Statement by the Staff Representative on the Republic of Tajikistan

Discussions on the Second Review Under the Poverty Reduction and Growth Ffacility (PRGF) arrangement took place in Dushanbe. The IMF-supported program concentrates on enhancing macroeconomic stability and implementing structural reform in the key areas of banking, energy, and agriculture. The discussions also focused on improving the implementation of monetary policy, accelerating structural reform, and strengthening governance. The authorities plan to work with independent third parties to enhance the transparency of the farm-restructuring process. The continued strong growth of GDP is welcomed.

Abstract

Discussions on the Second Review Under the Poverty Reduction and Growth Ffacility (PRGF) arrangement took place in Dushanbe. The IMF-supported program concentrates on enhancing macroeconomic stability and implementing structural reform in the key areas of banking, energy, and agriculture. The discussions also focused on improving the implementation of monetary policy, accelerating structural reform, and strengthening governance. The authorities plan to work with independent third parties to enhance the transparency of the farm-restructuring process. The continued strong growth of GDP is welcomed.

The following information has become available since the staff report was issued on December 19, 2003. This information does not alter the thrust of the staff appraisal.

  • The two prior actions were observed prior to end-December 2003. All privileged categories of consumers of gas and electricity have been eliminated; and the division of Agroinvestbank into two independent corporate entities, one that operates as non-bank cotton financing institution and one that is a commercial bank, has been finalized.

  • Preliminary data indicate that the authorities were on track to meet the end-December fiscal targets.

  • GDP growth was 10.2 percent in the first 11 months of 2003 compared to the same period a year earlier. The consumer price index increased by 0.6 percent in November and 0.3 percent in December, respectively. End-period inflation for 2003 was 13.8 percent, which is slightly higher than programmed.

  • Preliminary data indicate that the authorities met the end-2003 indicative targets for net international reserves and net domestic assets of the central bank. The stock of reserve money was SM 255 million, however, exceeded the end-December 2003 target by 13 percent. Although the authorities reduced purchases outside the inter-bank foreign exchange market (mainly from the Tajik Aluminum Plant), they did not reduce liquidity sufficiently to meet the indicative target for end-December. This reflects the absence of monetary instruments and concern about the impact of appreciation on competitiveness.

  • The staff visit scheduled for late January will focus on improving the implementation of monetary policy.