Albert Park, Chief Economist of the Asian Development Bank (ADB), visited Tajikistan with a two-day visit, following which he gave an exclusive interview to Asia Plus. He spoke about the impact of the Russia-Ukraine conflict on the Tajik economy, possibilities of financial support for the Roghun project, and the economy in general.
Q. I would like to know the purpose of your visit, whom did you meet with, what issues did you discuss?
A. First of all, thank you for your interest and the interview. It is my first visit to Tajikistan, and I had several purposes: to get acquainted with the country, discuss the current economic situation, and launch ADB’s key economic publication Asia Small and Medium-Sized Enterprise Monitor.
I met with Nematullo Hikmatullozoda, Assistant to the President on Economic Affairs, gave a lecture at the Tajik National University, and visited the Nurek hydropower plant, where ADB implemented an important project to reconstruct the 500-kilovolt switchyard.
Q. How, based on your estimates, has the socio-economic situation in Tajikistan changed after almost 9 months of the Russia-Ukraine armed conflict? After all, the economy of Tajikistan is tied to the Russian economy.
ИЗОБРАЖЕНИЕ
A. The conflict, of course, has had a negative impact on the Tajikistan economy. Tajikistan imports a large amount of goods from Russia, including food and energy products. The rise in prices of these goods led to a slowdown in economic activity, especially in the first half of the year.
In addition, 1 million Tajik citizens work in Russia, and the contraction of the Russian economy has led to a decline in remittances and economic opportunities for families of labor migrants.
As a result, the growth of the Tajik economy for 9 months of this year slowed down to 7.8% from 8.9% in the same period of 2021.
The volume of capital investments decreased by 20%, and a reduction in the production of flour, aluminum, and cement was also recorded.
Q. In September, an ADB report predicted a 25% decline in the inflow of remittances from labor migrants from Russia to Tajikistan – from $2.25 billion in 2021 to $1.69 billion in 2022. Which sectors of the Tajik economy will suffer the most from that?
A. The consumer’s sector, as remittances are mainly used for the needs of households. The less the volume of remittances, the less people will buy.
Also, the reduction in remittances affects the balance of payments, imports, and the exchange rate.
But, nevertheless, the economy of Tajikistan continues to grow, it is in surplus, although not as fast as in previous years.
There is resilience in industrial and construction growth. This allows to offset the negative impact, contributing to the continued growth of the economy.
"Diversification of economic activities should be a priority"
ИЗОБРАЖЕНИЕ
Q. To what extent can the processes taking place in the Russian economy affect Tajik-Russian trade relations?
A. Due to the reduction in trade between Russia and western countries because of the sanctions, there are opportunities for countries that have not joined the sanctions: these countries can now export to Russia goods that were previously purchased from the West.
The countries in Central Asia can take advantage of the current situation and increase exports to Russia.
It also works the other way: Russian goods that were previously sold to western countries can now be purchased at cheaper prices.
In any case, the war will have economic consequences not only on Russia, but on other countries as well. Disruption of supply chains is among those consequences.
Q. What can you advise to reduce Tajikistan dependence on Russia?
A. Diversification of economic activities should be the main priority of Tajikistan.
We know that industrial development is now a government priority. There is potential to increase agricultural production and develop the tourism sector. But to achieve these goals, it is necessary to mobilize private investment.
It is very important to support small and medium-sized business, because this is a very dynamic sector, thanks to which jobs are created.
Q. Does ADB plan to revise the structure and volume of assistance to Tajikistan in the short and medium term, considering the current difficult political, financial and economic situation in the world?
A. We stand by the government to help develop the economy. But we have our principles. One of these principles is debt sustainability. The volume of public debt in Tajikistan is quite high. Therefore, it was decided to help the country exclusively in the form of grants, not to worsen the situation.
The ADB Board of Directors will be open to reconsider its decision when the debt situation improves.
“There are no plans to finance Roghun yet”
Q. What sectors of the Tajik economy will be supported first in the current situation?
A. We have a country partnership strategy with Tajikistan for 2021-2025. This strategy has three main priorities: support the transition to a market-based economy, institutional reforms to improve the investment climate, restructuring of state-owned enterprises so that they become more market-oriented and improve their reporting.
The second direction is human capital development; and the third is the development of agriculture, rural areas, urban services and integration between them.
ИЗОБРАЖЕНИЕ
Overall, it is important to improve the investment climate and business environment, which will create good conditions for all sectors.
Q. The government of Tajikistan a year ago requested development partners, including ADB, to help finance the construction of the Roghun HPP. To what extent do you think it is necessary to implement this project at present, and do you have plans to finance the project?
A. There are no current plans to support the project. We still monitor the situation, work with our colleagues from the World Bank and other development partners. As I said, one of the concerns is debt sustainability. New borrowing can worsen the situation. ADB is developing new financing models for countries, and this applies not only to Tajikistan. There may be mixed financing from our own funds, different donors, private funds, and so on.
Q. That is, ADB may participate in this project?
A. Our position has not yet formulated; consultations are underway.
Q. How have your forecasts for the economy of Tajikistan changed compared to your projections at the beginning of this year?
A. We have prepared updated forecasts, but they have not yet been officially released, so I cannot announce any figures now.
In our September report, the country's growth was projected at 4% by the end of the year, and 5% in 2023.
The updated forecasts will be higher, we are optimistic about 2022 and 2023.
Background:
Albert Park is ADB Chief Economist and Director General of the Department of Economic Research and Regional Cooperation. He is chief spokesperson on economic and development trends, leads the production of ADB key information products and support for regional cooperation fora.
Albert Park joined ADB in December 2021.
A US national, he received his bachelor's degree in economics from Harvard University and his doctorate in applied economics from Stanford University.
