Tajikistan - Economic development



Soviet development policy in Tajikistan prioritized the development of the country's agricultural and other primary resources, while capital goods and manufactured consumer goods were imported from elsewhere within the former USSR. Since the late 1970s, greater development of small food processing and consumer plants had been urged by local government officials in order to absorb more of the republic's rural labor force; however, these proposals found little favor with Soviet central planners. After independence, the government targeted the development of hydroelectric power production and a number of other industries (silk, fertilizer, fruit and vegetables, coal, nonferrous metals, and marble production), seen as particularly important for improving the country's export base.

In 1991, a "Program of Economic Stabilization and Transition to a Market Economy" was adopted by the newly independent government. In accordance with the program's principles, price liberalization, privatization measures, and fiscal reform were initiated in 1991 and 1992. The government's overthrow in the course of civil war in 1992, however, brought economic development to a virtual standstill and slowed the pace of economic reform. Renewed efforts during 1996–97, as the civil war was brought to a formal end, to move from a state-directed economy to a market-oriented one resulted in proposals to convert medium and large state enterprises to joint-stock companies and to create a securities market. Other proposals were aimed at turning land over to private farmers and at privatizing the cotton industry, which continues to dominate agricultural production. In 1997, the private sector accounted for less than 30% of GDP. That percent had risen to about 40% in 2001, about half in the formal economy and half in the informal, family-run economy. In 2000 18 cotton ginneries were auctioned off, bringing about $9 million dollars. Local silk operations have also been privatized. The majority of enterprises have been bought by insiders rather than outside investors. Despite the return of real growth in 1997, the Russian financial crisis brought financial problems—inflation and external debt—to the top of the agenda ahead of market-oriented restructuring. As of early 2003, in fact, the IMF was advising against privatizing either the Tadaz aluminum plant or the country's hydroelectric facilities. In agriculture, the government remained undecided between allowing privatization and maintaining the large-scale, industrialized cotton operations that showed a 35% increase in productivity in 2001 over a drought-depressed 2000. Private farmers, however, show promise of leading the way to greater diversification in agriculture, expanding into higher value-added fruits and vegetables. However, a lack of credit facilities and distrust of the privatization process hampers movements towards diversification.

In pursuit of financial stability, on 24 June 1998 the government entered into a three-year arrangement under the IMF's PRGF (Poverty Reduction and Growth Facility) to run from 1998 to 2001. However, the IMF staff was unable to complete the third and fourth reviews of the third year of the program because of slow progress in improving the operations of the treasury and tax administrations, problems with the lack of transparency, and problems with the lack of independence of the Tajik Central Bank. However, in January 2002, a more successful structural reform program was implemented, including the creation of a new Ministry of State Revenues and Duties that has improved tax and customs collections. As the IMF program concluded in June 2002, the Tajikistan parliament adopted a three-year National Poverty Reduction Strategy (NPRS). The objectives of NPRS are to increase real income, achieve a fair distribution of growth benefits, and ensure a rise in living standards among the poorest groups. On 11 December 2002, the IMF Executive Board approved a second three-year program under the PRGF that will run in tandem with the Tajikistan's NPRS. IMF's approval of the government's debt and financial management is prerequisite to its ability to obtain the external finance it needs to develop its productive potential.

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