Tajikistan's economy enjoyed about 8% growth annually over the past decade thanks to a favorable external environment and high prices for its main exports, but following the crisis it now faces challenges related to energy and to job creation. Read More »
Tajikistan’s economy performed strongly in the decade following the end of the civil war in 1997. Strong economic growth, which averaged nearly 8 percent per annum during 2000-2008, was made possible by a favorable external environment, with world prices for country’s main export items of cotton and aluminum soaring. Rapid growth in Russia and other trading partners have boosted the demand for Tajik labor, which resulted in growth of remittances and a subsequent increase in domestic consumption. Internally, the Government’s efforts in stabilizing the economy allowed for existing businesses and households to take advantage of emerging opportunities.
Similar to other economies in the region, the 2009 global economic crises adversely affected Tajikistan. The effect came through a sharp decrease in remittances and decline in exports of its main commodities. The combination of government’s tighter fiscal policy, currency depreciation, and increased support from the development partners helped mitigate the adverse impacts of the crises. As a consequence the GDP has bounced back to 6.5 percent in 2010 from a low of 3.9 percent in 2009.
Nevertheless, continued vulnerabilities to external market shocks, susceptibility to natural disasters, underexploited economic diversification potential, limited arable land, and landlocked location make Tajikistan one of the poorest countries in the Europe and Central Asia region, with a GNI per capita of US$800 in 2011.
Responsible for 64 percent of total employment and 21 percent of GDP, the agricultural sector in Tajikistan offers a solid foundation for economic development. The Government displays a strong commitment to the ongoing Agricultural Reform, although the pace of implementation must be accelerated to secure the productivity gains that Tajikistan needs to improve the agricultural growth rate.
Tajikistan is endowed with abundant water potential, explaining the dominance of hydropower generation in the energy sector. The Government’s energy sector strategy is to ensure a reliable supply to consumers, reduce losses, deal with severe winter energy shortages, achieve sustainable exports of surplus summer electricity, and pursue critical financial reforms.
Tajikistan is also faced with a young and rapidly growing population. Recent estimates show that 40 percent of the population in Tajikistan is under the age of 17, 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’s biggest challenge in the coming years will be lifting its low rates of private investment. According to latest estimates, the private investment has stagnated at around 5 percent of GDP. The Government’s strategy has made removing binding constraints to private sector development a key priority to foster economic growth, and several key achievements have been made to date. In addition, implementation of the Extractive Industries Transparency Initiative has also been high on the Government’s agenda, to capitalize on Tajikistan’s comparative advantage in mining. Yet, the development of the private sector and the appropriate legal framework for its growth remain a work in progress, and their successful realization is critical to help the Government achieve its ambitious growth targets.
This year, Tajikistan and the World Bank Group will be celebrating 20 years of partnership. Tajikistan joined the World Bank in 1993 and the International Development Association (IDA) in 1994. Since 1996, the World Bank has provided approximately US$843 million in IDA grants and trust funds to Tajikistan. Around 34 percent of these funds have been committed for agriculture and rural development sector. Other major sectors for IDA support since 1996 are economic policy and public sector (17 percent), energy (15 percent), water and urban development (15 percent), health and social protection (9 percent), and education (10 percent).
The World Bank Country Partnership Strategy (CPS) for 2010-2013 was endorsed by the Bank’s Board of Directors in May 2010. The CPS has a two-fold objective: i). reducing the negative impact of the crises on poverty and vulnerability; and ii). paving the way for post-crisis recovery and sustained growth. Investment projects and technical assistance under the CPS are aimed at assisting the Government in realization of its Poverty Reduction Strategy objectives, such as improvements to public administration and governance, enhancing the investment climate and private sector growth, as well as supporting human development.
In October 2012, the CPS marked the shift of focus from crisis mitigation to the reforms needed to meet government’s ambitious growth targets. The CPS was also extended until 2014, so as to coincide with Governments preparations of its second long term National Development Strategy for 2016-2025.
The World Bank in Tajikistan focuses its activities and investments based on following key principles – how will they contribute to the well-being of Tajik people, improve their quality of life, and lead to reduction of poverty at large. Some of the highlights include:
The project was implemented in five highly food-insecure districts of Khatlon, with a population of approximately 84,500 households and a total irrigated area of around 88,700 hectares. The public works program created 435,000 person-days of work and employed 10,590 poor rural people in the project districts. Approximately 11 percent of beneficiaries (1,157) were women. Given that 39 percent of the economically active members of rural households in the project districts were unemployed, the public works program responded directly to a major source of food insecurity with generated net income of 1,176 somonis (US$230 equivalent) per person. Approximately 84 percent of beneficiary households used this income to buy food and make preserves, and food purchases accounted for 43 percent of the total use of this additional income. Approximately 43,300 households benefited from the combined impact of income transfers and improved access to irrigation over 44,276 hectares.
The main objective of the project is to contribute to increased access to an improved learning environment and a more efficient delivery of quality education services. The majority of the activities supported under this project are building on the results of the two previous FTI grants. The project has supported the Regional Conference on per capita financing in education, successfully conducted trainings for district and school methodologists and principals, provided the targeted schools with supplementary reading materials, and completed design work for school construction using innovative technologies. Another noteworthy component of the project is the national introduction of the Education Management Information System (EMIS), which will be completed by December 2012. These grants have helped build and rehabilitate a total of 75 schools and published 1.6 million textbooks and study materials. Almost 4300 teachers and 1100 school principals have had training in various updated methods of teaching and management. Further activities are planned under the upcoming Global Partnership for Education grants.
International Development Association (IDA) and International Finance Corporation (IFC) helped to establish a vivid example of how a public-private partnership can effectively work to provide affordable, reliable, and clean energy in a challenging environment. Electricity supply in the poorest region of Tajikistan has increased from three hours to 22–24 hours per day during the winter. An estimated 220,000 people, including more than half of which are women, have benefitted from improved electricity services. As a result of the project, schools, hospitals, and businesses can now stay open during the cold winter months.