Washington, D.C.: On February 28, 2024, The Executive Board of the International Monetary Fund (IMF) approved a twenty-two-month Policy Coordination Instrument (PCI)[1]for Tajikistan.
Tajikistan's favorable post-pandemic economic performance continued in 2023, with strong, broad-based growth and low inflation. The fiscal deficit has remained anchored within the authorities' medium-term deficit target, contributing to a further reduction in the public-debt-to-GDP ratio. The outlook for 2024 appears favorable, although there remains considerable uncertainty over the external environment.
The authorities requested approval of a twenty-two-month program supported by the Policy Coordination Instrument (PCI) to anchor economic policies and support implementation of vital structural reforms. The PCI aims to maintain macroeconomic stability, strengthen the authorities' policy frameworks and support their efforts to foster more sustainable and inclusive growth. Program reviews will take place on a semi-annual fixed schedule. While the PCI involves no use of IMF resources, a favorable performance under the program would signal to development partners and private investors Tajikistan's commitment to strong economic and structural policies, catalyzing financing for high-priority social and infrastructure projects.
The authorities' reform priorities under the program will focus on three key pillars: (i) strengthen revenue mobilization, spending efficiency and monitoring of fiscal risks related to state-owned enterprises to improve fiscal resilience and preserve debt sustainability while prioritizing essential social and development spending; (ii) modernize monetary, exchange rate and financial sector policies to increase their contribution to growth and resilience, and; (iii) advance broad-based structural reforms to foster more inclusive growth through augmented targeting of social assistance, improved governance of the central bank and state-owned enterprises and stronger anti-money laundering and anti-corruption frameworks.
Following the Executive Board's discussion, Ms. Antoinette Sayeh, Deputy Managing Director, issued the following statement:
"Tajikistan has returned to strong growth following the COVID-19 pandemic but there is uncertainty over the outlook in the context of heightened geopolitical risks. Public debt is sustainable, anchored by the authorities' commitment to a medium-term fiscal deficit target of 2.5 percent of GDP, but the risk of debt distress remains high while sizeable public investment needs reduce fiscal space for critical social and development spending.
"Against this backdrop, the authorities' economic program under the Policy Coordination Instrument focuses on policies to anchor macroeconomic stability and strengthen resilience against shocks while advancing governance and transparency reforms to foster more diversified and inclusive growth. The program, supported by capacity development, sends a strong signal of the authorities' commitment to sound policies and reforms, and would help catalyze additional support by development partners.
"The program focuses on improving fiscal resilience to increase space for priority social and development spending while keeping public debt on a downward trajectory. Fiscal reforms under the program increase revenue mobilization and spending efficiency and strengthen social protection of the most vulnerable. Debt sustainability is anchored in medium-term revenue and debt management strategies supported by electricity sector reforms and domestic debt market development to support more efficient resource allocation.
"Monetary, exchange rate and financial sector policies aim to strengthen the economy's resilience to shocks. Improvements in exchange rate flexibility and monetary policy transmission will enhance shock absorption and facilitate a gradual transition toward inflation targeting. Financial sector reforms will expand the use of macroprudential instruments, forward-looking analytical tools and beneficial ownership information in supervision and macroprudential analysis to reinforce financial stability.
"Broad-based governance and transparency reforms foster an enabling environment for sustainable and inclusive growth. Priorities supported under the program include improved central bank governance and strengthened oversight and management of fiscal risks related to state-owned enterprises, more efficient AML-CFT and anti-corruption frameworks, and enhanced extractive sector transparency, financial inclusion and resilience to climate risks to raise Tajikistan's long-term growth potential."
[1]The PCI is available to all IMF members that do not need Fund financial resources at the time of approval. It is designed for countries seeking to demonstrate commitment to a reform agenda or to unlock and coordinate financing from other official creditors or private investors. (see https://www.imf.org/en/About/Factsheets/Sheets/2017/07/25/policy-coordination-instrument )
