan maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions, except for exchange restrictions maintained for security reasons that have been notified to the Fund pursuant to Executive Board decision No. 144-(52/51).

XI. FSAP Participation

Tajikistan participated in the Financial Sector Assessment Program during 2007-08, and the FSSA report has been published at

XII. Article IV Consultation

The 2009 Article IV consultation was completed on Apr 21, 2009.

XIII. Resident Representative

Mr. Aisen, Resident Representative of the Fund, started his assignment in Dushanbe in July 2010.

XIV. Technical Assistance

The following list summarizes the technical assistance provided by the Fund to Tajikistan since 2004.

Fiscal Affairs:
July 2004Revenue Administration Reform
December 2004Poverty and Social Impact Analysis
June 2005Public Financial Management
August 2005Tax Policy and Administration
August 2006Fiscal ROSC
May 2007Public Financial Management (Budget Classification)
February/July 2010Tax Policy and Administration
June 2010Public Financial Management Reforms
OngoingPublic Financial Management (Regional Advisor)
Monetary and Financial Systems:
May 2006Strengthening the Monetary Policy Framework and Liquidity Management
October/December 2009 and September 2010NBT Recapitalization Strategy
April 2004Data ROSC
October 2004General Data Dissemination System (GDDS)
June 2006Report on Monetary and Financial Statistics
OngoingNational accounts and price statistics (Regional Advisor)
January 2004Tax Legislation
May 2004Tax Legislation
October 2010NBT Law
Annex II. Tajikistan: Relations with the World Bank Group

(As of September 30, 2010)

1. The Fund’s mission met with the World Bank’s team during the IMF’s September 2010 mission in Dushanbe, to identify macro critical structural reforms and coordinate the two teams’ work for the period September 2010–September 2011. Subsequent interaction in Dushanbe and Washington with staff of both institutions led to finalization of this memorandum.

2. Tajikistan was hard hit by the international financial crisis, mainly through the remittances channel. An incipient economic recovery—aided in part by a rebound in remittances—appears to be taking shape in 2010, and should continue into 2011 barring new shocks. The teams agreed that, apart from the need to maintain strong growth and achieve lasting poverty reduction, Tajikistan’s main macroeconomic challenges are: (i) to meet—within the context of fiscal and debt sustainability—the country’s pressing spending needs—including for the recapitalization of the central bank—while maintaining public debt at or below the authorities’ 40 percent of GDP ceiling; (ii) to further strengthen central bank governance and enhance the effectiveness of monetary policy; (iii) to develop the financial sector and provide for an effective intermediation of savings and investment.

3. Based on this shared assessment, the teams identified six structural reform areas as macro critical, and agreed on the division of labor in these areas:

  • Central bank governance and operations: Due to past directed credits, the central bank has large negative capital. Despite recent governance improvements, checks and balances need to be strengthened further, and the central bank needs to be recapitalized, eliminating crucial constraints to the effectiveness of monetary policy. Key reform areas include: central bank law, internal and external audit processes, budgeting, and monetary instruments. The Fund takes the lead.

  • Agricultural sector reform: The sector employs 70 percent of the population (mainly low income households), but suffers from excessive government intervention that holds back its growth potential. Key reform areas include: agriculture financing, land reform and property rights, building infrastructure for noncotton agriculture products. The Bank and other donors take the lead.

  • Energy sector reform: The sector fails to provide reliable electricity supply to the country, while running large deficits that are financed through underinvestment in capital and maintenance, as well as tax and inter-enterprise arrears. Key reform areas include: increasing production capacity, improving transmission and distribution infrastructure, and rationalizing the tariff structure and bringing the average tariff to cost recovery. A reform priority is to strengthen the power utilities’ financial controls and reporting system. The Bank takes the lead, and is working on a comprehensive energy strategy, which will try to incorporate all interactions between the relevant SOEs and Ministries. The Bank will also follow up to the 2007 financial audit of Barki Tajik.

  • Investment Climate Reform: Tajikistan’s corporate sector is held back by a business environment that is not conducive to private sector investment and growth. Key reform areas include: reducing risk and uncertainty for the entrepreneur, removing barriers to entry, reducing the cost of doing business, and supporting the private sector to increase productivity and human capacity to drive growth. The Bank leads, on the basis of its latest survey-based investment climate assessment. The tax system may also feature, and the Fund will take the lead in this area, in cooperation with any sector-specific work (such as agricultural taxation) undertaken by donors.

  • Public financial management reform: Despite recent reforms, budgeting and financing procedures can still be significantly improved, with potentially large benefits for fiscal policy. Key reform areas include: implementation of the Treasury Single Account, closer monitoring of fiscal aspects of large state-owned enterprises (SOEs), social services and safety net reform. The Fund’s FAD regional TA advisor works on budget classification issues and SOE monitoring, aiming to reduce quasi-fiscal activities and increase transparency. The Bank leads the switch to per capita based financing in education and health sectors, and will also continue to support public financial external and internal control reform. It will also work on a social spending strategy, and thus assist the implementation of the Fund’s ECF benchmark on increasing social spending.

  • Financial sector reform: Tajikistan’s financial sector is underdeveloped. Only a small amount of savings is channeled through the banking system, and private sector credit extension is insufficient to facilitate strong, sustained, private-sector-led economic growth. Key reform areas include interbank market, strengthening regulations and supervision, deposit insurance law, and securities market. A Financial Sector Assessment Program (the country’s first), carried out jointly by the Bank and the Fund, was discussed with the authorities in late 2007. The Bank is supporting implementation of the assessment’s recommendations, working on the commercial banking law, deposit insurance law, AML/CFT law, and an overall financial sector strategy. The Fund leads on Central Bank reform, as well as securities market development, via its MCM regional TA advisor.

4. The teams have the following requests for information from their counterparts:

  • The Fund team requests to be kept informed of progress in the above macro critical structural reform areas. Timing: when milestones are reached (and at least semiannually).

  • The Bank team requests to be kept informed of the Fund’s assessments of macroeconomic policies and prospects. Timing: in the context of Art. IV and other missions (and at least semi-annually).

5. The appendix lists the teams’ separate and joint work programs during September 2010–August 2011.

Table 1:JMAP Implementation, September 2010–September 2011
TitleProducts and brief

description (pillars)
Provisional Timing of

Expected date of

A. Mutual information on relevant work programs
Bank Work Program in next 12 monthsPDPG 5

  • Protecting delivery of basic services within a sustainable fiscal framework

  • Improving the environment for private sector development and growth

  • Strengthening government effectiveness

Identification/Pre-appraisal November 2010

Appraisal March 2010

Board June 2011

Disbursement: July 2011
Private Sector Development DialoguePSD TA support (Doing Business)

November 2010 June 2011
Rural Investment Climate Study (with DFID TF) AgricultureField work starts Oct. 2010

Expand farmland restructuring to enable more rural people to become independent farms

Build productive assets of rural communities in selected mountain watersheds.

Increase domestic food production and reduce the loss of livestock to help at least 55,000 poorest households;

Supervision of Land Registration and Cadastral System Project Sept. 15–Oct. 5 2010 April 2011

Supervision of Community Agriculture and Watershed Management Project Sept. 15–Oct. 5 2010 April 2011

Supervision of Emergency Food Security and Seed Imports Project (with Russian trust Fund) October 20–November 1, 2010

Project closing March 2012

Project closing April 2011

Project closing March 2013
Improve the livelihood of cotton farmers and create the conditions for sustainable growth of cotton productionSupervision of Cotton Sector Recovery Project October 20–November 12, 2009Project closing March 2013
Energy—emergency operation to provide electricity during the cold period from alternative (commercial) sources

Conducting assessment studies for the Roghun HPP project
Supervision of Energy Loss Reduction Project (with additional financing for emergency operation) Sept. 20–Sept. 26, 2010

Contract award–Oct. 2010 and December 2010
Social safety netsSocial assistance and preparation of options for targeting. Appraisal–October 2010May 2011

Supporting improving equitable allocation of resources and efficiency in health sector provision through

Supervision mission in Oct 2010 for Community and Basic Health Project
Closing Dec 31, 2010
EducationFast Track Initiative–3rd grant, starting April 2010 Supervision–October 2010 and March 2011

Education Modernisation (incl. Additional Financing) Supervision–October 2010 and March 2011
Financial SectorAugust 2010: FIRST TA consultant mission on bank insolvency law and secured transactions reform (law and registry)

Sept. 2010: WB FSD mission to prepare FIRST TA to strengthen banking regulation and onsite supervision, prepare FIRST TA to assist in preparing payment system strategy and procurement of card payment system, prepare FIRST TA on secured transactions reform

Oct 11, 2010: WB FSD mission to prepare FIRST TA on insurance sector reforms

Oct 18, 2010: WB FSD mission (Claire McGuire) to assist NBT on contingency planning for problem banks
Other expected missions:

Feb 2011: WB missions to initiate FIRST TAs

May 2011: WB missions to monitor FIRST TAs and implementation of government-approved FSD action plan
Fund work program in next 12 months- Third ECF review staff report

- TA report on NBT recapitalization

- NBT Law reform TA project

- The 2011 Article IV Consultation and 4thECF review

- Fifth ECF review staff report
- September 2010: Third ECF review mission

- September 2010 mission (MCM)

- October 2010

- February/March 2011: Article IV report and 4th ECF review mission

- September 2011: Fifth ECF review mission
- November 2010: Third ECF review board meeting

October 2010

- TA report by Nov. 2010; revised NBT law to parliament by Dec. 2010

- April/May 2011: 2011 Article IV and 4th ECF review board meeting

- November 2011: ECF Fifth review Board meeting.
Fund request to Bank- Follow-up on Barki Tajik audit

- Electricity tariff increases

- Roghun feasibility study

- Cotton/agriculture sector reforms

- Any STATCAP work on NA and inflation statistics

- PFM work

- Social spending

- Financial sector work

- Work by DFID-financed macroeconomic advisor
Bank request to Fund-Provide BOP/fiscal data for updating macro data base annual meetings

-Assessment Letter for PDPG 4
October 2010

March 2011

May 2011 (tentative)
B. Agreement on joint products and missions (as needed)
Joint products in next 12 monthsDSA Feb/March 2011Feb/March 2011 Article IV consultation & Fourth ECF review missionApril/May 2011 Article IV consultation and Fourth ECF review board meeting

Formerly PRGF.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

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