International financial institutions recommend that the government of Tajikistan refrain from attracting non-concessional loans.
A report released by the Asian Development Bank on April 8, notes that the latest joint debt sustainability analysis by the World Bank and the International Monetary Fund in February 2022 assessed Tajikistan’s debt-carrying capacity as medium and determined that it is at high risk of debt distress for both external and public debt.
The Asian Development Bank (ADB)’s annual flagship economic publication, Asian Development Outlook (ADO) 2022, highlighted that Tajikistan’s public debt at the end of 2021 reached the equivalent of 43.8% of GDP, of which nearly 87% was external. External debt service equaled 15.9% of export value in 2021, somewhat above the 15.0% threshold for countries with medium debt-carrying capacity. However, this ratio is expected to stabilize after Tajikistan’s eurobond is repaid in 2027 and fall below 15.0% by 2028, according to the report.
The report notes that in 2022, the government reportedly plans $453 million in concessional borrowing from external sources. In 2020, the Debt Service Suspension Initiative of the Group of Twenty reportedly postponed more than $43 million in debt service owed by Tajikistan.
Tajikistan’s high risk of debt distress reflects several factors: chronic fiscal deficits that, if measured by international standards, would count loans as financing rather than revenue; past heavy use of non-concessional borrowing, including $500 million in eurobonds with a 7.125% interest rate; failure to conduct economic assessments when selecting investment projects; and the decision to undertake the Roghun hydroelectric project, whose initial cost of $3.9 billion has risen thus far to $4.8 billion and required considerable external financing. Losses from natural disasters and the cost of pandemic response have added to the debt burden.
Various initiatives reportedly can strengthen debt sustainability. These include maintaining the prohibition on non-concessional external borrowing; using cost–benefit analysis when selecting public investment projects and limiting the size of the investment budget; improving the performance of loss-making SOEs; promoting private sector growth through measures to improve the investment climate; taking steps to rely less on external borrowing by developing the domestic capital market, including a secondary market in government securities to encourage commercial banks and other parties to buy and hold government debt; and regularly publishing Ministry of Finance reports on public debt, including the audited annual statements of the 15 largest state-owned enterprises (SOEs).
Under the World Bank country classifications by income level, Tajikistan with its Gross National income (GNI) per capita of US$1,060 is currently in the lower-middle income category.
The World Bank assigns the world’s economies to four income groups—low, lower-middle, upper-middle, and high-income countries. The classifications are updated each year on July 1 and are based on Gross National income (GNI) per capita in current USD (using the Atlas method exchange rates) of the previous year (i.e. 2020 in this case).
For the current 2022 fiscal year, low-income economies are defined as those with a GNI per capita, calculated using the World Bank Atlas method, of $1,045 or less in 2020; lower middle-income economies are those with a GNI per capita between $1,046 and $4,095; upper middle-income economies are those with a GNI per capita between US$4,096-US$12,695, and high income economies are those with a GNI per capita more than US$12,695
As of January 1, 2022, Tajikistan’s external debt amounted to about 3.3 billion U.S. dollars, according to the Tajik Ministry of Finance (MoF).
The Export-Import Bank of China (Eximbank) remains the largest creditor of Tajikistan over the past 12 years – 1.2 billion U.S. dollars. Tajikistan’s large-scale borrowing from China started around 2006.
