Tajikistan

EDB investment portfolio

06/30/2017

6 projects

$51.3 million

0.9% of the total

EFSD investment portfolio

06/30/2017

3 projects

$150 million

2.7% of the total


Tajikistan became a full member of Eurasian Development Bank in June 2009. Its contribution to the Bank’s capital is US $500,000.

Trends

GDP

Economic activity in Tajikistan continues to be driven by the strong foreign investment of previous years. GDP growth was 6.5% YoY in 1Q 2017.

The main factors behind economic growth in Tajikistan in 1Q 2017 included:

on the income side: nominal growth in wages at 19.0% compensated for the acceleration in annual inflation, resulting in 12% growth in real wages. Recovery in the net inflow of remittances (1.3% YoY according to the Russian Central Bank) relieved the pressure on households, for whom transfers from labor migrants dominate the income structure.

on the value added side: the growth drivers in 1Q 2017 were the construction sector, up 20.0% versus 1Q 2016, and manufacturing (19.4% YoY). Growth in the extraction industry (43.4% YoY) is the key driver in the industrial sector: output in the processing industry grew by 12.8% YoY. The agricultural and retail sectors grew at a moderate pace, by 4.3% and 3.0%, respectively.

The output gap was in negative territory in 1Q 2017, estimated at -0.7%.

The reduction in investments in January – May 2017 and falling corporate lending by the banking sector amid its declining stability create uncertainty over short-term economic growth prospects. Weak freight turnover trends in the first five months of 2017 also evidence increased probability that economic growth will decelerate.

Inflation

Growth in the somoni-denominated money supply, driven by both the limited strengthening of the TJS - USD rate in the second half of 2016 and the withdrawal of deposits from troubled banks, led to an inflationary overhang by the end of 2016. The decision to allocate public funds to support a number of banks triggered the uncoiling of the devaluation - inflation spiral. The devaluation of the somoni translated into an inflationary trend, which reached 7.3% YoY by the end of 1Q 2017, thus exceeding the 7.0% target.

Inflation continued to accelerate in the first months of 2Q 2017, due to devaluation of the somoni and a supply shock in the fruit and vegetable market. By the end of the 2nd quarter of 2017, inflation had reached 9.0% YoY amid TJS - USD devaluation of 12% on an annual basis.

External sector

The somoni’s real effective exchange rate depreciation in 1Q 2017 reached 4.8% YoY. That partially stimulated goods exports, which grew by 16.9% YoY (a reduction by 8.2% YoY was recorded a year before). Declining goods imports (down 19.4% YoY) and a recovery in net remittances had a positive effect on the current account. Net capital inflows to the financial account will be mainly driven by the inflow of foreign direct investment.

Fiscal Policy

The budget surplus was 4.7% of GDP in 2016, while in the preceding year it was 2.2%. Budget revenues grew by 41.8% compared with 1Q 2016, primarily due to 9.5% YoY growth in tax proceeds and 2.7 times growth in other revenues. The 35.7% YoY increase in public expenditure was driven by the financing of social programs, as well as the fuel and energy complex.

Monetary Policy

With the gold and foreign exchange reserves low and the banking sector increasingly troubled, the National Bank of Tajikistan has attempted to use all available leverage to limit the devaluation of the somoni against the US dollar. Together with the effect of the administrative measures taken to support the exchange rate, the National Bank of Tajikistan increased the refinancing rate twice, from 11.0% to 16.0%, during the 1st quarter. Nevertheless, the high build-up rate of the somoni-denominated money stock (53% compared with 1Q 2016) is driving a tendency towards devaluation of the somoni against the US dollar. Total banking system loans as of the end of March 2017 dropped by 1.3% compared with the start of 2017. The share of bad loans (including interbank loans) was 50.8% as of the end of March 2017.

EDB’s investment activities in Tajikistan in 2013-2017 included the following:

  • The Bank supports power projects by providing expert and technical assistance in the development of necessary technical and economic documents, as well as finance for investment projects (subject to EDB’s Environmental and Social Responsibility Policy and international treaties).
  • EDB will help to develop export-orientated sectors, diversify agriculture, improve productiveness, and solve food security issues by providing targeted finance, in particular for the development of vertically integrated agricultural enterprises.
  • Given the importance of transport infrastructure for the country’s economy, the Bank is ready to support projects servicing export and import exchanges and promoting improvements in transport services and logistics, as well as renovations of the transport fleet and key assets.
  • EDB will continue to provide targeted loan facilities to financial institutions to ensure access for finance for SMEs (targeted loans to SMEs, finance for agricultural producers, trade finance, and lease finance under approved programmes).

Dushanbe Representative Office

Адрес:
C.A.C. Business Centre, 4th floor, 24A Aini St., Dushanbe, 734012, Republic of Tajikistan