The World Bank notes that COVID-19 has dealt a major blow to world’s poorest countries, causing a recession that could push more than 100 million people into extreme poverty. Public debt in emerging markets has reportedly surged to levels not seen in 50 years, and many developing countries have increasingly taken on debt on non-concessional terms.
The World Bank survey Tajikistan Economic Update – Fall 2020 released on December 23, 2020 says the Tajik authorities deferred tax collections, boosted health and social spending, and eased monetary policy. They established an interagency task force to address health challenges emerging from the pandemic. The government amended the 2020 state budget, substantially increased healthcare expenditure, and expanded social assistance transfers to the population. Deferred tax payments and postponement of the administrative price increases reportedly provided liquidity support to firms and households.
Despite lower revenues, the government managed to consolidate the state budget by scaling up spending cuts in the maintenance and repair works, purchasing new equipment, and deferring low-priority projects. Because of higher spending on healthcare and social assistance programs, the amended 2020 state budget targets a fiscal deficit of 5.8% in 2020.
Tajikistan’s external public debt reached almost 40% of GDP by September 2020 compared to 36.6% of GDP at the end of 2019, according to the report. Since Tajikistan has a high risk of debt distress, any new non-concessional borrowing adds to the pressure on public debt sustainability. To ensure the soundness of public finances, the government committed to consolidating the budget and updated its Debt Management Strategy for 2021-2023 to guide borrowing criteria and debt ceilings over the medium term.
Tajikistan is in the group of countries that recently applied to the G20 Debt Service Suspension Initiative (DSSI).
The World Bank and the International Monetary Fund urged G20 countries to establish the DSSI, which is helping countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people. Since it took effect on May 1, 2020, the initiative has reportedly delivered about $5 billion in relief to more than 40 eligible countries, according to the World Bank.
In all are eligible for a temporary suspension of debt-service payments owed to their official bilateral creditors. The G20 has also called on private creditors to participate in the initiative on comparable terms. The suspension period, originally set to end on December 31, 2020, has been extended through June 2021.
