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Annual Report 2001

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Tajikistan

Economic performance

Economic growth in Tajikistan was strong in 2001. Real GDP grew by 10.2%, while industry sector output, led by aluminum production, grew by 14.8%. Inflation rose to 38.5% in 2001, up by 6.0% from the previous year; the exchange rate remained stable, and gross international reserves increased to around 2.3 months of import cover. The fall in world market prices of cotton by about 35% in 2001 had serious consequences for the Tajik economy. Cotton and aluminum are the main foreign exchange earners. Cotton accounts for 80.0% of exports. The Government agreed with Russia to reduce the debt stock by $49.4 million. The size of the debt stock remains contentious because of disagreements over which exchange rate applies to value it. With external debt now around 120.0% of GDP, the Government plans to approach the Paris Club to discuss debt rescheduling. However, because of higher-than-expected GDP growth, fiscal revenue and tax collection were stronger than anticipated, easing the pressure on the budget. A primary surplus of 5–10 million somoni was recorded for 2001. The IMF did not conclude its third and fourth review of the Poverty Reduction and Growth Facility (PRGF) because of the need to meet specific structural reform targets and resolve issues related to external debt management. Privatizing and restructuring state-owned farms slowed, mainly because of the State Land Reform Committee’s limited constitutional capacity and the complexity of the reform process. In May 2001, the four largest commercial banks, accounting for 84.0% of bank assets, signed restructuring agreements with the National Bank of Tajikistan (NBT). To improve supervision further, a Problem Bank Unit was established within the Bank Supervision Department of NBT. Banks that failed to make satisfactory progress by 2001, as stipulated in their restructuring plans, will either have to merge with more successful ones or be closed.

ADB operations

Operational strategy: ADB’s operational strategy and program has been based on the interim operational strategy, endorsed by the Board of Directors in 1998. The objectives are to facilitate the country’s transition to a market economy, assist in postconflict rehabilitation and reconstruction, and support natural disaster rehabilitation. To maximize the development impact of ADB’s assistance, the strategy focuses on three priority areas: agriculture; infrastructure rehabilitation, especially roads and power; and the social sector. ADB plans to prepare a full country strategy and program following the conclusion of a partnership agreement on poverty reduction with the Government, which will be based on the national poverty reduction strategy.

Policy dialogue: ADB has held close policy dialogue with the Government in all areas of ADB operations. In 2001, ADB strengthened its ties with the Government with visits of ADB President Tadao Chino and the Board of Directors. Dialogue with the Government continued, particularly on the national poverty reduction strategy and ADB’s assessments on governance, private sector, and social sector. Cooperation with funding agencies has been favorably developed and has strengthened ADB presence in the country. ADB supports the Government in strengthening aid coordination through the technical assistance for Improving Aid Coordination and External Debt Management for the coming 3 years.

Loans and technical assistance: In 2001, ADB approved one loan for the emergency restoration of the Yavan water conveyance system for $3.60 million. Five technical assistance grants were approved totaling $2.12 million in 2001—three advisory assistance for the governance assessment-sound development management study, building a poverty monitoring mechanism, and support for facilitating sustainable project benefits. Two were project preparatory assistance for social sector development and road rehabilitation. ADB also approved a $2.9 million grant to help reduce rural poverty, financed by the Japan Fund for Poverty Reduction.

Project implementation: Since joining ADB in 1998, Tajikistan has received six loans, of which five were active at the end of 2001. Contract awards totaled $3.6 million, bringing the cumulative figure to $27.1 million. The contract award ratio was 5.8%, lower than the ADB-wide average of 14.8%. Disbursements during the year totaled $2.9 million, bringing cumulative disbursements to $25.1 million. The disbursement ratio was 3.7%, lower than the ADB-wide average of 20.5%.

ADB monitors portfolio performance through regular missions from headquarters. A liaison office, established in 1998, was strengthened in 2001 because of increased demand for operational assistance. Preparations for the second seminar on ADB operational policies and procedures and the first country portfolio review began in 2001.

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