Tajikistan economic growth slowed to an estimated 4.2 percent in 2015 from 6.7 percent a year earlier, due to the spillover effect from the slowdown in Russia and the weak global demand and lower prices for key export commodities. The U.S. dollar value of remittances, about 80 percent of which originate from Russia, fell by 33 percent in 2015 compared to 2014, largely due to the sharp depreciation of the Russian ruble.

Tightening legislation on migration in the Russian Federation since January 2015 has also contributed to the decline of remittances. The slowdown in remittances affected domestic demand, which in turn depressed growth in services, the major contributor to economic growth in the past.

The slower growth in services was largely offset by an acceleration of growth in construction and industry as a result of the implementation of a number of projects, financed by private foreign and public investments

Growth is projected to significantly slow down in the medium term, with a very gradual recovery, putting Tajikistan's poverty reduction gains of the last decade at great risk.

As this trend in the economy is likely to persist in the medium term, it is even more important that Tajikistan implements sound macroeconomic policies and structural reforms that are necessary to create the foundation for more domestically generated inclusive growth, while investing in quality public services. The current situation should be seen as an opportunity to reform the economy and to adopt new engines of growth - private investment and export - to generate more and better-paying jobs in the country.

To date, Tajikistan has done a remarkable job in reducing poverty. During the period 1999 and early 2014, poverty fell from over 80 percent to about 31.3  percent. Tajikistan’s pace of poverty reduction over the past 15 years has been among the top 10 percent in the world.

However, the country has done less well in reducing non-monetary poverty. Recently available micro-data suggests 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 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 higher growth, Tajikistan needs to implement a deeper structural reform agenda designed to: (a) 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) 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, 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 an important 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$1.1 billion in IDA credits, grants, and Trust Funds, of which some US$831 million have already been disbursed.

The current World Bank Group Country Partnership Strategy (CPS) for Tajikistan for 2015-2018 supports the transition to a new growth model led by private sector investment and exports, and is 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.

The World Bank’s active portfolio in Tajikistan includes 24 projects (including regional projects and Trust Funds) with a net commitment of US$ 405 million.  The largest share of the portfolio is in water sector (21 percent),  followed by  social, urban, and rural development (15 present), energy (14 percent), transport (11 percent), governance (10 percent), education (8 percent), health (7 percent), environment and natural resources  (6 percent), agriculture (5 percent), trade and competitiveness (2 percent), and social protection and labor (1 percent).  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.

The 2013 Debt Sustainability Assessment (DSA) for Tajikistan reduced the risk of debt distress from high to moderate, and further from moderate to low risk of debt distress in the 2014 DSA. As of July 1, 2015 Tajikistan is in the “green light” category, moving from being eligible a mix of grants and credit from the International Development Association (IDA) to 100 percent credit from IDA. The current concessional IDA lending terms for Tajikistan includes no interest, repayment over 38 years and grace period of 6 years. There is service charge of 0.75 percent.

The change in financing terms reflects a progress in Tajikistan in economic development, poverty reduction as well as an improved quality of the World Bank country portfolio. Tajikistan moved from a low income to a lower middle income country in the World Bank’s country classification on July 1, 2015, which is based on countries’ gross national income (GNI) per capita. As a result of these changes in lending terms Tajikistan saw about 47 percent increase in IDA resource allocation with about US$68.3 million of extra IDA credits being made available to support country’s development priorities.

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$151 million, including $11.5 million mobilized from partners, to support 40 private sector projects in the financial sector, hydro power, retail, tourism and manufacturing sectors. As of June 30, 2015, IFC’s committed portfolio stood at US$67 million, which includes investments in telecommunications, financial markets, food, retail and agribusiness sectors.

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 highlights of our work include:

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.  So far, over 1.3 million contracts have been uploaded into the system to allow credit information on over 970,000 clients - individuals and SMEs; more than 800 users, including banks and microfinance institutions are active users of the CIBT system, with around 70,000 requests per month.

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 in 2014 to 6 in 2015 and to 7 in 2016, adding Tajikistan to reformers on getting credit indicator.

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.

Supporting Municipal Infrastructure

The World Bank financed Municipal Infrastructure Development Project assisted nine provincial towns in improving the access, reliability, and quality of basic municipal services. The project has achieved the following results i) 1,766 improved community water points, ii) 19,248 new piped household water connections, iii) 38,805 piped household water connections that have benefited from rehabilitation works, iv) 90% of the population in Farkhor and Vose have improved solid waste collection; and v) 3,737 people in Farkhor and Vose are benefitting from improved sanitation solutions.

A key pillar of success and measure of sustainability under the project is its Citizen Engagement program, which has led to proper operations and management of sanitation investments through the establishment and registration of Sanitation Zone Management Committees comprised of community members who also promote improved hygiene behavior and collect user fees.  Due to the introduction of a modern billing and collection system 100% of financial transactions of bills issued and collected are done automatically. In turn, it has contributed to transparency and financial viability of target water utilities in Kurgan-Tyube, Dangara, Kulyab, Farkhor, and Vose.

A total of 221,544 people have benefited and been covered by the original project and its AF with improved water sources out of which 53% are women.

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

*Amounts include IBRD and IDA commitments