Overview

Real GDP growth in Tajikistan had moderated to 6.7 percent in 2014 and a deep recession in Russia will significantly undermine growth and poverty-reduction prospects in Tajikistan in 2015. According to the World Bank’s Global Economic Prospects report (January 2015), sharp or sustained decline in commodity prices or remittance inflows from Russia—the major source of remittances to the region - represent major risks for the CIS countries, and Tajikistan is particularly vulnerable to these shocks. The World Bank projects the economic growth in Tajikistan to slow down to 4.2 percent in 2015, with significant downside risks.

To date Tajikistan has done a remarkable job of reducing poverty. The national poverty rate fell from 96 percent in 1999 to 47 percent in 2009 and an estimated 36 percent in 2013.  Tajikistan’s pace of poverty reduction in the past 15 years has been among the top 10 percent in the world.   The country has done less well in reducing nonmonetary than monetary poverty. Recently available micro-data suggest that limited or no access to education (secondary and tertiary), heating, and sanitation are the main contributors to non-monetary poverty.  These three are the most unequally distributed services, with access to education varying by income level and to heating and sanitation according to location.

The Government of Tajikistan has set ambitious goals to be reached by 2020: to double GDP, to reduce poverty to 20 percent, and to expand the middle class.  To achieve these goals Tajikistan would need to fundamentally alter its current consumption-driven growth model, which is ultimately unsustainable.  Fuelled by the remittances of migrant workers, as well as higher wages in state-owned enterprises, the service sector is expanding while the small industrial sector is contracting. Job creation is insufficient to absorb the youth bulge and wage growth has outpaced that of labor productivity. To achieve higher growth, Tajikistan needs to implement a deeper structural reform agenda designed: (a) to reduce the role of the state and enlarge that of the private sector in the economy through a more conducive business climate, thus increasing private investment and generating more productive jobs; (b) to modernize and improve the efficiency and social inclusiveness of basic public services; and (c) to enhance the country’s connectivity to regional and global markets and knowledge.

The difficult environment for doing business in Tajikistan as well as obstacles to foreign direct investment have discouraged private investment and limited overall investment. Averaging about 15 percent of GDP annually since 2008, total investment is low by regional and international standards. Public investment accounts for 80 percent of the total, or 12 percent of GDP, and private investment for 20 percent, or only 3 percent of GDP—much lower than the Europe and Central Asia developing country average. The main obstacles cited by both local and foreign entrepreneurs are inadequate infrastructure, in particular insufficient and unreliable energy supply, the weak rule of law, especially as regards property rights, and tax policy and administration. Increased private investment and new business development are crucial prerequisites for increased job creation. 

With 20 percent of GDP and 53 percent of employment, the agriculture sector in Tajikistan offers a solid foundation for economic development. The Government of Tajikistan displays a strong commitment to the agricultural reform program, which includes the resolution of the cotton debt crisis, accelerated land reform, freedom to farm, improved access to rural finance and increased diversification of agriculture.  Efforts are underway to make investment in agriculture more profitable, especially for exports, by enhancing access to markets and by empowering farmers through strengthening their land-use rights, improving their access to credit and inputs, and enabling them to make their own cropping decisions. The recent growth of non-cotton agricultural exports indicates the potential for growth in agro-processing, including storage of fruit and vegetables, which holds great promise for development, along with textiles and clothing.

Meeting Tajikistan’s energy demand will be important as part of the agenda to reduce poverty and create an enabling environment for private businesses.  Approximately 70 percent of the population suffers from extensive electricity shortages during winter. The shortages increased considerably starting in 2009, when Tajikistan’s power network was severed from the Central Asia Power System and power trade with Central Asian countries stopped. Electricity shortages in winter are estimated to be at least 2,000 gigawatt-hours, or about 20 percent of winter electricity demand.

Tajikistan is also faced with a young and rapidly growing population. Recent estimates show that 55 percent of the population in Tajikistan is under the age of 25, making improved public services in social sectors (education, health, and social protection), as well as job creation, imperative components of Government’s Poverty Reduction Strategy.

Tajikistan joined the World Bank in 1993 and the International Development Association (IDA) in 1994. Since 1996, the Bank has provided approximately US$1,023 billion in IDA credits, grants, and Trust Funds, of which some US$788 million have already been disbursed.

The current World Bank Group Country Partnership Strategy (CPS) for Tajikistan for 2015-2018 with a tentative program of US$280 million supports the transition to a new growth model led by private sector investment and exports and aimed at improving the income-earning opportunities of the poorest 40 percent of the population. The three main pillars of the CPS include:

  • Promote private sector–led growth by improving the investment climate and strengthening competitiveness in key sectors to attract investment and create jobs;
  • Promote social inclusion by increasing access to improved social services, including education, health, social assistance, water supply, and sanitation;
  • Enhance regional connectivity to increase the country’s access to regional markets and to global information and knowledge. 

Mainstreaming climate change, governance and narrowing the gender gap will remain important measures across all sectors of the CPS.

Trust Fund activities complement the Bank assistance program and finance a wide range of projects in key strategic sectors, including education, energy, agriculture, food security, and the social sectors. Forty projects in Tajikistan’s portfolio are funded by TFs for the total amount of US$61 million.

In addition, as an institution of global expertise in development, the World Bank Group invests heavily in research and analytical work. The produced analytical material - over 40 publications since 2000 and advisory services on private sector development - bring global expertise in areas such as health, education, energy, agriculture, investment strategies and climate change.

As of March 2015 the World Bank Group’s active portfolio in Tajikistan includes 21 projects totaling US$283.4 million. The largest share of the portfolio is in agriculture (24 percent), followed by urban and rural development (21 percent), transport  (16 present), governance  and economic policy (9 percent) environment and natural resources  (7 percent), education (6 percent), health and social protection (6 percent), water (6 percent), the private sector (4 percent) and  social protection and labor (1 percent). Since 1996, the World Bank provided over US$1 billion in grants and highly concessional credits from the International Development Association and trust fund resources to Tajikistan.

Tajikistan became a member of IFC in 1994. IFC works with private sector clients, government, and civil society to bring the benefit of global expertise to Tajikistan through its advisory services and selected investment projects. IFC, with its focus on private sector development, has an important role to play in supporting inclusive growth and job creation in Tajikistan.

Since 1997, IFC has invested US$192.5 million to support 52 private sector projects in the financial, hydropower, retail, tourism, telecom and manufacturing sectors. Since 2004, IFC has also implemented advisory services projects focused on the legal and regulatory infrastructure of small and medium enterprises, credit bureau development, leasing, agricultural finance, and infrastructure development through public-private partnerships.

Tajikistan became a member of MIGA in 2002. MIGA has not so far provided any political risk guarantees for investment projects in Tajikistan.

The World Bank Group’s investments in private sector development and public services for people, such as education, health, municipal services and social protection focus on creating better living conditions for people in urban and rural regions. The World Bank Group is committed to supporting Tajikistan as it strives to improve the lives of its people and meet the aspirations of its young and growing population. Some of the highlights include:

Tajikistan Health Services Improvement Project

The Health Services Improvement Project aims to improve maternal and child health outcomes by piloting an innovative approach to performance-based financing. Primary health care (PHC) facilities receive incentives based on their performance in meeting certain pre-agreed maternal and child health targets, involving verification of the facilities’ performance before any payments are given. This new financial mechanism is successfully pre-piloted in 17 PHC facilities in Spitamen district of Tajikistan since April 2014. The results include increased number of postnatal care visits, fully vaccinated children, and contraceptive use in Spitamen district.  In addition, incentive payments as reimbursement to quantity and quality of provided services to the 17 PHC facilities in the pilot district increased from US$5,534 in August 2014 to US$19,315 in December 2014. The project also supported a six-months Family Medicine Training Program for 35 doctors and 72 nurses in Sughd and Khatlon regions, with additional 24 doctors and 90 nurses currently enrolled.  Moreover, 520 PHC providers, managers and administrative personnel have been trained on performance-based financing principles.

Credit Information Bureau in Tajikistan 

The World Bank Group (WBG) focuses on strengthening financial market infrastructure in Tajikistan by developing effective credit information sharing. As part of this objective the WBG supported the establishment of the first Credit Information Bureau in Tajikistan (CIBT). The CIBT collects all payment data on the previous loans, information about the courts decisions if any, and bankruptcy, in order to draw up a detailed report on the payment discipline of the borrower, which allows speeding up the procedure of verifying the borrower’s paying capacity and accelerates loan issue in case of a positive credit history. In its first year of operations from 2013, the bureau database surpassed 800,000 records on 500,000 individual and legal entities representing 90 percent of the country’s active credit clients. Largely due to the presence of a well-functioning, modern credit bureau built on the international best principles, Tajikistan’s rating in the Getting Credit section of the World Bank’s Doing Business Report went from zero before 2014, to four, in 2014 year’s edition and additionally to 6 in 2015 edition, which brought Tajikistan to the top ten leaders.

National Testing Center

The National Testing Center (NTC) was founded by the Government of Tajikistan in 2008 as a first step in establishing a national education assessment system, with the goal of contributing to improved access and quality of education in the country. The World Bank supported the implementation of this important reform through the Russia Education Aid for Development Project and the Education Modernization Project. The Open Society Foundation assisted with capacity building of the national experts and the NTC staff in the assessment area. After stages of design, evaluation and pilots in 2012 and 2013, the NTC launched the Unified University Entrance Examinations in December 2013, and in May 2014 it was administered nation-wide for the first time, including the allocation of university places.  More than 52,500 applicants were registered for the exams (including 17,500 females), 30 percent more than in the previous year, by all higher education institutions in the country.  Around 46,000 registered applicants took the exam and around 30,000 have passed the minimum score needed to participate in the competition. In addition to the university admission test, the NTC is expected to administer other types of large scale national and international student learning assessments to provide key information to policy makers and citizens on what children are learning in school, and to help identify areas for improvement.


LENDING

Tajikistan: Commitments by Fiscal Year (in millions of dollars)*

*Amounts include IBRD and IDA commitments