Statement by the IMF Staff Representative

This paper examines Tajikistan’s 2004 Article IV Consultation and Fourth Review Under the Poverty Reduction and Growth Facility. Strengthened fiscal discipline and tighter monetary policy have reduced inflation from 40 percent in 2001 to 5.6 percent in 2004. Strong growth in tax revenues and continued expenditure restraint contributed to small fiscal surpluses during the past two years. Nonetheless, progress in a number of priority reform areas envisaged in the Poverty Reduction Strategy Paper has been slow. In particular, the business environment and public and private sector transparency and governance need to be strengthened further.

Abstract

This paper examines Tajikistan’s 2004 Article IV Consultation and Fourth Review Under the Poverty Reduction and Growth Facility. Strengthened fiscal discipline and tighter monetary policy have reduced inflation from 40 percent in 2001 to 5.6 percent in 2004. Strong growth in tax revenues and continued expenditure restraint contributed to small fiscal surpluses during the past two years. Nonetheless, progress in a number of priority reform areas envisaged in the Poverty Reduction Strategy Paper has been slow. In particular, the business environment and public and private sector transparency and governance need to be strengthened further.

The following information has become available since the staff report was issued on March 3, 2005. This information does not alter the thrust of the staff appraisal.

  • In the February 27 elections for the lower house of parliament, the ruling People’s Democratic Party of Tajikistan won 80 percent of the votes. Opposition parties signed a petition complaining about irregularities during the electoral process. Elections for the upper house are scheduled for March 24, 2005.

  • Consumer price inflation (on a 12-month basis) rose slightly to 6 percent in February 2005 owing to weather-related food price increases.

  • Preliminary data indicate that policy implementation has been consistent with the program. In particular, the fiscal surplus was larger than projected in January-February 2005. The recent resumption of cotton exports in response to a moderate increase in international cotton prices is contributing to higher budget revenue, as well as to a reduction in the indebtedness of the cotton sector.

  • The somoni has remained broadly stable against the U.S. dollar since end-2004.

  • On the structural side, on March 4 the authorities approved the Strategy for the Resolution of Cotton Farm Debt in order to address this long-standing problem that has constrained development in the farm sector. The strategy contains both cotton sector reform and debt resolution measures, including the resolution of the farm debt on a case-by-case basis using an independent commission and without government guarantees.