Statement of the National Bank of the Republic of Tajikistan
- Susana Almuina, Ian McCarthy, Gabriel Sensenbrenner, and Justin Zulu
- Published Date:
- December 1995
The retreat from central planning and the shift from a command to a market-oriented economy in the Baltic countries, Russia, and other countries of the former Soviet Union require an unprecedented change in the mechanism of overall economic management, including restructuring of the banking system and refinement of rules and techniques for a sound monetary policy.
The improvement of such rules for banking operations in line with international standards is by far more urgent than any other elements of economic reforms in these countries. This is because most of the republics at the periphery have been historically excluded from international transactions, real or financial, that occurred at the center (Moscow), and therefore did not need an advanced financial system that supports international trade and payments.
After the collapse of the political system of the Soviet Union, however, the republics themselves needed to establish a reliable payments system and trade arrangement not only among themselves but also with other countries. Concerns about negative spillover effects, which emanate from an unsound and inefficient banking system in one country onto others, further necessitate a closer coordination among the central banks within the Baltic countries, Russia, and other countries of the former Soviet Union. A high degree of conformity of banking systems, especially in areas of banking supervision and regulation that are designed to prevent the credit and liquidity risks in payments system, is essential and is important to ensuring such coordination.
In our efforts to establish an efficient and reliable banking system, the IMF and the World Bank have been the first international organizations seeking to assist us by offering much-needed technical assistance on various topics. The first mission from the two international institutions, which visited the Republic of Tajikistan in February 1992, helped diagnose the overall state of the Republic’s economy and, by preparing preliminary information on the country’s prospective quota, greatly facilitated the country’s obtaining membership in the two institutions.
A more substantive and focused mission from the IMF’s Monetary and Exchange Affairs Department visited our country in November 1993. Since Tajikistan’s political situation had not permitted the National Bank of the Republic of Tajikistan to work more flexibly and cooperatively with any international organization, the mission was arranged and sent at the initiative of the IMF. The main purpose of the mission was to assess the state of the country’s financial system, focusing especially on the progress in the modernization of the National Bank. The mission provided many valuable recommendations on such challenging issues as a future currency regime; a proper monetary policy framework; strengthening of the National Bank’s banking supervision function; improving the payments, clearing, and settlement system; and a regulatory framework for foreign exchange operations.
Of course, these recommendations brought considerable positive results and we were able to implement some measures. We already have begun to adopt internationally accepted accounting standards in the balance sheet of the consolidated banking system as a preparation to the introduction of a national currency, and we are in the process of setting up the legislative foundations for banking and financial activities. At the same time, we are in the initial stages of implementing some of the IMF’s recommendations on the National Bank’s compiling and regulating framework for foreign exchange operations.
If we are allowed to assess the technical assistance received from the IMF, we are especially grateful for the assistance in personnel training at the Joint Vienna Institute and for regional courses and workshops that have been organized by the IMF. These courses contain advanced material on central banking and exchange system issues and have helped our staffs improve their specialized skills. We also feel that the active participation of experts from other countries’ central banks in the IMF-coordinated technical assistance mission has proven a practical way of transmitting those countries’ experiences in monetary and foreign exchange policy and management.
In a medium-term perspective, the Republic of Tajikistan is in continuous need of IMF technical assistance in putting the previously proposed recommendations into practice. Areas of particular importance would be improving the legal framework for monetary and financial operations, establishing an effective monetary policy framework, resolving problems in the payments system, and developing an advanced reporting system for banking supervision purposes. Once a clear decision is reached regarding the form of the monetary cooperation with Russia, we would like the IMF to provide further assistance in formulating and implementing more concrete proposals on the improvement of monetary policy instruments as well as on the development of an active foreign exchange market. In order to help facilitate earlier implementation of IMF recommendations, we would also like to have an IMF resident advisor on a long-term basis, or alternatively, longer-term IMF missions to the National Bank. This will also prompt resolution of problems that might arise in the process of policy and institutional reforms.
Finally, though Tajikistan is regarded by some outside critics as a country where certain domestic political issues must first be resolved before undertaking major economic reform, the National Bank of the Republic cannot afford to lag behind other central banks of neighboring countries in its improvement of the banking and financial system. That is why our need for IMF technical assistance is at an unprecedented level at present.