Tajikistan

EDB investment portfolio

01/01/2018

6 projects

$51.4 million

0.84% 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

The uncertainty surrounding sources of funding resulted in a slowdown of economic growth in Tajikistan. 2Q 2017 GDP growth was 5.5% y-o-y (vs. 6.5% in 1Q 2017 y-o-y).

Economic activity in Tajikistan was shaped by the following key factors:

  • In terms of incomes:

Nominal wage growth (up 25.8% from 2Q 2016) was complemented by the growth in the net inflow of remittances from migrant workers (up 21.3% y-o-y in dollar terms). In the face of the shrinking portfolio of bank loans to households (-6.0% since the beginning of 2017) and the accelerating inflation rate, the nominal growth of the above-mentioned income sources has supported the households capacity to pay.

  • In terms of value added:

2Q 2017 growth was driven by the manufacturing industry (up 23.2% from 2Q 2017), agriculture (up 8.5% y-o-y), and retail (up 4.2% y-o-y). The key factor that restricted 2Q 2017 GDP growth was a reduction in the volume of work completed in the construction industry, which was accompanied by a decline in investments.

The output gap was negative in 2Q 2017 and estimated at -0.8%.

The successful USD 500 million debut eurobonds placement in the international market in September to fund the construction of the Rogunskaya hydropower plant could support a recovery in investment growth in the near future.

Inflation

The supply shock from gasoline and fruit and vegetables, together with the exchange rate shock in early 2017, was compounded by a new spiral of devaluation in late May 2017, all of which contributed to an acceleration in inflation. While in 1Q 2017 the inflation rate was 6.1% y-o-y, it accelerated to 8.6% y-o-y in 2Q 2017. Overall CPI growth was driven by fast inflation in food and gasoline prices. Growth slowed in prices for basic durable goods, which is an indication of the postponed demand of households for non-food goods.

The stabilization of the domestic foreign exchange market at the start of the summer and a more marked seasonal decline in prices for root crops reversed the upward inflation trend in 3Q 2017.

External Sector

The effective exchange rate of the somoni devalued by 5.8% in 2Q 2017 y-o-y. However, the improvement in price competitiveness was offset by the fluctuations in precious metals exports, whose contribution to the annual drop in overall exports amounted to 17.9 percentage points. A deeper reduction in imports of goods and services (down 7.4% from 2Q 2016) reduced the trade deficit. Meanwhile, positive growth in primary and secondary incomes (attributable mostly to the increase in remittances from migrant workers) reduced the current account deficit. Net capital outflow from direct foreign investments was caused by the payment of debt principal to international parent companies. Capital inflow into the country was driven by operations with debt instruments, including in the form of trade credit.

Fiscal Policy

The budget surplus in January-June 2017 amounted to 1.5% of GDP, while in the comparable period of 2016 the state budget posted a deficit of 0.9% of GDP. Budget revenue increased by 23.3% from January-June 2016, mainly due to growing tax revenue (up 11.9% y-o-y) and revenue from other sources (up by 1.7 times). The public spending growth rate decreased to 4.0% y-o-y, mostly due to a 30% reduction in state investments in the fuel and energy industry. Investments in this industry increased by 2.2 times during the same period last year.

Monetary Policy

The continuing devaluation pressure combined with low international reserves and accelerating inflation prompted the National Bank of Tajikistan to keep its refinancing rate at 16.0%. Despite the measures taken to rehabilitate the banking sector, the key indicators still signal the presence of risks in the system. As of the end of June 2017, the share of non-performing loans in the total credit portfolio had decreased by 2.8 percentage points since the beginning of 2017 to 55.4%. Against a background of an outflow of deposits (down 2.2% since the beginning of 2017), the credit portfolio decreased by 3.8% from end December 2016.

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

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