Challenge

Tajikistan faces ongoing structural bottlenecks that make it hard for the private sector to grow and create well-paying jobs. The country’s economy is held back by a weak private sector and inadequate capacity of public institutions, limiting the development of productive human capital. Job creation is low, even though the population is growing quickly. Most private investment goes into the capital-intensive mining sector, and Tajikistan has not been able to attract efficiency-seeking foreign direct investment (FDI).

As a result, this has led to low structural transformation, as labor has not moved from low-productivity farming to better paying jobs in manufacturing and services. Because there are not enough jobs domestically, a quarter of the labor force leaves Tajikistan to work abroad. Money sent home by these workers (i.e., remittances) reached close to 50 percent of the country’s GDP on average from 2022 to 2025. Such large dependency on remittances also makes Tajikistan’s economy vulnerable to problems in countries where its workers go.

Solution

The ongoing DPO series is aligned with the overall engagement of the World Bank Group (WBG) with the Government of Tajikistan, as laid out in the current Country Partnership Framework (CPF).

In the context of the DPO series, the World Bank and International Financial Corporation (IFC) jointly support the government to boost competition and improve governance in the telecommunications and digital sector, facilitate air transport connectivity, strengthen the legal framework for foreign investment, support greater transparency of subsidies to private investors, improve transparency in the allocation of funds within the energy sector, and enable a conducive environment for private investment in renewable energy. All of these are foundational reforms in the economy that are expected to improve the opportunities for private investors and are aligned with the WBG’s approach for Maximizing Finance for Development (MFD), leading to a more prosperous and sustainable economy.

Result

Key results achieved to date:

• In the telecommunications sector, the reforms strengthened the legal framework governing competition in access to international gateways. Since 2025, when the implementation of the DPO program started, the cost of mobile internet has declined by about 8 percent as measured by an average cost of 1GB of mobile data priced in US dollars.
• In civil aviation, the reforms focused on removing competitive obstacles. The new Open Skies policy has improved air connectivity of Tajikistan with a 36 percent increase in the frequency of international flights (Q4-2025 data compared to Q4-2024; excluding destinations to and from Russia), including an expansion of the number of connections (by Turkish Airways, flydubai, and China Southern Airlines) and the entry of new air carriers (Pegasus Airlines and Centrum Air).
• The DPO also supports greater transparency of government subsidies to private investors and state-owned enterprises to reduce market distortions and fortify the competition framework. As part of these reforms, the authorities already implemented a 20 percent cut in tax expenditures in 2024–25 and are undertaking a further 10 percent cut this year, resulting in higher tax revenues. Meanwhile, the competitive legal framework is also being revamped to allow the antimonopoly authority to perform its duties better.
• Improvements in the allocation of funds within the power sector aim to bolster governance and transparency, reduce the power sector’s deficit, and create a conducive environment for private sector investment in renewable energy. The new cash distribution mechanism supports incentives to reduce technical and commercial losses in transmission and distribution of electricity, and together with the tariff increases, will improve the sector companies’ ability to service their debts. As a result of joint efforts from this DPO as well as a Power Utility Financial Recovery Program for Results, technical and commercial losses in transmission and distribution of electricity are already on a downward path from 3.3 percent and 19.2 percent, respectively, in 2024 to 3.1 percent and 15.6 percent in 2025, while new renewable energy capacity is being developed (with two photovoltaic solar power plants for 500 megawatts to be launched in 2026) with the private sector participation.

World Bank Group Contribution

The reform package supported by the DPO program is estimated to increase Tajikistan’s GDP cumulatively by above 2.4 percent by 2030 and contribute to the creation of over 92,000 more and better-paid jobs over the same period. The economic reforms supported by the DPO series will contribute to the recently announced WBG Targets of improving digital connectivity, upscaling green energy provision, ensuring gender equality in decision making, and social projection. MFD-enabling reforms, supported by the DPO series, will also help with levelling the playing field for private sector development, better protecting efficiency-seeking FDI, and ultimately creating more and better-paid jobs in Tajikistan. Reforms in the renewable energy space will act as private capital enablers bringing more and greener FDI into the economy going forward.

Lessons Learned

One important lesson from the ongoing DPO engagement is that investing in capacity building programs to strengthen institutional capabilities of various government agencies responsible for the timely achieving results is very crucial. This helps ensure that the government has the necessary skills and resources to implement and sustain reforms. Another good lesson is that regular monitoring and evaluation of progress and impact of DPO-supported reforms are essential for identifying challenges, making necessary adjustments, and ensuring accountability.

Moving Forward

The World Bank Group remains engaged in the reform areas supported by the DPO series. The second DPO in the series is scheduled for delivery in 2026, further advancing reforms in these areas. After the scheduled delivery of these two DPOs, the Government of Tajikistan and WBG will explore new areas for a new programmatic DPO series under the new CPF.