The International Monetary Fund (IMF) hopes to agree a new lending program with Tajikistan within the next few months after seeing progress in talks with the country, a Fund executive said on Friday, according to Reuters.
“Discussions are under way and the key issue there is the banking sector,” Juha Kahkonen, IMF Deputy Director for the Middle East and Central Asia department, reportedly said during a visit to the Kazakh financial hub Almaty.
“Progress has been made in the discussions and discussions will continue in the coming weeks and we hope the program can be agreed in the coming months,” he told Reuters.
Tajikistan said in February it was in talks with the IMF on “financial and technical assistance,” without disclosing the amount of requested aid.
The Fund, in turn, said it would assist Dushanbe if it quickly undertakes substantial reforms, such as reinforcing the independence of the central bank.
Kahkonen said on October 21 that Tajik banks did not have sufficient capital and “their lending practices have not been very sound.”
"Non-performing loans currently are about half of total loans," he said, adding the amount of potential lending under the program has not been determined yet.
Reuters reports that in a move that could help it secure IMF financing, the Dushanbe government said last week it would hike the price of electric power, for the first time in two years, by 16 percent from November 1 and gradually phase out power subsidies for companies such as TALCO, the country's only aluminum smelter.
Tajikistan has also sought $100 million in loans from the European Bank for Reconstruction and Development (EBRD) in order to shore up local banks. The EBRD has said it could lend to Dushanbe once it has an IMF program in place.
Recall that Mr. Neil McKain, Director for Central Asia, European Bank for Reconstruction and Development (EBRD) said in Dushanbe on October 14 that International financial institutions (IFIs) are expected to put together a comprehensive program to support rehabilitation of banking sector in Tajikistan.
Mr. McKain noted that EBRD was aware of problems facing Tajik entrepreneurs, and one of the most important issues was access to finance.
According to him, the EBRD is currently considering the issue of providing a US$100 million loan to support the Tajik banking sector reform and restructuring. If the loan approved by the EBRD’s Board of Directors, it would be conditional on an IMF program and a World Bank Development Policy Operation being in place, including a roadmap for banking sector reforms.
Experts note that Tajikistan's banking sector has shown substantial weaknesses. Tajikistan’s banks have been hit hard by the country’s economic problems, much of them reportedly linked to declining exports and remittances with Russia, which have left many of the country’s businesses and individuals unable to repay their loans to banks and microfinance institutions
Thus, Tajikistan's banking regulator suspended the management of major lender Tojik Sodirot Bonk (TSB) and its smaller competitor Tajprombank in May, appointing caretaker administrations there.
