Overview

  • Country Context

    TAJIKISTAN

    2018

    Population, million

    8.8

    GDP, current US$ billion

    7.2

    GDP per capita, current US$

    801

    Life Expectancy at Birth, years (2015)

    71.1

    Tajikistan has achieved rapid poverty reduction over the past two decades, mainly due to a favorable external environment. Poverty fell from over 83% to about 47% between 2000 and early 2009, and from 37% to 31% between 2012 and 2016.

    In contrast to the decline in monetary poverty, Tajikistan has done less well in improving the quality and accessibility of public goods and services. The country’s multidimensional poverty index indicates that non-monetary deprivations in the country are widespread. Many residents are not satisfied with the quality of key public services, such as electricity, water, heating, and roads. Only three out of four persons have access to an improved water source—essential for maintaining good health. Market accessibility mapping highlights the lack of infrastructure integration outside the largest cities.

    The National Development Strategy 2016–30 envisions improving the living standards of the population in four main areas: (i) achieving energy security; (ii) improving transport and communication connectivity; (iii) improving food security and the population’s access to good quality nutrition; and (iv) expanding productive employment.

    To achieve higher growth, Tajikistan needs to implement a deeper structural reform agenda that is designed to: (a) reduce the role of the state and enlarge that of the private sector in the economy through a more favorable business climate, thus increasing private investment and generating more productive jobs; (b) modernize and improve the efficiency and social inclusiveness of basic public services; and (c) 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 (FDI), have discouraged private investment and limited overall investment. Averaging about 15% of GDP annually since 2008, total investment is low by regional and international standards.

    The main obstacles cited by local and foreign entrepreneurs are inadequate infrastructure, in particular, an insufficient and unreliable energy supply; weak rule of law (especially with regard to property rights); and an overly burdensome tax policy and administration. Greater private investment and new business development are crucial prerequisites to increased job creation.

  • Strategy

    World Bank Portfolio in Tajikistan
    Number of projects16
    IDA grants and creditUS$560 million

    About the World Bank Group in Tajikistan

    Tajikistan joined the World Bank in 1993 and the International Development Association (IDA) in 1994. During this time, the World Bank invested over $1.4 billion to support Tajikistan’s efforts to reduce poverty and improve people’s lives.

    Over twenty-five years, the partnership with Tajikistan has evolved in line with changes in local needs and the global economy. Initially, the World Bank focused on post-conflict reconstruction projects in the late 1990s and provided emergency funding in response to food insecurity and natural disasters.

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    Starting in 2000, investments have aimed to restore productivity-led growth and job creation through improved education, better access to healthcare and safe drinking water, enhanced land rights, diversification of agriculture in rural areas, and an improved business environment.

    Following the 2008 and 2014 economic shocks, which impacted Tajikistan through reduced remittances and lower export commodity prices, Bank support aimed at protecting the poorest households and creating income generation opportunities in rural regions.

    Subsequent strategies focused on supporting second generation reforms in agriculture, energy, health, and education, to increase acess to and quality of services for the population. At the same time, the World Bank Group worked closely with the government of Tajikistan, the private sector, civil society and development partners to improve the business environment, promote private investments for better job creation and create sources of sustainable economic growth.

    The current World Bank Group Country Partnership Strategy aims to support Tajikistan’s transition to a new growth model led by investment and exports. The active World Bank portfolio in Tajikistan includes 16 projects (including regional projects) with a net commitment of $560 million. The largest share of the portfolio is in the energy sector (44%), followed by water (16%) and urban and rural development (12%). Other sectors supported by the Bank Group include transport, governance, agriculture, health, education, and social protection.

    Tajikistan and the World Bank Group are currently consulting on strategic priorities to be addressed jointly under the new Country Partnership Framework for 2019–23. This new strategy aims to support the country’s efforts to transform the economy along the “industrial-innovative scenario” spelled out in Tajikistan’s National Development Strategy to 2030.

    Tajikistan became a member of the International Finance Corporation (IFC) in 1994. The IFC, a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector in developing countries. Since 1997, the IFC has invested $152 million to support 40 private sector projects in the financial, hydropower, retail, tourism, and manufacturing sectors.

    The IFC’s Advisory activities focus on improving the business environment, promoting private sector development, strengthening the financial sector, supporting the improvement of corporate governance practices, promoting electronic and digital financial services, supporting agribusiness, and enabling private sector involvement in infrastructure. The IFC’s investment portfolio in Tajikistan stands at $32 million. The current portfolio comprises 45% in the financial market and 37% in telecommunications, while the rest is distributed among food, retail and agribusiness. 

    Tajikistan’s portfolio is complemented by Trust Fund grants to the amount of $356 million. These grants cover important sectors including education, energy, agriculture, food security and social sectors. Some of the World Bank Group’s technical assistance in Tajikistan is financed directly by the country’s various bilateral and multilateral development partners.

    As an institution of global expertise in development, the World Bank Group invests heavily in research to understand country development experience and shares this cross-country knowledge through analytical and advisory services. In Tajikistan, over 100 publications have been produced on economic and other sector issues since 2000. In addition, advisory services have brought international experience to Tajikistan on private sector development, health, education, energy, agriculture, investment strategies, and climate change.

    Tajikistan became a member of the Multilateral Investment Guarantee Agency (MIGA) in 2002. MIGA has not, so far, provided any political risk guarantees for investment projects in Tajikistan.

  • Economy

    Recent Economic Developments

    Tajikistan’s GDP growth accelerated to 7.2% in the first half of 2018, up from 6% a year earlier. Growth was mainly supported by increased public investment in infrastructure projects. On the supply side, the construction of the Rogun Hydropower Plant (HPP), together with a strong performance from both industry and agriculture, bolstered overall economic activity. However, the services sector shrank as remittance inflows eased and constrained private consumption.

    The fiscal deficit remained relatively large at 4% of GDP in the first half of 2018. Capital spending on the Rogun HPP, largely financed by the remaining balance of the Eurobond issued in 2017, continued to drive the Government’s expansionary fiscal policy.

    The foreign exchange market remains highly regulated by the Central Bank, which constrains access to hard currency, indirectly limits imports, and stimulates the informal market. In the context of growing pressures and an increasing spread between the official and black market rates, in mid-July, the Central Bank made a one-off adjustment by devaluing the somoni by 2.6% against the U.S. dollar.

    The financial sector continued to show signs of improvement as business activity picked up. The nonperforming loans ratio declined to 28.4% in June 2018 (from 35.8% at end-2017).

    Economic Outlook

    Tajikistan’s outlook remains positive, building on Russian economic growth, the upward trend of global prices for major export commodities, and further dynamism in the region, specifically trade relations with Uzbekistan. Growth is projected to average 6% in the medium term, supported by strong private consumption, a gradual rehabilitation of the banking sector, and continued investment in public infrastructure projects.

    The poverty rate is projected to fall to 12.5% by 2020. The fiscal stance will gradually improve as the authorities seek to balance the country’s need to finance large infrastructure projects with a commitment to meet soaring debt service obligations within prudent macro-fiscal parameters. With this intention, the level of public debt is forecast to remain within the recently adopted fiscal rule on the debt ceiling; in addition, a new Eurobond issuance has been not ruled out under the baseline scenario.

    The medium-term outlook is subject to downside risks. As remittances recover, economic performance will become more dependent on exogenous factors. Given its narrow and concentrated export basket, any external headwinds will limit Tajikistan's already limited economic policy choices. Domestic risk factors include the ailing banking sector, the high contingent liabilities of state-owned enterprises, and rising debt pressures. To mitigate these risks, Tajikistan needs to embark on structural and institutional reforms that are vital to gaining investor confidence. To address the poverty reduction challenge, the authorities will need to foster a better business climate, promote job-creation policies, and increase the amount and coverage of the Targeted Social Assistance program.

  • ALL PROJECTS

    Highlighted Project

    Second Phase of the Central Asia Road Links Program – CARs-2 

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    The CARs-2 project improved safety conditions in sections where school children regularly cross the road. The installation of traffic lights, pedestrian walkways, and additional road signs have significantly improved road safety.
     

    Tajikistan is Central Asia’s least connected and most isolated country. Transportation by road is often the only option, given the country’s alpine topography and small rail network. The Second Phase of the Central Asia Road Links Program, or CARs-2, focuses on the rehabilitation of approximately 70 kilometers of cross-border roads in the Sughd oblast of Tajikistan, which connects the country’s road network with that of Uzbekistan and the Kyrgyz Republic and accounts for 40% of the country’s overall freight turnover. 

    The CARs-2 project is financed by the World Bank in the amount of US$45 million from IDA resources, consisting of US$38 million provided as a highly concessional credit and US$7 million as a grant. By financing the rehabilitation of critical road links, the project is expanding opportunities for trade and increasing the competitiveness of domestic products, leading to private sector growth and job creation. In addition, improvements in road infrastructure, including the installation of drainage dikes and flood protection systems as well as the construction of bridges, will help protect villages from frequently occurring natural disasters.

    Central Asia Road Links is a collaborative multi-phase program initiated by the governments of the Central Asian countries, with World Bank support. The program is helping to rebuild a regional network that links population centers and economic hubs across borders in the highly populated Ferghana Valley. More than 10 million residents of the Ferghana Valley and more than 3 million people in other areas of the Kyrgyz Republic and Tajikistan will benefit from improved connectivity and better market access across borders.


LENDING

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

*Amounts include IBRD and IDA commitments

MULTIMEDIA

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VIDEO Jun 27, 2018

Central Asia Regional Links

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Additional Resources

Country Office Contacts

Dushanbe, +992 48 701-5810
48 Ayni Street, Business Center "Sozidanie", 3rd floor, Dushanbe, Tajikistan
tajikistan@worldbank.org
Almaty, +7 727 377-8220
Central Asia Regional Office: 41A Kazybek bi Street, 4th Floor, 050010 Almaty, Kazakhstan