Tajikistan: Strong Structural Reforms Needed to Accelerate Growth, Says the World Bank

April 18, 2014

Dushanbe, Tajikistan, April 18, 2014 – Despite economic growth of 7.4 percent in 2013, achieved mainly on the back of record high remittances, Tajikistan’s economy remains vulnerable to external shocks and is projected to decline in the medium term in the absence of strong structural reforms that would improve growth prospects, according to the latest Tajikistan Economic Report by the World Bank. 

Almost all sectors of the economy have contributed to GDP growth, according to the World Bank.  Supported by inflows of remittances, services remained the largest sector of the economy, contributing almost half of gross value-added, followed by agriculture with one-fifth.  The construction sector recovered to 17.2 percent and extractive industries demonstrated high output growth at 43.6 percent.  Inflation was reduced to a record low 3.7 percent principally due to lower international food prices that were transmitted to households through a stable exchange rate. 

At the same time, the economy remains vulnerable to external shocks.  Weaker external demand and lower prices for aluminum and cotton adversely affected export earnings.  Remittances, which reached a record high of US$4.1 billion in 2013, have largely benefited consumption, but the poor business environment, weak financial intermediation, and low confidence in the banking sector have prevented these inflows from being efficiently channeled into investments. 

“Given its vulnerability to external economic developments, it would be important for Tajikistan to accelerate domestic reforms aimed at improving the institutional environment for private sector-led growth and job creation. This is the essential foundation for Tajikistan to meet its ambitious growth and poverty reduction objectives,” said Marsha Olive, World Bank Country Manager for Tajikistan.

The World Bank’s Economic Report on Tajikistan concludes that the government needs to ignite a new engine of growth, based on private investment from both domestic and foreign sources.  Prudent macroeconomic management and structural reforms aimed at diversification would create better economic opportunities and reduce vulnerability to shocks. Investing in human and institutional capital would support productivity improvements and job creation, and the transition to a more sustainable growth model.

The active portfolio of the World Bank consists of 13 projects with a net commitment of US$222 million. The largest share of the portfolio is in agriculture and rural development (46 percent), followed by energy (16 percent), the public sector, governance and economic policy (10 percent), health and social protection (8 percent), education (8 percent), water (7 percent), and the private sector (5 percent).

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