A Concluding Statement released by the IMF staff team on December 23 describes the preliminary findings of IMF staff at the end of an official mission, in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF's Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.
The authorities reportedly have consented to the publication of this statement. The team notes that the views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.
Describing recent developments and outlook, the statement, in particular, notes that strong growth has continued in 2022, with minimal disruption from the war in Ukraine.
After growing by 9.2 percent in 2021, real GDP reportedly increased 8.0 percent (year-on-year) during January-October, reflecting broad-based growth in industry (including mining), agriculture, and construction. Adverse spillovers from the war have not materialized as expected, while strong financial inflows have supported domestic demand and liquidity. Remittances slowed immediately after the beginning of the war but rebounded sharply in the second quarter. This helped keep the current account in surplus and boost FX reserves from US$2.5 billion at end-2021 to US$3.4 billion in October, more than 8 months import coverage.
Inflation has been well-contained during 2022 despite higher international commodity prices. Twelve-month inflation decreased from 8.0 percent at end-2021 to 4.5 percent in November, below the mid-point of the NBT’s medium-term target range of 6.0 (±2) percent. A tight monetary stance has helped contain inflationary pressures, while rising international prices for imported food and fuel in the first half of the year appear to have been mitigated by a stronger somoni and the release of strategic food reserves. Strong domestic agricultural production oriented towards internal consumption has also contained prices for local food products. The NBT reduced the refinancing rate by 50 bps in late October to 13 percent, in line with subdued inflation.
However, significant uncertainty remains over the near-term outlook, according to the statement. While negative spillovers from the war have not materialized so far, it remains unclear to what extent Tajikistan will continue to be immune from weaker economic activity in Russia. Real GDP growth is projected to decelerate from 7.5 percent this year to 5.0 percent in 2023 as the positive impact of this year’s strong inflows diminishes. Over the medium-term, growth is expected to converge to its potential of about 4.0 percent, with inflation staying within the NBT’s target range and FX reserves remaining at around 8 months of imports through 2027.
The statement notes that risks to the outlook appear tilted to the downside. Russia is likely to be increasingly affected as the war continues, against the backdrop of a deteriorating global environment and tighter financing conditions. A decline in remittances would have a negative impact on growth, with possible spillovers to the banking system, while the return of migrant workers from Russia could increase the need to scale up social assistance.
According to the statement, Tajikistan’s economy is especially exposed to climate-related risks. On the upside, increased FX reserves have helped reduce near-term vulnerabilities, and further development of Tajikistan’s large proven gold reserves provides scope to build external buffers and increase fiscal resources.
