Republic of Tajikistan: First and Second Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waiver of Performance Criteria, and Request for Augmentation of the Arrangement—Informational Annex
Author: International Monetary Fund
Publication Date:
09 Jul 2010
eISBN:
9781455206940
Language:
English
Keywords:
ISCR; CR; Tajik authorities; Tajikistan; government; debt constraint; NIR audit report; court authorization; reform priority; government of the Republic of Tajikistan; Tajikistan government's capacity; government effectiveness; Infrastructure; Global
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Tajikistan was hit by severe external shocks in 2009. The government plans to address the structural energy deficit and achieve energy independence. Tajikistan should proceed with care on the Roghun project, paying close attention to social, macroeconomic, and debt sustainability. The need is to strike a careful balance between social and capital spending, which are complementary for growth. Macroeconomic policies are appropriate, but the weakened health of the banking sector and of state-owned enterprises needs to be addressed urgently.

Abstract

Tajikistan was hit by severe external shocks in 2009. The government plans to address the structural energy deficit and achieve energy independence. Tajikistan should proceed with care on the Roghun project, paying close attention to social, macroeconomic, and debt sustainability. The need is to strike a careful balance between social and capital spending, which are complementary for growth. Macroeconomic policies are appropriate, but the weakened health of the banking sector and of state-owned enterprises needs to be addressed urgently.

Annex I. Tajikistan: Relations with the Fund

(As of April 30, 2010)

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

II. General Resources Account:

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III. SDR Department

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IV. Outstanding Purchases and Loans

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V. Latest Financial Arrangements

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VI. Projected Payments to Fund 2

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

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VII. Implementation of HIPC Initiative Not Applicable.

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

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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 structure 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 agreed to the following immediate steps: (i) finalizing and publishing the end-April 2009 audited financial statements; (ii) finalizing the appointment before end December of an external auditor to conduct the end-2009 statutory audit of the financial statement; (iii) continuing the NIR reviews at test dates and adopting these as necessary for emerging findings; (iv) adopting an appropriate external audit selection, multiyear appointment, and rotation policy; and (v) outsourcing to an external audit consulting firm the internal audit of the activities of the international relations department. Certain immediate steps have already been implemented.

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 http://www.imf.org/external/country/TJK/index.htm.

XII. Article IV Consultation

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

XIII. Resident Representative

Mr. Moers, Resident Representative of the Fund, started his assignment in Dushanbe in June 2006.

XIV. Technical Assistance

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

Fiscal Affairs:

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Monetary and Financial Systems:

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Statistics:

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Finance:

Legal:

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Annex II. Tajikistan: Statistical Issues

As of May 11, 2010

Assessment of Data Adequacy for Surveillance

1. General: Data provision has some shortcomings (mainly in the areas of national accounts, price statistics, and monetary statistics), but is broadly adequate for surveillance

2. National Accounts and Price Statistics: There are significant deficiencies in the statistical techniques for national accounts and price statistics, most notably in procedures to estimate the informal economy, and the techniques for imputation, replacement, quality adjustment, and introduction of new products in the price indices. Technical assistance from the World Bank and the Fund have yielded some improvements, but there are remaining problems with the CPI compilation methodology and the GDP volume estimates, relating in parts to the period-to-period averages of price indices.

3. Government finance statistics: Government finance statistics (GFS) are based on cash transactions as recommended in the 1986 Manual on Government Finance Statistics. There are no plans to migrate the basis of compilation to the 2001 Government Finance Statistics Manual. In 2010, the authorities introduced an administrative classification of the budget. However, there are occasional budget classification issues within the economic classification of expenditures and the classification of above- and below-the-line transactions, which are being resolved with the help of a regional advisor.

4. Monetary and financial statistics: The special audit of the National Bank of Tajikistan that was completed in March 2009 found that there was no “reliable accounting baseline.” The accounting baseline has since been established, but the accounting function is still fragmented and needs to be strengthened. These risks are mitigated by the statutory audits of the financial statements and the ongoing semiannual NIR reviews by external audit firms. The authorities have yet not adopted the latest methodology for the compilation of monetary statistics and reporting of monetary data through the standardized report forms introduced to all IMF member countries in 2004. Thus, the monetary data published in International Financial Statistics are outdated with respect to the methodology and timeliness as well.

5. Balance of payments: There is a need for consistency in applying the residency concept in the balance of payments and the national accounts, and the scope of the foreign trade data needs to be improved to cover the shuttle trade.

Data Standards and Quality

6. Tajikistan began participating in the General Data Dissemination System (GDDS) on November 17, 2004. Metadata updated regularly. The authorities have indicated their interest in graduating from the GDDS to the Fund’s Special Data Dissemination Standard (SDDS).

They have appointed a national SDDS coordinator and requested technical assistance for this purpose.

7. Data ROSC was published on March 30, 2005.

Reporting to STA

8. Country page in the International Financial Statistics (IFS) has been published since February 2003.

Tajikistan: Table of Common Indicators Required for Surveillance

(As of May 11, 2010)

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Includes reserve assets pledged or otherwise encumbered, as well as net derivative positions.

Both market-based and officially determined, including discount rates, money market rates, and rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government comprises central government (budgetary, extra budgetary, and social protection funds) and state and local governments.

Including currency and maturity composition.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A); NA: Not Available.

Reflects the assessment provided in the data ROSC published in April 2005 and based on the findings of the staff mission during April 2004 for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 7, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies.

Annex III. Tajikistan: Bank-Fund Relations

(As of April 27, 2010)

Country Director: Mr. Motoo Konishi Telephone: (202) 473 4278

Country Economist: Mr. Sudharshan Canagarajah Telephone: (202) 473 4458

The Fund’s mission chief for Tajikistan, Mr. Schimmelpfennig, and resident representative, Mr. Moers, conducted consultations with the Bank’s country manager for Tajikistan, Ms. Bronchi, and Lead Economist, Mr. Sudharshan Canagarajah, during the September 2009 mission, to identify macro critical structural reforms and coordinate the two teams’ work for the period October 2009 - September 2010. The extensive discussion of the Bank-Fund division of labor provided in the Annex represents the summary of agreed macro-critical sectoral issues and the work program emanating from the consultation.

A. Partnership in Tajikistan’s Development Strategy

1. The Bank’s Country Partnership Strategy, to be discussed by the Bank’s Board of Executive Directors on May 27, 2010, aims at reducing the negative impact of the crisis on poverty and vulnerability, and paving the way for sustained post-crisis recovery and sustained development. It supports the implementation of Tajikistan’s Third Poverty Reduction Strategy for 2010–2012 that was formally approved by the Government of the Republic of Tajikistan in February 2010.

2. Tajikistan has been badly affected by the 2008/09 global economic crisis. The economy, which had been growing strongly during from 2000–08, grew by an estimated 3.4 percent in 2009, due to a sharp decline in remittances and a fall in exports of cotton and aluminum. Remittances, which accounted for nearly 47 percent of gross national product (GDP) in 2008, declined in 2009 by nearly 31 percent from US$2.4 billion in 2008 to US$1.6 billion in 2009 (see Figure 1). Exports of goods and services fell by 18.3 percent, due to lower international prices of cotton and aluminum. Revenues (excluding grants) diminished substantially from 2008 levels. At the same time, expenditures rose to provide essential services to the population and to returning migrants who have lost their jobs abroad rose. Budget support from development partners helped to make up the revenue shortfall, resulting in an overall fiscal deficit in 2009 of –0.5. While affected by the global economic downturn, Tajikistan’s performance was better than that of any other country in the region, and significantly exceeded expectations at the start of 2009.

3. To restore growth to the previous robust levels, Tajikistan now needs to undertake much deeper structural reforms to improve the business climate, strengthen the financial sector, promote agricultural diversification, enhance transparency and governance of large state-owned enterprises, better public financial management, and strengthen regional trade. Growth in non-cotton agriculture and related agribusinesses following institutional reforms, a restoration of the inflow of remittances as the Russian economy recovers, increased trade with other countries in the region and the world, and carefully sequenced investments in hydropower infrastructure have the potential to support strong growth over the long term.

4. The IMF has taken the lead in assisting Tajikistan in enhancing macroeconomic stability. The Fund has encouraged the authorities to continue with fiscal consolidation, maintain a restrictive monetary policy, and manage debt prudently to enhance its sustainability.

5. The World Bank has taken the lead in the policy dialogue on structural issues, including reforms aimed at reducing poverty, promoting agricultural diversification and growth, encouraging private sector investment, building public sector capacity, creating transparent public financial management, and improving governance. The Bank has been supporting policy dialogue through policy based lending. Following the successful completion of the first series of Programmatic Development Policy Operations (PDPO) in 2009, the Bank is preparing a new series of three operations with the first expected to be presented to the Bank’s Board for approval in June 2010. The development objectives of the programmatic series are to protect basic services within a sustainable fiscal framework, and to lay the foundation for post-crisis recovery and growth. The series is providing support for reforms to improve the investment climate and to improve public sector effectiveness.

6. The development policy operations complement support of investment projects and technical assistance in health, education, municipal infrastructure, energy, agriculture and rural development, public financial management, and public sector reform. The Bank in collaboration with other development partners also undertakes analytical work to provide the basis for policy dialogue and for investment operations. The November 2009 poverty assessment has deepened understanding of poverty and its dynamics, and has influenced the focus of the operation on protecting basic services and on reforming agricultural institutions. Findings of background studies for the forthcoming Country Economic Memorandum (expected to be finalized in 2010) and the private sector development strategy (2007) have identified the key constraints to growth and priority measures to address them, including reforms of the energy sector, of state-owned enterprises, of agriculture, and of the business regulatory environment.4 An assessment of implementation of inspections and licensing reforms (July 2009) recommended a regulatory guillotine to cleanup existing administrative procedures affecting business, such as permits. A joint 2009 IMF-Bank Financial Assessment Program has identified priority measures to strengthen the financial sector, and a grant from the Financial Sector Reform and Strengthening Trust Fund is financing technical assistance to further refine the next set of reforms. An aviation sector note has laid out reforms required to modernize Tajikistan’s aviation sector, essential to foster provision of better quality, higher frequency, and lower cost aviation services. A fiscal policy analysis (June 2009), a 2008 public and civil service wage note, and a 2005 remittances note have informed the measures required for macroeconomic stability. A programmatic public expenditure review is supporting Tajikistan’s first public expenditure and financial accountability (PEFA) review, analyzing the country’s prospects for achieving the MDGs and long-term growth, and providing support for the introduction of the medium-term expenditure framework. Two public expenditure tracking surveys, one for health and one for education, are promoting transparency and efficiency of expenditure in these sectors. Drawing on the results of the surveys, health and education sector fiduciary capacity assessments are identifying the measures required to improve the efficiency and effectiveness of public spending on these services. A country environmental analysis (2008) has specified policy and capacity reforms to improve environmental management.

B. World Bank Collaboration in Specific Areas

Areas in which the World Bank leads and there is little direct IMF involvement

7. Areas in which the Bank leads and there is little direct IMF involvement include the social sectors, infrastructure, and environmental management. In the social sphere, the Bank has carried out regular poverty assessments to monitor poverty and develop programs to alleviate poverty, the most recent of which was issued in November 2009. Under the Strengthening National Statistics System Project, data collection of a new living standards survey was completed in 2009; analysis of the results is underway.

8. In education, the Bank is providing policy advice and investment resources. The ongoing Education Modernization Project (fiscal 2003) aims to upgrade the basic education system by supporting reforms in education financing and management, curriculum and textbooks development; teacher training and student assessment improvement, and upgrading school facilities. Tajikistan has also received grant funding from the Education for All Fast Track Initiative catalytic fund, administered by the Bank. Key issues in education, apart from infrastructure rehabilitation and capacity building, are pay reform, and education financing reform, and implementation of measures to improve efficiency of resource use. Assistance to this sector will continue through the PDPO, a multi-donor education investment program, and the Public Sector Reform Program. The Bank is also helping with wage reform in education through the PDPO. Jointly with the UNICEF the Bank assists the government in the overall national education strategy formulation.

9. In health, the Bank is helping the government to improve the effectiveness and efficiency of delivery—both of which are aimed at ensuring the poor access to a basic level of services. Through the Community and Basic Health Project and the PDPO, the Bank is helping to strengthen the institutional capability (both at the center and district levels) to carry out health care reforms, to improve the system for budgeting and spending for basic health services, and pay reform. It is also supporting programs to prevent the spread of HIV/AIDS, malaria, and other communicable diseases. The Avian Fluenza Control and Human Pandemic Preparedness and Response is minimizing the threat of highly pathogenic avian influenza infection and other zoonoses posed to humans and poultry; and preparing for control and respond to influenza pandemics and other infectious disease emergencies in humans.

10. With regard to infrastructure development, the Bank is concentrating on upgrading basic utility services for the population as a whole and especially the poor. The Dushanbe Water Supply Project is helping the Dushanbe municipality and the local water company to address the most critical deficiencies of water supply services. The Pamir Private Power Project is supporting improvements in reliability of electricity supply in the Gorno Badakshan region with participation of the private sector. The Energy Loss Reduction Project is helping to reduce commercial losses and improve the financial viability of the power and gas sectors. The Bank has also been leading policy dialogue (under the PDPO) on increasing efficiency/viability to ensure long-term growth prospects of the energy sector. The Municipal Infrastructure Project is providing support to improve urban infrastructure in big towns.

11. In agriculture, the Bank is concentrating on restructuring farmland, rehabilitating irrigation and drainage infrastructure, and reforming the cotton sector. The PDPO is leading the dialogue on farmland restructuring and cotton debt resolution. The Land Registration and Cadastre Project is assisting the government with the issuance of land certificates, and establishment of a modern cadastre system. The Ferghana Valley Project aims to increase water supply and efficiency of irrigation systems in the Ferghana Valley, and develop institutional capacity in land and water resources management. The Cotton Sector Recovery Project is helping to improve the livelihoods of cotton farmers and to create conditions for sustainable growth of cotton production in selected, low-income areas.

12. The Bank is supporting measures to improve environmental management and to deal with natural disasters through all its investment projects. A 2008 Country Environmental Analysis has highlighted the country’s most severe environmental issues and proposed measures to strengthen the legal and institutional framework for addressing them.

13. The Bank also supported the government in coping with emergencies. The Energy Emergency Project assisted the government in implementing an Energy Emergency Mitigation Action Plan to address the energy crisis in 2008 due to the harshest winter in 25 years. Through the Global Food Price Crisis Response Trust Fund, the Emergency Food Security and Seed Imports Project and Community and Basic Health Project Additional Financing assisted the government in mitigating the impacts of food prices crisis in 2008.

Areas in which the World Bank leads and its analysis serves as input into the IMF program

14. The Bank leads the dialogue on structural reforms through the PDPO series. Institution building and technical assistance in support of PDPO structural reforms come from several sources, including the Public Sector Reform Program, the Education Modernization Project, the Fast Track Initiative Catalytic Grant, and the Community and Basic Health Project.

15. The Bank and the Fund both support private sector development, including in the areas of financial transparency and improvements in the regulatory framework. The Bank is preparing a Country Economic Memorandum to identify the key constraints to growth and propose solutions to overcome them. The Bank Group has also undertaken investment climate assessments, small and medium enterprise surveys, and agriculture sector reviews to deepen understanding of issues affecting performance in specific areas. Tajikistan has participated in Doing Business surveys and in Business Environment and Enterprise Performance surveys since the mid-2000s. These provide insight into trends within Tajikistan to improve the business environment and show how Tajikistan is performing relative to other countries of the region. The Bank has supported the preparation of the government’s private sector development strategy, which is now under implementation with support of an Institutional Development Fund grant.

16. Regulatory reforms include (a) changing role of anti-monopoly agency and further strengthening its capacity, (b) improving the inspection regime for businesses; and (c) streamlining the licensing and permitting systems. In addition, under the PDPO, the Bank is assisting with reforms aimed at fostering competitive, convenient, and safe aviation services. It has supported the preparation and adoption of the national aviation sector policy. Previously, it assisted with separating in aviation the functions of policymaking, technical regulation, and accident investigation, with the aim of increasing the transparency and performance of operations. It is has also helped with the restructuring the Tajik Air Company aimed at creating separate entities to operate the airport, airline, and air traffic control system. This aviation sector reforms are expected to increase the competitiveness of Tajikistan’s aviation sector, with benefits for economic growth and poverty reduction.

17. While the Bank has taken the lead in privatization and in structural reforms in the private sector, the IMF has also a strong interest in these areas, since many of these reforms are critical to achieving macroeconomic stabilization and enhancing growth. Accordingly, the two institutions maintain an active dialogue with each other on these matters to ensure good coordination of interventions.

Areas of shared responsibility

18. The Bank and the Fund are working jointly in the following four main areas (supported by the Bank’s PDPO, grants, and several investment operations, and the Fund’s Extended Credit Facility):

  • Public sector management. The Bank has provided technical support to the government to develop a comprehensive public administration reform strategy. It includes policy actions in public administration reforms aimed at redefining the role of the state in line with the market economy needs, reorganizing key ministries, strengthening the internal control and audit function, and supporting the pay reform. The Bank is involved in civil service reform while the Fund is providing technical assistance in support of tax and customs administration and treasury management.

  • Public financial management. Both institutions work on providing support for a treasury, adoption of new law on public finances introducing modern budgetary procedures and improved fiscal management, and switching from norm-based costing and allocation of expenditures to per capita based financing in education and health sectors. The Bank will continue to provide technical support and mobilize donor funds to implement the medium-term budget framework. The Bank will also continue to support reform of public financial management through the PDPO, Institutional Development Fund grants, and the Public Financial Management Modernization Program.

  • Financial sector reforms. This area includes the acceleration of financial sector restructuring and closure of weak banks, a new regulatory framework for the establishment of non-bank intermediaries, and significant changes in the tax code making tax authorities’ access to bank accounts conditional on a court authorization. In terms of banking supervision, the IMF is monitoring the closure and merger of banks that do not satisfy prudential requirements. 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 administering a grant from the FIRST trust fund to support implementation of the assessment’s recommendations, especially reforms at the National Bank of Tajikistan.

  • Utilities reform. The Fund included in its program supported under the Extended Term Facility a structural benchmark on preparing and releasing to the public external audits of the financial statements of Talco, the state-owned aluminum company, and Talco Management. The Bank under the PDPO is supporting tariff reform aimed at reducing the quasi-fiscal deficit. It also supported the preparation in 2008 of an external audits of the financial accounts of Barki Tajik. The Bank is providing financial assistance to help the government to repair the electricity and gas transmission system, to import the energy needed to meet periodic winter shortfalls, and to help implement the Energy Emergency Action Mitigation Plan. The Bank-supported Energy Loss Reduction Project is supporting implementation of reforms.

  • Debt sustainability analysis: The Bank and the IMF have started carrying out joint debt sustainability analyses (DSA). The most recent update was prepared in March 2010.

Areas in which the IMF leads and its analysis serves as input into the World Bank program

19. The Fund leads the dialogue on fiscal matters, setting the overall envelope for public expenditures. The Bank’s work in key sectors, such as health, education and infrastructure, necessitates close cooperation.

20. In the budgetary area, the Fund is taking the lead on tax reforms and budget preparation and execution. The IMF also leads the dialogue on polices to rationalize and contain expenditures in the public sector. These include policies regarding wage setting in both the public service, and defining the ceiling for public investment expenditures. In these areas, the Bank takes into account the policy recommendations of the IMF and ensures that its own policy advice is consistent with the Fund’s.

Areas in which the IMF leads and there is no direct World Bank involvement

21. The Fund takes the lead in the formulation and execution of fiscal and monetary policies, tax policy, external trade policies, and issues involving economic and financial statistics. The Bank-financed Strengthening National Statistics System Project is improving Tajikistan’s capacity to collect, analyze, and disseminate key information required for evidence-based decision-making.

C. IDA Funding

22. The indicative IDA15 allocation for Tajikistan is projected to be about US$86.6 million (SDR 55.9 million), about 13 percent lower, in absolute terms, than under IDA14 (SDR 64.6 million). About US$30 million of the IDA 15 envelope was allocated in fiscal 2009. The remaining allocation (about US$57 million) will finance operations in fiscal 2010 and 2011. More than half the IDA 15 allocation will support the PDPO, and the remainder will be distributed across investment activities. Trust funds, which will nearly match the IDA allocation in fiscal 2010–11, will continue to play an important role in supporting the Bank’s program. In addition to these resources, Tajikistan will receive additional funding equivalent to US$23.4 million (SDR 15.3 million) in fiscal 2010 from the IDA Crisis Window to address the impacts of the global crisis and it may be eligible to access IDA regional funds and IBRD enclave loans for infrastructure that promises to deliver high returns. The fiscal 2010 IDA allocation to Tajikistan will be 100 percent grant. Tajikistan’s eligibility for grants is determined based on the annual debt sustainability analyses.

Tajikistan: JMAP Implementation Table, October 2009 – September 2010

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Annex IV. Tajikistan: Relations With The Asian Development Bank

(As of April 30, 2010)

Country Director: Mr. Makoto Ojiro—Telephone: 992-372-210558/271895/ 271897

1. Tajikistan became a member of the Asian Development Bank (ADB) in 1998. The ADB has participated in the Consultative Group Meeting for Tajikistan since 1998. After conducting an initial mission in June 1998, ADB completed an Economic Report and Interim Operational Strategy that identified three areas: (a) agriculture; (b) infrastructure rehabilitation (especially energy and transport sectors); and (c) social sector, in which ADB assistance would have the greatest development impact. Based on the Interim Strategy, in October 1998, ADB’s Board of Directors approved Tajikistan’s country classification, which provides the basis for Tajikistan’s full access to concessional resources (Asian Development Fund (ADF)). Under the new ADF grants framework, starting from 2008, Tajikistan is eligible for 100% grants of its entire ADF allocation up to 2012, subject to a 20% volume discount. Under the performance-based allocation of ADF for 2010, Tajikistan has been allocated $150 million, which includes regional ADF allocation. As of end 2009, Tajikistan has received $372.54 million in loans, $33.89 million in technical assistance, and $160.77 million in grants.

2. In view of Tajikistan’s urgent need for assistance in 1998, in coordination with the IMF and the World Bank (WB), the ADB provided a Post-conflict Infrastructure Program Loan ($20 million), which was designed to create a framework for developing market-based transport and energy sectors. The loan was for two years and was fully disbursed by end-2000. Based on the satisfactory progress of the Postconflict Infrastructure Program loan conditionality, the following loans were approved in these two sectors:

3. Transport Sector: the Road Rehabilitation Project loan ($20 million in 2000), which rehabilitated the most deteriorated sections of the Dushanbe—Kulyab road in the southern part of Tajikistan, the most civil-war affected areas; Dushanbe—Kyrgyz Border Road Rehabilitation Project (completed first phase of $15 million loan in 2003, second phase of $30 million loan in 2005, $20 million grant of supplementary financing in 2009); and the Regional Road Corridor Improvement Project ($53.4 million loan/grant in 2007), which improves Tajikistan’s transportation link toward north and east through Kyrgyz Republic, further to Kazakhstan and Russia, as well as to the People’s Republic of China. These projects also improve rural roads in the project areas. Continued support in strengthening the government’s institutional capacity for efficient management of national road network is provided under technical assistance grants associated with these loans and on stand-alone basis. In October 2007, ADB approved a $2.0 million Japan Fund for Poverty Reduction (JFPR) grant to reconstruct key infrastructure in northeast Tajikistan to restore access to rural communities that were isolated after flooding in 2006 washed away a suspension bridge.

4. Power Sector: the completed Power Rehabilitation Project loan ($34 million in 2000) aimed to improve people’s quality of life and support poverty reduction by increasing the availability of electricity, and assist in post-conflict recovery of Tajikistan’s economy (the project rehabilitated and reinforced power transmission and distribution facilities in the war-damaged areas in Khatlon and Dushanbe regions, and rehabilitated the Nurek Hydro Power Plant and Central Hydro Power Plant). The Regional Power Transmission Modernization Project loan ($20 million in 2002) was geared towards improving the reliability and the operation of the Central Asian power transmission system, enhancing power trade between Tajikistan and Uzbekistan, and laying the foundation for a future wholesale regional power market. However, the later loan had to be cancelled due to the inability of Tajikistan and Uzbekistan to agree on the terms and conditions of Power Trade Agreement. The $21.5 million Tajikistan-Afghanistan Power Transmission Interconnection Project loan was approved in 2006. This project is aimed to construct a 220 kilovolt double circuit transmission line that will link the hydropower stations on Tajikistan’s Vakhsh River to the border town of Sherkan Bandar, then to Kunduz, Baglad, Pul-e-Khumri and, ultimately, Kabul in Afghanistan. In November 2008, ADB approved a $54.77 million grant for the Nurek 500 kV Switchyard Reconstruction Project to rehabilitate an ageing facility in Tajikistan’s electricity supply network which is in danger of collapse. Various technical assistance projects were provided to accelerate market-oriented reforms in the power sector also in line with IMF and WB programs and for supporting the government in formulating a power sector development strategy.

5. In addition to the above, the ADB Board approved the following projects to Tajikistan in relevant sectors:

6. Social Sector: the Social Sector Rehabilitation Project loan ($20 million in 1999) to address the serious deterioration in living standards and strengthen the delivery of essential social services; the Health Sector Reform Project loan ($7.5 million in 2003) to improve health, especially of the poor, women, and children by providing pro-poor health service package, and by reforming the health service delivery and financing mechanism; and the Education Sector Reform Project loan ($7.5 million in 2003), which focused on supporting the government’s reform priorities in primary (grades 1–4) and general secondary education (grades 5–11) by improving the education system and its management. These two social sector reform loans were supported by respective JFPR grants: (a) the project for Community Participation and Public Information Campaign for Health Improvement ($1 million in 2004); and (b) the School Improvement Project ($2 million in 2004).

7. Agriculture Sector: based on the agriculture sector assessment prepared during 1999–2000, the Agriculture Rehabilitation Project loan ($35 million in 2002) is being implemented to improve living conditions of the farming communities in the project area and to institute measures to sustain benefits of improvements for irrigation and drainage systems and water supply, as well as by providing farm production support services. In order to support the agriculture sector reforms, the TA for Farm Debt Resolution and Policy Reforms, which was associated with the loan, has been completed in consultation with the IMF, involving a wide range of stakeholders. Based on the findings of the TA, ADB supported the government in close cooperation with other donors and NGOs for formulating a National Farm Debt Resolution Strategy. ADB, in collaboration with DFID, supported donor coordination for implementing the Strategy. On 5 March 2007, the Government approved the Roadmap for Implementation of the Farm Debt Resolution Strategy. The road map, which includes a comprehensive program of reforms for the sustainable and profitable farming of cotton and other crops, guides the preparation of a suitable intervention for ADB. Grant assistance for Rural Poverty Reduction Project ($2.9 million in 2001) financed by JFPR supported implementation by pilot testing innovative poverty-oriented on- and off-farm supports. In 2004, Irrigation Rehabilitation Project loan was approved for $22.7 million. In a major push supporting the agriculture sector and rural development, Sustainable Cotton Sub-Sector Project loan/grant and Rural Development Project loan/grant were approved in 2006 and 2007, respectively.

8. Finance: Microfinance Systems Development Program loan ($4 million in 2003) aimed to support policy, legal, and regulatory reforms; and Microfinance Systems Development Project loan ($4 million in 2003) helped to transform nongovernmental organizations’ microfinance programs into independent licensed and regulated microfinance institutions. In 2009, ADB approved and disbursed a $40 million program grant to help Tajikistan sustain social spending imperiled by the global economic crisis. The program helped the government manage a serious budget shortfall and maintain programs for critical social needs. It also supported public investments designed to preserve jobs and create new ones.

9. Trade Facilitation: the Regional Trade Facilitation and Customs Cooperation Program loan ($10 million in 2002) supported trade and customs reform development across the East and Central Asia. Regional Customs Modernization and Infrastructure Development ($10.7 million in 2004) co-financed by the US Government through a 1.6 million grant in 2009, is aimed to promote international trade and enabling environment for private sector development,

10. Emergency Assistance: in response to the government’s urgent requests, three emergency loans including the Emergency Flood Rehabilitation Project loan ($5 million in 1999), the Emergency Restoration of Yavan Water Conveyance System loan ($3.6 million in 2001), and the Emergency Baipaza Landslide Stabilization Project loan ($5.3 million in 2002) were approved. In 2007, ADB provided a $22 million loan for the Khatlon Province Flood Risk Management Project to help to address recurring flood risks in four districts of the province through a comprehensive and coordinated approach. A major part of the project is the rehabilitation of 8.3 kilometers of flood protection embankment along Pyanj River, which borders Tajikistan and neighboring Afghanistan.

11. In end-2000, ADB started supporting the government in developing PRSP through participatory approach under a TA grant in close cooperation with the IMF, WB, and UNDP. Following the finalization of the Poverty Reduction Strategy Paper (PRSP) in June 2002, ADB concluded the Poverty Partnership Agreement (PPA) with the government in December 2002, and proceeded to prepare a new five-year Country Strategy and Program (CSP) for 2004–08 for Tajikistan, which was endorsed by the ADB Board in October 2003. The CSP was successfully completed in 2008, and its main objectives were (a) to strengthen rural development through institution building that will support policy implementation and the private sector; (b) to rehabilitate power and rural infrastructure; and (c) to strengthen regional cooperation through improved customs services and transport links, both within the country and neighboring ones.

12. ADB prepares and updates its three-year rolling programs for Tajikistan every year in consultation with the government based on the ADF resources availability, carefully examining the country’s social and economic development status and in coordination with other donors, including IMF. ADB is currently preparing a new Country Partnership Strategy for 2010–2014 for Board consideration in May 2010. ADB’s program in Tajikistan is expected to continue supporting regional cooperation, the energy and transport sectors, and provide policy support for improving the investment climate and private sector development. In addition, a joint country partnership strategy for Tajikistan for 2009–2012 was developed with the joint effort of twelve development partners working in the country, including ADB. ADB pays full attention to the progress of Tajikistan’s MDG achievement. ADB is also paying significant attention to governance reforms through investment projects and technical assistance. In 2006, ADB approved a technical assistance project on Strengthening Results Management in Support of Poverty Reduction in Tajikistan, co-financed by the Swedish Government. The $2.0 million grant package co-financed by the Government of the United Kingdom Department for International Development was approved in 2007 to help boost the Tajikistan government’s capacity in promoting private sector development.

13. The proposed 2010 investment program comprises of two projects (regional power rehabilitation, and investment climate improvement program) worth a total of $150 million. The actual assistance level will be determined by (a) availability of overall ADF resources; (b) country performance assessment vis-à-vis ADB’s policy on performance based allocation of ADF resources; and (c) processing status of the projects in the pipeline.

1

Formerly PRGF.

2

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

3

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.

4

Background papers for the country economic memorandum have been prepared on macroeconomic stability, agriculture, private sector, energy, migration, trade and connectivity, and growth diagnostics. These have already influenced the design of the forthcoming CAS and of new series of programmatic development policy operations.

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Cover IMF Staff Country Reports
Tajikistan: First and Second Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waiver of Performance Criteria, and Request for Augmentation of the Arrangement: Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Tajikistan.
Author: International Monetary Fund
Volume/Issue:
Volume 2010: Issue 203
Publisher:
International Monetary Fund
ISBN:
9781455206940
ISSN:
1934-7685
Pages:
114
DOI:
https://doi.org/10.5089/9781455206940.002