tajikistan economic overview

Macroeconomic performance

Real economic growth in 2008 amounted to 7.9 per cent, supported by record inflows of remittances (some 43 per cent of GDP), public spending on infrastructure and higher output from the non-cotton agricultural sector. However, the economy slowed towards the end of 2008 as the external environment deteriorated, reflected in declining aluminium exports and significantly lower remittances. In the first half of 2009, real GDP grew by 2.8 per cent year on year while the rate of inflation fell from its August 2008 peak of 27 per cent to 7.6 per cent in June 2009.

Tajikistan met the key conditions of a six-month, non-funded IMF programme (agreed in June 2008) and in March 2009 entered a new US$ 120 million three-year programme with the Fund. This unlocked other donor financing (around US$ 80 million) that had been frozen since the IMF became aware of the misreporting of pledges, guarantees and direct lending provided by the NBT for the cotton sector. The main focus of the facility is exchange rate flexibility, while accommodating the need for higher social spending and ensuring sustainable debt levels.

Total donor funding in 2009, representing around 3.7 per cent of GDP, should cover the expected revenue shortfalls (about 1.8 per cent of GDP) from the economic slow-down, while permitting some increase in social expenditure. The fiscal deficit is targeted to widen from 6.1 per cent in 2008 to 8.9 per cent in 2009. The exchange rate policy has remained flexible, mainly because of limited international reserves which amounted to less than one month of imports at the end of 2008. As the external environment has deteriorated, the exchange rate has come under pressure and the somoni depreciated by 22 per cent in nominal terms against the US dollar during the first half of 2009.

The current account deficit narrowed from 8.6 per cent in 2007 to 7.9 per cent in 2008, reflecting a sharp increase in remittances. However, the deficit is likely to widen in 2009 as remittances decline (by 35 per cent during the first half of the year) and the trade deficit increases due to a sharp fall in exports (by 48 per cent during the same period).

Outlook and risks

Economic growth in 2009 is likely to remain sluggish, but is expected to be followed by a modest upturn in 2010. The economy remains vulnerable to potential risks, such as a loss in confidence in the banking system or to further macroeconomic shocks. In the medium to long term, if reforms in agriculture are implemented as planned, there should be an additional stimulus to growth. Improved governance of SOEs should also enhance the productivity of enterprises that account for a significant proportion of the Tajik economy. External debt levels in relation to infrastructure investment could potentially become a source of macroeconomic vulnerability unless more emphasis is placed on selecting projects on the basis of their anticipated economic returns.