Publication: Monitor Volume: 6 Issue: 169

Tajikistan’s fragile economic recovery from its five years of domestic conflict seems to be continuing. But recent reports indicate that the recovery could be imperiled by a combination of a serious drought and the fighting in neighboring Uzbekistan and Kyrgyzstan. And–as in Kyrgyzstan–economic prospects in Tajikistan continue to rely heavily on support from the IMF and World Bank.

An IMF mission visited Dushanbe in mid-August to review the current economic situation and draft a joint memorandum on economic policy for the third year of the country’s Poverty Reduction and Growth Facility. The IMF released an US$18 million loan tranche for Tajikistan in January 2000 and is expected to make a decision regarding disbursement of the next tranche in late October (Interfax Central Asia & Caucasus Business Report, August 21). Although there has been some slippage in the implementation of structural reforms, the Fund seems broadly satisfied with the economic policies pursued by Prime Minister Aqil Aqilov’s government. By intensifying revenue collection and prioritizing expenditures, the central government budget was reported to be in balance the first half of 2000. Since September 1999, the National Bank of Tajikistan has tightened monetary policy, particularly through the collection of overdue loans from the cotton sector and other domestic borrowers (IMF Public Information Notice No. 00/6, www.imf.org)

The IMF’s current program for Tajikistan involves three phases. The first, already completed, included improvements in the legal infrastructure, agricultural reforms and privatization of small-scale enterprises. The second involves financial sector development and privatization of large enterprises. The third, scheduled to begin in 2001, involves changes in the legal system to foster a market economy, utility and regulatory reform, and pension and welfare reform. World Bank financing for Tajikistan includes a Structural Adjustment Credit (SAC) as well as several project loans. In 1999, SAC disbursements amounted to US$23 million, while project disbursements were about US$15 million mainly for postconflict programs, agriculture and poverty alleviation (Republic of Tajikistan: Recent Economic Developments, IMF Staff Country Report No. 00/27).

Tajikistan’s economy seems to be continuing its gradual recovery under this policy framework. GDP growth is reported to have accelerated to some 6 percent in the second quarter of this year, up from 4 percent in the first quarter. Exports grew in the first half, as higher prices for aluminum Tajikistan’s most important industrial and export product and a recovering Russian market helped sales to other CIS countries to more than double. However, the resurgence of armed conflict in Uzbekistan and Kyrgyzstan could upset this fragile growth, particularly if the fighting spreads to Tajikistan. (Both Bishkek and Tashkent claim that the insurrections in their countries are partially staged out of bases in Tajikistan.) Even before the fighting began, the Tajik economy was buffeted by rising prices and a falling exchange rate: after ending 1999 at a rate of US$1=1436 Tajik rubles, the exchange rate had soared to US$1=2000 Tajik rubles before dropping back in July. And producer price inflation was running at 60 percent during the first five months of the year (Sotsial’no-Ekonomicheskoye Polozhenie Rossii, June 2000, RFE/RL, July 15).

Moreover, drought conditions now appear to be a major threat to Tajik agriculture. A senior Red Cross official told the press on August 30 that drought could cause Tajikistan to face food shortages within three months. According to the Agriculture Ministry, humanitarian assistance will be needed to offset the damage done to Tajikistan’s grain crop. The Red Cross will attempt to set up a large-scale food distribution system before the onset of winter (Reuters, August 30).