Min Zhu
Deputy Managing Director of the IMF

The Executive Board of the International Monetary Fund (IMF) has completed its fifth review of Tajikistan’s economic performance under a program supported by the Extended Credit Facility (ECF) arrangement. The decision enables the authorities to draw an amount equivalent to SDR 13.045 million ($20.1 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 91.355 million ($140.9 million).

The three-year SDR 104.4 million (about $116 million) ECF arrangement with Tajikistan was originally approved by the IMF’s Executive Board on April 21, 2009 and subsequently augmented on June 7, 2010.

In completing the review the Executive Board approved the authorities’ request for waivers of non-observance of the performance criteria on net international reserves, and wage and pension arrears. The Board also approved the authorities’ request for modification of end-December 2011 performance criteria on net domestic assets, net international reserves, and the budget deficit, as well as the indicative targets on tax revenue and National Bank of Tajikistan liquidity loans.

Following the Executive Board discussion, Mr. Zhu, Deputy Managing Director and Acting Chair, said:

Tajikistan’s economy continues to recover. Despite adverse external shocks, implementation of sound policies under the IMF-supported program has helped ensure strong growth. Inflation also appears to be on a downward path. However, the country faces a number of challenges going forward, including potential risks from a deterioration in the global economic environment.

Higher prices for imported fuel products have had a significant and negative effect on the balance of payments during 2011 – limiting the central bank’s ability to accumulate foreign exchange reserves. The authorities responded appropriately by tightening fiscal and monetary policies, allowing some depreciation of the somoni, and seeking alternative sources for key petroleum products. Continued flexibility in the exchange rate, along with close coordination on fiscal and monetary policies, will be essential for dealing with future shocks. In this context, and to ensure medium-term fiscal and debt sustainability, the government has committed to reduce the budget deficit in 2012 and beyond.

Ongoing structural reforms are geared toward improving governance and transparency, the investment environment, and Tajikistan’s growth potential. The tax code is being redrafted and simplified, tax administration is being improved to increase the efficiency of collection and bolster public revenues, and public financial management is being strengthened to enhance transparency and monitoring of key state enterprises.

While key banking indicators have stabilized, ongoing efforts to strengthen accounting and provisioning rules along with supervision are critical. The authorities intend to press ahead with reforms in this area, in line with a financial sector reform plan developed by the National Bank of Tajikistan this year, while closely monitoring systemically important institutions.