The Executive Board of the International Monetary Fund (IMF) has completed its fourth review of Tajikistan’s economic performance under a program supported by the Extended Credit Facility (ECF) arrangement ¹. The decision enables the authorities to draw an additional amount equivalent to SDR 13.045 million (US$20.9 million), bringing total disbursements under the arrangement to an amount equivalent to SDR 78.31 million (US$125.3 million).

The three-year SDR 104.4 million (about US$167.1 million) ECF arrangement with Tajikistan was originally approved by the IMF’s Executive Board on April 21, 2009 and subsequently augmented on June 7, 2010 (see Press Releases No. 09/136 and No. 10/230.

In completing the review the Executive Board approved the authorities’ request for waiver of nonobservance of the performance criterion on the non-accumulation of external payment arrears and modification of end-June 2011 and end-December 2011 performance criteria.

The Executive Board also concluded the 2011 Article IV consultation with the Republic of Tajikistan. Under Article IV of its Articles of Agreement, the IMF has a mandate to exercise surveillance over the economic, financial, and exchange rate policies of its members in order to ensure the effective operation of the international monetary system.

Following the Executive Board discussion, Mr. Shinohara, Deputy Managing Director and Acting Chair, issued the following statement:

“Helped by recovery in remittances and a strong policy response, Tajikistan is emerging from the global crisis, with real GDP growth rising to 6.5 percent in 2010, up from 3.9 percent in 2009. The external accounts have strengthened, but the improvement is expected to be temporary. In this context, the Tajik authorities have requested the completion of the fourth review under the Extended Credit Facility.

“The authorities’ 2011 program aims to further reduce poverty and raise growth. The program seeks to safeguard macroeconomic stability by containing the overall fiscal deficit and reserve money growth, while maintaining a flexible exchange rate regime. The overall fiscal deficit target for 2011 (at 1 percent of GDP) is appropriate, given pressing social and infrastructure needs. However, over the medium term, a return to fiscal balance or, preferably, small surpluses (excluding the foreign-financed PIP) will be necessary to preserve fiscal and debt sustainability.

“Despite improvement in financial sector indicators, banks remain vulnerable to shocks. The authorities are prepared to address problems in this sector by strengthening banking supervision and regulation, refraining from directed lending, and subjecting state enterprises to hard budget constraints. Creating sustainable mechanisms for agricultural finance will also be key.

“The authorities have made progress in enhancing the governance of the central bank, and should continue to press forward with their reform strategy. Progress has also been made towards increasing transparency of state enterprises. A review of the tax regime is expected to contribute to improving the business environment. The Fund believes that the policy package put in place by the authorities is appropriate to support recovery,” Mr. Shinohara said.

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¹ The Extended Credit Facility (ECF) has replaced the Poverty Reduction and Growth Facility (PRGF) as the Fund’s main tool for medium-term financial support to low-income countries by providing a higher level of access to financing, more concessional terms, enhanced flexibility in program design features, and more focused streamlined conditionality. Financing under the ECF carries a zero interest rate, with a grace period of 5½ years, and a final maturity of 10 years (http://www.imf.org/external/np/exr/facts/ecf.htm). The Fund reviews the level of interest rates for all concessional facilities every two years.