Republic Of Tajikistan: Staff Report for the 2011 Article IV Consultation, Fourth Review Under the Three–Year Arrangement Under the Extended Credit Facility, Request for Waiver of Nonobservance for Performance Criteria and Modification of Performance Criterion, and Request for Waivers of Nonobservance of Performance Criteria Resulting in Noncomplying Disbursements Informational Annex

Tajikistan’s economic performance has been satisfactory, but challenges still remain. Executive Directors agreed that the challenge is to support recovery while addressing risks to macroeconomic stability. They emphasized for prudent monetary stance to avoid inflation and also to address vulnerabilities in the financial sector. Directors agreed that structural reforms should be given top priority. They welcomed progress in establishing a framework for agricultural financing. Directors commended plans to improve the business climate through a reform of the tax regime and improved transparency and accountability of state-owned enterprises.

Abstract

Tajikistan’s economic performance has been satisfactory, but challenges still remain. Executive Directors agreed that the challenge is to support recovery while addressing risks to macroeconomic stability. They emphasized for prudent monetary stance to avoid inflation and also to address vulnerabilities in the financial sector. Directors agreed that structural reforms should be given top priority. They welcomed progress in establishing a framework for agricultural financing. Directors commended plans to improve the business climate through a reform of the tax regime and improved transparency and accountability of state-owned enterprises.

I. Relations with the Fund

(As of February 28, 2011)

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 Fund2

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VII. Implementation of HIPC Initiative:

Not Applicable

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

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II. Debt Relief by Facility (SDR Million)

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IX. Safeguards Assessment

An update safeguards assessment of the National Bank of Tajikistan (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 FY2010; 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 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. 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.

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II. The JMAP Bank-Fund Matrix

(As of March 31, 2011)

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III. Statistical Issues

(As of March 31, 2011)

Assessment of Data Adequacy for Surveillance

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

31. 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 has recently focused on the quarterly calculations of GDP by expenditure and sectors, a framework for reconciling the two approaches, and the improvement of accuracy of the annual estimates. As regards to price statistics, the most important general issue is the further implementation of the system of prices and volumes, instead of presently used comparable volumes.

32. 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.

33. Monetary and financial statistics: The safeguard assessment in 2010 concluded that the accounting function at the NBT 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.

34. 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

35. Tajikistan began participating in the General Data Dissemination System (GDDS) on November 17, 2004. Metadata is 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.

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

Reporting to STA

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

Tajikistan: Table of Common Indicators Required for Surveillance

(As of March 31, 2011)

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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.

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.