DUSHANBE, May 27, 2013, Asia-Plus – World Bank’s Tajikistan Partnership Program Snapshot published in April 2013 notes that Tajikistan’s economic performance was strong across the major economic sectors. In 2012, real GDP growth was 7.5 percent, slightly higher than in the previous two years. Economic activity was buoyed by retail trade (up 16.9 percent) and services (up 15.3 percent), and to a lesser extent by agriculture (up 10.4 percent) and industrial production (up 10.4 percent). Remittances, which remain a key factor in stimulating domestic consumption, continued to grow steadily and reached about US$3.6 billion, or 47.4 percent of GDP in 2012. Benefiting from increased remittance inflows, retail trade and services contributed to more than 40 percent of the total GDP growth recorded during the year.
Inflation reportedly declined but remains susceptible to external factors last year and monetary policy was gradually eased in 2012 in light of lower inflation in the first half of 2012. This trend allowed the National Bank of Tajikistan (NBT) to gradually lower the refinance rate from around 10 percent at the end of 2011 to 6.5 percent in August 2012. The exchange rate was stable in 2012.
According to the report, the overall budget performance was satisfactory in 2012. General Government revenue and grants amounted to about 24.7 percent of GDP in 2012, which is 17 percent higher than the revenues collected in 2011.
The report notes that external debt has been kept in check. “As GDP growth exceeded the growth of external debt, the ratio of Tajikistan’s public and publicly guaranteed external debt to GDP dropped from 35.8 percent in 2009 to about 28.5 percent in 2012. As of end-2012, the external debt was 79 percent of total public debt outstanding, and is dominated by highly concessional external loans, held in broadly equal parts between bilateral and multilateral creditors. Chinese bilateral loans represent the most significant source of funding (roughly 41 percent of total external public debt). Other main lenders are the World Bank (17 percent of total external public debt) and the Asian Development Bank (ADB) (15 percent).”
Debt sustainability reportedly remains a concern and debt service costs are on the rise, the report says. “A range of potential shocks stemming from slower growth, not very favorable financing terms, or slow progress on fiscal consolidation could reverse the positive debt dynamics. In addition, debt servicing costs (as a ratio to exports of goods and services) have almost doubled as compared to 2011 and are expected to be over 10 percent over the medium term. High remittances help servicing the debt, but they, in turn, are highly vulnerable to growth in Russia, which, in turn, is heavily dependent on volatile oil prices.”
The government has reportedly taken steps to improve public debt management. “In 2011, with support from the World Bank, the Government of Tajikistan conducted a comprehensive assessment of the country’s debt management policy, functions, objectives, and legal and institutional arrangements using the Debt Management Performance Assessment Tool. The Ministry of Finance prepared a Public Debt Management Strategy, approved by the Government in April 2012. The Strategy reaffirms its commitment to keep the debt below 40 percent of GDP, take on new loans only if they have a minimum 35 percent grant element, and carry out a careful cost-benefit assessment of large-scale investment projects.”
