Middle East and Central Asia > Tajikistan, Republic of

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International Monetary Fund. Middle East and Central Asia Dept.
This paper presents Republic of Tajikistan’s Request for a Twenty-Two-Month Policy Coordination Instrument. Tajikistan’s favorable post-pandemic economic performance continued in 2023, with strong, broad-based growth and low inflation. 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. 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. Tajikistan is reliant on remittances, primarily from Russia, to support domestic demand and provide a source of foreign exchange. Risks to the outlook are tilted to the downside in the context of heightened geopolitical tensions and sanctions on Russia.
Mr. Tigran Poghosyan
This paper analyses how financial inclusion in the Caucasus and Central Asia (CCA) compares to peers in Central and Eastern Europe (CEE). Using individual-level survey data, it shows that the probability of being financially included, as proxied by account ownership in financial institutions, is substantially lower across gender, income groups, and education levels in all CCA countries relative to CEE comparators. Key determinants of this financial inclusion gap are lower financial and human development indices, weak rule of law, and physical access to bank branches or ATMs. This suggests that targeted policies aimed at boosting financial and human development, strengthening the rule of law, and supporting fintech solutions can broaden financial inclusion in the CCA.
International Monetary Fund. Middle East and Central Asia Dept.
This 2022 Article IV Consultation discusses that Tajikistan continued to experience strong growth in 2022, with minimal disruption from the war in Ukraine as strong financial inflows supported domestic demand and liquidity. Fiscal space remains limited due to debt sustainability concerns, and the fiscal deficit target of 2.5 percent of gross domestic product is an important anchor to keep public debt on a downward trajectory. Inflation remains well-contained, but strong monetary growth in 2022 warrants caution and macroprudential controls could help mitigate potential risks. Enhancing exchange rate flexibility is also an important part of the policy toolkit to absorb external shocks. A transition to inflation targeting will require sustained efforts to improve monetary policy transmission. Emerging risks call for further strengthening banking supervision in line with the 2022 Financial Sector Stability Review. Far-reaching structural reforms are critical to unlock the economy's long-term potential and support growth that is more inclusive.
Mr. Tigran Poghosyan
This paper presents stylized facts on financial development in the CCA countries relative to their EM and LIC peers and assesses how financial development can boost growth in the CCA. Drawing on IMF’s multidimensional index of financial development, we find that CCA countries have made progress following the independence in early 1990s. However, the progress was uneven across the CCA, resulting in a divergence of financial development over time and mixed performance relative to EM and LIC peers. Financial institutions have progressed the most, while financial markets remain underdevelped in most CCA countries except Kazakhstan. In terms of sub-indicators of financial development, financial access has expanded markedly, while the depth of financial intermediation has remained largely shallow and efficiency of financial intermediation has fluctuated over time. Standard growth regressions suggest that CCA countries with relatively lower level of financial development have scope to boost annual growth rates between 0.5-2.5 percent by reaching the level of financial development of frontier CCA countries.