TAJIKISTAN: WILL RECONCILIATION LEAD TO ECONOMIC RECOVERY?
Publication: Monitor Volume: 6 Issue: 81
Tajikistan’s March parliamentary elections, while hardly letter-perfect, marked a major step in political reconciliation for a country still shell-shocked from the civil war which ended in 1997. Although leaders of the United Tajik Opposition (UTO) are unhappy about the small number of parliamentary seats they received, most of the UTO appears to have accepted the election results. This trend toward political stability is helping policy makers to consolidate Tajikistan’s post-war economic recovery. The preliminary 3.7 percent GDP growth recorded last year means that output has grown by some 11 percent since the fighting stopped in 1997. Industrial output in 1999 grew for the second year in a row (by 5 percent), while agricultural output staged its third consecutive year of growth, despite a bad cotton harvest.
Both official and unofficial forecasts predict faster economic growth in Tajikistan in 2000. In part, this is because investment spending rose in 1999 for the first time in a decade. Thanks to its willingness to follow IMF fiscal and monetary policy guidelines, Dushanbe remains in the Fund’s good graces, so that Tajikistan’s fiscal and current account deficits are likely to be financed in a relatively painless fashion by concessional lending. This support is expected to prevent the gradual depreciation of the Tajik ruble from becoming a rout.
Still, Tajikistan’s economy faces many difficulties. Although the IMF seems broadly satisfied with Tajikistan’s fiscal and monetary policies, the slow pace of privatization could lead to growing friction with the Fund. Tajikistan’s growth prospects also depend heavily on the Tursunzade aluminum smelter, which alone accounts for 10-12 percent of GDP. But while Tursunzade is Tajikistan’s only large industrial facility and largest exporter, the plant is currently operating at less than half capacity. Moreover, Tajikistan lacks bauxite, and shortages of working capital and foreign exchange have prevented Tursunzade from importing sufficient quantities of alumina. Although the government intends to privatize Tursunzade during the next 2-3 years, the smelter’s prospects for a healthy sale price, boosting capacity utilization and restructuring remain uncertain (PlanEcon Review and Outlook for the Former Soviet Republics, April 2000). Meanwhile, the country remains plagued by extreme poverty, large-scale drug trafficking and instability from neighboring Afghanistan (Reuters, March-April 2000).
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