Republic of Tajikistan: Sixth Review Under the Three–Year Arrangement Under the Extended Credit Facility—Informational Annex

This paper presents key findings of the Sixth Review for Tajikistan under the Extended Credit Facility. Real GDP growth for 2011 reached 7.4 percent, driven mainly by agriculture, construction, and services. The authorities plan to maintain a conservative fiscal stance in line with the macroeconomic framework agreed during recent reviews, targeting a deficit of 0.5 percent of GDP. The fiscal stance for 2012 remains appropriate, but further consolidation will be necessary over the medium term to maintain fiscal and external sustainability.


This paper presents key findings of the Sixth Review for Tajikistan under the Extended Credit Facility. Real GDP growth for 2011 reached 7.4 percent, driven mainly by agriculture, construction, and services. The authorities plan to maintain a conservative fiscal stance in line with the macroeconomic framework agreed during recent reviews, targeting a deficit of 0.5 percent of GDP. The fiscal stance for 2012 remains appropriate, but further consolidation will be necessary over the medium term to maintain fiscal and external sustainability.

I. Relations with the Fund

(As of February 29, 2012)

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 Fund10

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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

The 2009 update assessment of the NBT noted considerable safeguard risks in key functions such as accounting, NIR compilation, the control environment, and the NBT’s organizational structure. Independent governance mechanisms were largely absent, in particular for overseeing audit mechanisms, and the internal audit function was weak. Subsequently, an NBT reform action plan was drawn up, and since 2009 several measures have been implemented, including six-monthly reviews of NIR data by an external auditor. One more such review is planned for December 2011 is underway and should be completed before the Executive Board meeting for the Sixth Review.

Audited financial statements are published on the NBT website, albeit with some delays. These delays, combined with limited capacity in the accounting area, can raise the risk of inadvertent misreporting. The internal audit of core functions was recently outsourced, while the NBT is strengthening its internal audit capacity through on-the-job training and technical assistance.

A recent safeguards staff visit concluded that increased transparency and oversight of key operations, notably large scale support of local banks, is needed to help safeguard IMF resources.

X. Exchange Rate Arrangements

Since March 2011, the de facto exchange rate regime is classified as craw-like. 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

XII. Article IV Consultation

The 2011 Article IV consultation was completed on May 11, 2011.

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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Tajikistan: Relations with the World Bank Group

(As of September 30, 2011)

23. The Fund’s mission met with the World Bank’s team during the IMF’s September 2011 mission in Dushanbe and in Washington to identify macro critical structural reforms and coordinate the two teams’ work for the period September 2011–September 2012. Subsequent interaction in Dushanbe and Washington with staff of both institutions led to finalization of this memorandum.

24. Tajikistan’s economy continues to recover from the global economic crisis, but remains vulnerable to exogenous shocks. Despite lower than anticipated rainfall in the early part of 2011, growth appears relatively strong. Inflation has remained a key concern, however, particularly given the negative impact on the poor. The teams agreed that, apart from the need to maintain strong growth and achieve lasting poverty reduction, Tajikistan’s main macroeconomic challenges are: (i) to meet—within the context of fiscal and debt sustainability—the country’s pressing spending needs while maintaining public debt at or below the authorities’ 40 percent of GDP ceiling; (ii) to further strengthen central bank governance and enhance the effectiveness of monetary policy; (iii) to subject the state enterprise sector to greater transparency and financial discipline; and (iv) to develop the financial sector, strengthen bank supervision, and provide for an effective intermediation of savings and investment.

25. Based on this shared assessment, the teams identified six structural reform areas as macro critical, and agreed on the division of labor in these areas:

  • Central bank governance and operations: Due to past directed credits, the central bank has large negative capital. Despite recent governance improvements, checks and balances need to be strengthened further, and the central bank needs to be recapitalized, eliminating crucial constraints to the effectiveness of monetary policy. Key reform areas include: monetary policy formulation, central bank independence and role as lender of last resort, internal and external audit processes, budgeting, and monetary instruments. The Fund takes the lead.

  • Agricultural sector reform: The sector employs 70 percent of the population (mainly low income households), but suffers from excessive government intervention that holds back its growth potential. Key reform areas include: agriculture financing, land reform and property rights, building infrastructure for non-cotton agriculture products. The Bank and other donors take the lead.

  • Energy sector reform: The sector fails to provide reliable electricity supply to the country, while running large deficits that are financed through underinvestment in capital and maintenance, as well as tax and inter-enterprise arrears. Key reform areas include: increasing production capacity, improving transmission and distribution infrastructure, improved planning of winter energy management and export of summer surplus power, conducting energy audits of key state enterprises, and rationalizing the tariff structure to achieve cost recovery. A reform priority is to strengthen the power utilities’ financial controls and reporting system. The Bank takes the lead.

  • Investment Climate Reform: Tajikistan’s corporate sector is held back by a business environment that is not conducive to private sector investment and growth. Key reform areas include: reducing risk and uncertainty for the entrepreneur, removing barriers to entry, reducing the cost of doing business, and supporting the private sector to increase productivity and human capacity to drive growth. The Bank leads, on the basis of its latest survey-based investment climate assessment. The tax system also features prominently, and the Fund will take the lead on tax policy, in cooperation with any sector-specific work (such as agricultural taxation) undertaken by donors, while the Bank will take the lead on tax administration, in cooperation with the Fund and other donors.

  • Public financial management reform: Despite recent reforms, budgeting and financing procedures can still be significantly improved, with potentially large benefits for fiscal policy. Key reform areas include: implementation of the Treasury Single Account, closer monitoring of fiscal aspects of large state-owned enterprises (SOEs), social services and safety net reform. The Fund’s FAD regional TA advisor works on budget classification issues and SOE monitoring, aiming to reduce quasi-fiscal activities and increase transparency. The Bank leads the switch to per capita based financing in education and health sectors, and will also continue to support public financial external and internal control reform. It will also work on a social spending strategy, and thus assist the implementation of the Fund’s ECF benchmark on increasing social spending.

  • Financial sector reform: Tajikistan’s financial sector is underdeveloped. Only a small amount of savings is channeled through the banking system, and private sector credit extension is insufficient to facilitate strong, sustained, private-sector-led economic growth. Key reform areas include interbank market, strengthening regulations and supervision, deposit insurance law, and securities market. 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 leads on supporting implementation of the assessment’s recommendations, working on commercial banking laws, the deposit insurance law, AML/CFT issues, and an overall financial sector strategy (in cooperation with the Fund). The Fund leads on Central Bank reform, securities market development, and certain aspects of financial sector supervision (in cooperation with the Bank).

26. The teams have the following requests for information from their counterparts:

  • The Fund team requests to be kept informed of progress in the above macro critical structural reform areas. Timing: when milestones are reached (and at least semiannually).

  • The Bank team requests to be kept informed of the Fund’s assessments of macroeconomic policies and prospects. Timing: in the context of Art. IV and other missions (and at least semi-annually)

27. The appendix lists the teams’ separate and joint work programs during September 2011–August 2012.

Table 1:

JMAP Implementation, September 2011–September 2012

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Formerly PRGF.


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


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.

Republic of Tajikistan: Sixth Review Under the Three-Year Arrangement Under the Extended Credit Facility: Staff Report; and Press Release
Author: International Monetary Fund