DUSHANBE, May 2, 2009, Asia-Plus – The International Monetary Fund (IMF) issued the Public Information Notice (PIN) following the 2009 Article IV consultation the IFM Executive Board concluded with Tajikistan on April 21.

In 2009, Tajikistan faces a negative external shock that is aggravated by domestic problems, according to the PIN.

Most of Tajikistan''s hard currency earnings come from aluminum and cotton exports as well as remittances and the IMF notes that with the global slowdown -- in particular in Russia -- remittances are projected to decline by 30 percent and exports are projected to contract by 7 percent in value terms.

This will require a large balance of payments adjustment, which will be accompanied by weaker demand.  On the supply side, ongoing electricity rationing and expected water shortages during the agricultural season are weighing on growth.  As such, real GDP growth is projected to decline to 2 percent at best.  Inflation should stabilize around 13 percent in 2009.

Tajikistan’s financial system remains vulnerable, despite improvements in some financial soundness indicators during 2008.  Some banks face severe funding problems due to large corporates drawing down their deposits, a drying up of trade credits and advances for remittances, and rising nonperforming loans.

Moreover, the economic slowdown is expected to deteriorate asset quality in 2009, and the somoni depreciation could further add to the stress in the banking sector.  In response, most banks have started to raise deposit rates and have constrained credit growth.  In addition, the National Bank of Tajikistan (NBT) has provided liquidity loans, mainly in the somoni.

The IMF Executive Directors stressed the need to push forward with agricultural sector reforms to remove rigidities and secure macroeconomic stability and growth as well as the need to enhance transparency and accountability in state-owned enterprises.

It is expected that the next Article IV consultation with Tajikistan will be held in accordance with the IMF Executive Board decision on the consultation cycle for members with Fund arrangements.