tajikistan...tajikistan this country profile is a reference work, analysing the country's...

Country Profile 2004

TajikistanThis Country Profile is a reference work, analysing thecountry's history, politics, infrastructure and economy. It isrevised and updated annually. The Economist IntelligenceUnit's Country Reports analyse current trends and provide atwo-year forecast.

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Tajikistan 1

© The Economist Intelligence Unit Limited 2004 www.eiu.com Country Profile 2004

Contents

Tajikistan

3 Basic data

4 Politics4 Political background4 Recent political developments7 Constitution, institutions and administration8 Political forces11 International relations and defence

13 Resources and infrastructure13 Population14 Education15 Health16 Natural resources and the environment16 Transport, communications and the Internet18 Energy provision

20 The economy20 Economic structure21 Economic policy24 Economic performance25 Regional trends

26 Economic sectors26 Agriculture27 Mining and semi-processing28 Manufacturing29 Construction29 Financial services30 Other services

31 The external sector31 Trade in goods32 Invisibles and the current account33 Capital flows and foreign debt33 Foreign reserves and the exchange rate

35 Regional overview35 Membership of organisations

39 Appendices39 Sources of information40 Reference tables40 Population41 Employment by sector41 Government finances42 Money supply

2 Tajikistan


42 Interest rates42 Gross domestic product43 Nominal gross domestic product by expenditure43 Gross domestic product by origin44 Prices and earnings44 Agricultural production44 Yields of major crops44 Livestock numbers45 Industrial production by sector45 Main exports45 Main imports45 Main trading partners46 Balance of payments47 External debt, World Bank series47 Exchange rate

Tajikistan 3


Tajikistan

Basic data

143,100 sq km

6.38m (2002)

Population in 000 (2002)

Dushanbe (capital) 562Khujand 149Kulob 78Qurghonteppa 60Istaravshon (formerly Uroteppa) 51Khorog 28

Continental high mountain

Tajik, a variant of Persian, is the official language and the one most widelyused. Russian is also used, especially in urban areas, and Uzbek is the mainlanguage for about 25% of the population. The majority of people in themountainous Badakhshan province speak distant variants of Tajik, which couldbe categorised as separate languages. Other languages, such as Kyrgyz, Tatar,Turkmen, Uighur and Korean are also spoken by their respective minoritygroups

Metric system

The Tajik rouble, introduced in May 1995, was replaced in October 2000 by thesomoni (S), at a rate of S1:TR1,000. The average exchange rate in 2003 wasS3.06:US$1. The market exchange rate at end-June 2004 was S2.98:US$1.

5 hours ahead of GMT

Calendar year

January 1st (New Year s Day); February 23rd (Army Day); March 8th(International Women s Day); May 1st (International Labour Day); May 9th(Victory Day); September 9th (Independence Day)

Total area

Population

Main towns

Climate

Languages

Weights and measures

Currency

Time

Fiscal year

Holidays

4 Tajikistan


Politics

Tajikistan is a presidential republic, with a bicameral legislature, made up of aCouncil of Representatives (lower house) and a National Council (upperhouse). The People s Democratic Party (PDP), led by the president, ImomaliRahmonov, won 65% of the vote in the 2000 parliamentary election, andcontrols both houses. Opposition parties including the Islamic RenaissanceParty (IRP), which was formerly part of the United Tajik Opposition (UTO), andthe Democratic Party together won just over 10% of the vote. Under the 1997peace agreement between the government and the mainly Islamist UTO, theopposition has the right to 30% of the seats in the government.

Political background

Modern Tajikistan is the result of the Soviet division of Central Asia in the1920s. Before that most of what is now Tajikistan (excluding the northern Soghdprovince) was part of the feudal Bukharan Emirate, which by the late 19thcentury had become a Russian Tsarist protectorate. In 1924 Tajikistan became anautonomous region subordinate to Uzbekistan, itself a Soviet creation. In 1929Tajikistan gained the status of a full Soviet Socialist Republic and was grantedthe additional territory of Leninabad (now Soghd), which was detached fromUzbekistan ostensibly to provide the Tajik economy with an industrial base.

As elsewhere in the Soviet Union, the policies of perestroika (restructuring) andglasnost (openness) introduced in the late 1980s by the Soviet leader, MikhailGorbachev, opened the way for anti-communist and nationalist movements inTajikistan. During riots in February 1990 general discontent turned into anger atrumours that Armenian refugees from the conflict with Azerbaijan overNagorny Karabakh were to be resettled in the Tajik capital, Dushanbe. AsRussia led the way in dissolving the Soviet Union in 1991, independence forTajikistan (and the other Central Asian republics) arrived more as a faitaccompli than by revolution.

Recent political developments

In 1992 civil war broke out in Tajikistan between opposing regional andideological groups. One side in the conflict was made up of the followers of theCommunist Party, the majority of whom were from the northern Leninabadand southern Kulob regions. The other consisted of a nationalist coalition ofIslamists and secular politicians, with large followings in the southern andeastern regions. Mass demonstrations in early 1992 had forced the Communistpresident, Rahmon Nabiyev, to resign, paving the way for the formation of agovernment coalition that included representatives of both Islamist and seculardemocratic groupings. However, the situation soon spun out of control asarmed supporters of Mr Nabiyev forced the coalition out of office and installeda neo-communist administration, from which Mr Rahmonov emerged as

Regional and ideological splitsbring civil war in the 1990s

Modern Tajikistan reflectsSoviet-era political cartography

Gorbachev's policies lead torise of nationalist movements

Tajikistan 5


parliamentary chairman and, following a controversial election in 1994, aspresident. Mr Rahmonov has remained in power ever since.

The 1992-97 civil war, which took between an estimated 50,000 and 100,000lives and forced close to 1m people to flee their homes, was one of the mostviolent internal conflicts among the post-Soviet republics, and resulted inTajikistan s northern political group (the Leninabadis), which provided most ofthe country s Soviet-era rulers, transferring power to its allies from the poorersouth (the Kulobis). Reprisal attacks against the supporters of the oppositiondevastated rural areas in the Qurghonteppa region. Hundreds of thousands ofpeople whose ethnicity was associated with the opposition became internallydisplaced people and refugees, and as many as 70,000 fled to northernAfghanistan, where the UTO coalesced into an effective guerrilla force. Assporadic fighting continued, the Tajik government relied on support fromRussian border guards stationed in Tajikistan as holdovers from the SovietUnion s military activity in the region to prevent incursions. By 1996, however,the UTO s forces had captured the valleys in the east of Tajikistan, where itspopular support was strongest.

An increased sense of realism, together with greater pressure from internationalmediators, mainly the UN, Russia and Iran, eventually led to the conclusion of apeace deal in Moscow between the government and the UTO on June 27th 1997.That accord provided for a coalition government involving the IRP and otheropposition parties, the return of all refugees, the demobilisation of guerrillagroups and the holding of national elections. Although disagreements andsporadic political violence have continued, nearly all of the conditions set by thepeace accord have been met, including the appointment of a significant numberof former opposition figures to government posts, the legalisation of oppositionpolitical parties, and the holding of presidential and parliamentary elections.

In 1999 and 2000 Tajikistan s neighbours were destabilised by periodicinsurgencies by forces sympathetic to the Islamic Movement of Uzbekistan(IMU), which aimed to oust Uzbekistan s president, Islam Karimov, from power.The IMU was believed to have had bases in Tajikistan, as well as in northernAfghanistan. The Tajik government repeatedly denied that the IMU rebels werebased on Tajik territory, but the incursions nevertheless demonstratedMr Rahmonov s less than complete control over outlying areas of the country.That said, the routing of the Taliban in Afghanistan in early 2002, which alsoreportedly resulted in the death of the IMU s military leader, Juma Namangani,has reduced the risk of instability on Tajikistan s southern border, and theweakening of the IMU has lessened the threat of incursions by the group intoTajik territory. Nevertheless, there is speculation that the IMU is regroupingunder its political leader, Tohir Yuldoshev, and that it has forged an alliancewith other Islamic extremist groups, based along the border between Pakistanand Afghanistan.

Political stability in Tajikistan has improved notably in recent years. Thegovernment has proved able to maintain the peace, has introduced limitedsteps towards greater political openness, and has pursued a number of formerUTO commanders turned warlords who had opposed the 1997 peace accord.

Civil war officially ends withthe 1997 Moscow peace accord

The risk of violence has to alarge extent subsided

Risk of instability on southernborders is reduced

6 Tajikistan


Disaffected opposition groups no longer control the country s outlying regions,and the new armed forces comprising former neo-communist soldiers andUTO guerrillas have succeeded in neutralising any remaining armedopposition. As a result, acts of violence in the form of armed insurrections,hostage-taking, and assassinations of political figures and ethnic and religiousminorities have become far less of a concern than in the past. Nevertheless,widespread poverty and the risk of turmoil spilling over from neighbouringAfghanistan or Uzbekistan remain threats to political stability in Tajikistan.

The improvements in Tajikistan s security situation have been accompanied bya steady consolidation of political power and decision-making in thepresidency, thereby weakening the limited pluralism enshrined in the 1997peace agreement. Following a controversial referendum on constitutionalchanges in June 2003, Mr Rahmonov secured the right to stand for re-electionwhen his second term in office expires in 2006. He has also begun to dismiss orsideline those figures within the political hierarchy who could be perceived asthreats to his rule, while co-opting some potential opponents through politicalappointments. With the 2005 parliamentary election likely to provide anoverwhelming victory for the president s PDP and its allies, Mr Rahmonov s re-election in 2006 seems all but assured.

Important recent events

June 1997

A peace accord is signed in Moscow between the government and the United TajikOpposition (UTO).

November 1998

Colonel Mahmud Khudoiberdiyev and 1,000 armed men invade northern Tajikistanfrom Uzbekistan. The uprising is crushed by government and UTO forces.

September 1999

A referendum approves a series of constitutional changes to allow a seven-yearpresidential term, legalise political parties based on religion and establish abicameral parliament.

November 1999

Imomali Rahmonov is re-elected as president. The UN, the Organisation for Securityand Co-operation in Europe (OSCE) and Human Rights Watch accuse thegovernment of vote-rigging, manipulation of the media, intimidation of opponentsand illegal disqualification of several political parties.

February-March 2000

The pro-government People s Democratic Party (PDP) takes the majority of seats inan election to a new, bicameral parliament. The main opposition parties the IslamicRenaissance Party (IRP) and the Democratic Party attract far fewer votes thanoriginally expected.

July-September 2001

In July, government forces clash with followers of the former UTO fighter RahmonSanginov, leaving some 60 people dead. Mr Rahmonov s special adviser on

Mr Rahmonov is consolidatingpower in the presidency

Tajikistan 7


international and political affairs, Karim Yuldashev, is assassinated, as is the cultureminister, Abdurahim Rahimov.

November 2001

The Tajik government agrees to allow a limited contingent of US and French troopsto use its territory to support the US-led military operations in Afghanistan.

January 2002

The leadership of the state border committee is dismissed on charges of financialcorruption.

May 2003

A deputy chairman of the IRP, Shamsiddin Shamsiddinov, is arrested on variouscriminal charges, including treason. The IRP describes the arrest as politicallymotivated and aimed at discrediting the party. In early 2004 Mr Shamsiddinovreceives a 16-year prison sentence.

June 2003

The government sponsors a controversial plebiscite in which, amid significantelectoral irregularities, the people vote by a wide margin to approve a package ofconstitutional amendments. These include one that allows the president to stand forelection for two further seven-year terms.

January 2004

Mr Rahmonov dismisses Ghaffor Mirzoyev as head of the presidential guard. Thereasons for his dismissal are unclear, but he is known to have long-standing and closelinks with Mahmadsaid Ubaidulloyev, the powerful mayor of Dushanbe and speakerof the upper house of parliament, whom many believe has presidential aspirations.

May 2004

Three opposition parties announce the formation of a coalition to monitor theconduct of the 2005 parliamentary election, but they decide to put forward separatecandidates and political programmes.

June 2004

Russia and Tajikistan sign a new military agreement that envisages the establishmentof a permanent Russian military base in Tajikistan and the gradual handover to Tajikofficers of the border guard service, in conjunction with significant Russianinvestment in the Tajik economy.

Constitution, institutions and administration

Following a nationwide referendum, a new constitution came into effect onNovember 6th 1994, replacing the previous constitution dating from 1978. Itmade Tajik the state language and Russian a language of inter-ethniccommunication in effect a second state language. It also included an extensivesection on human rights, individual liberties and legal due process, althoughprogress in implementing these provisions has been mixed. A nationalreferendum in September 1999 approved a series of constitutionalamendments, the most significant of which were the extension of thepresidential term from five to seven years, the introduction of a bicameralparliamentary system, and the legalisation of political parties based onreligion. This permitted the IRP, which was the core political body in the UTO,

The constitution was amendedin 1999 and again in 2003

8 Tajikistan


to participate in presidential and parliamentary elections. The constitution wasyet again amended in June 2003 following a controversial plebiscite thatapproved more than 50 amendments. These included amendments thatremoved a constitutional right to free healthcare and tertiary education for all,as well as allowing the president to stand for election for two further seven-year terms. On the basis of these changes, Mr Rahmonov could now remainin office until 2020.

The provisions of the 1997 peace agreement in theory afforded more power tothe opposition via the allocation of 30% of the seats in government. However,the extent to which the opposition has actually benefited is debatable, as inpractice the opposition occupies few influential positions within theadministration. Political power remains concentrated in the presidency, andgovernment and parliament to a large extent act as the executors ofMr Rahmonov s decisions. Moreover, Mr Rahmonov has retained wide powersof patronage, enabling him to control government and other politicalappointments, and contributing to the prevalence of corruption and cronyism.This is particularly widespread within the judiciary, whose independence isfurther undermined by political pressure. Traditional regional and clan rivalriesremain a regular feature of Tajikistan s political scene.

Political forces

The 1997 peace accord ended the state of civil war that from 1992 had pittedcommunist supporters against the UTO, a coalition of Islamists and democraticsecularists. Thanks to major compromises made by both the UTO chairman,Sayed Abdullo Nuri, and Mr Rahmonov, a peace accord was signed, whichforced an alliance between the Kulobi-dominated government and the Gharmi-dominated opposition. Although the present government is broadly under thecontrol of ethnic Tajiks from the Kulob region in the south, the 1997 accordforced the president to reserve up to 30% of leading government positions forformer UTO members. The most notable of these is the deputy prime minister,Akbar Turajonzoda, a former deputy of the UTO and the IRP, who has sincecut his ties with the IRP and become a staunch supporter of Mr Rahmonov.

The struggle between the former communists and the UTO obscured morefundamental political divisions in Tajikistan. The 1997 peace agreement, whilebringing a degree of stability to Tajikistan, has not succeeded in overcomingregional and political rivalries, nor in addressing the country s socio-economicproblems. Until 1992, Tajikistan had been ruled for nearly 50 years bytechnocrats from the economically prosperous northern Leninabad (nowSoghd) province. The alliance that permitted the formation of a coalitiongovernment in the wake of the 1997 peace accord has continued to excludemany of the Leninabadis (Soghdis). Government policies to prevent theethnic Uzbek minority and Leninabadis from forming political parties orjoining the dialogue leading up to the 1997 peace accord helped to prompt theinvasion of Soghd province by armed supporters of Colonel Khudoiberdiyev.Furthermore, such restrictions have also led to the continued popularity of theformer prime minister and exiled northern politician and businessman,

The 1997 peace accord leads tocoalition government

Political exclusion of the northbrings a threat of instability

Tajikistan 9


Abdumalik Abdullojonov at least among the northern Leninabadis.Mr Abdullojonov s supporters resent not having been able to take part in thepeace process in 1997.

Tajikistan has arguably made more progress in developing a political partysystem than its Central Asian neighbours. This is partly a product of theresolution of the civil war, which has helped to foster a greater openness todialogue as a means of resolving disputes as well as a more tolerant politicalelite. Nevertheless, the president s PDP dominates the political scene, andtogether with its independent allies holds a majority of seats in the country sparliament. The PDP has benefited from the fact that much of the populationcredit it with having restored stability to Tajikistan after the civil war. The PDPis also generally supported by the Communist Party. Although in theory anopposition party, the Communist Party tends to back the president on mostissues, apart from privatisation. The Communist Party still has a coreconstituency, but is not attracting new voters.

Tajikistan s other secular opposition parties none of which are represented inparliament are weak and relatively uninfluential. They tend to be personality-based, rather than viable political movements. The most popular is theDemocratic Party, which was set up after independence to present a nationalist-liberal opposition to Communist rule. Many of the party s leadership joined thegovernment after the civil war, contributing to a drop in popular support for theparty. The Social-Democratic Party and the Socialist Party enjoy very limitedsupport, and each had approval ratings of below 2% in December 2003. Otheropposition parties have repeatedly been denied permission to register,ostensibly on technical grounds. These include the Development Party and theUnity Party.

The IRP is the sole legal Islamic party in former Soviet Central Asia. Apart fromthe Communist Party, the IRP is the only opposition party represented in theTajik parliament, albeit with just two members. Over the past two yearsMr Rahmonov has become increasingly hostile towards the IRP, and severalleading IRP officials have been arrested on various criminal charges. The IRPhas described the arrests as politically motivated, and aimed at sidelining theparty in advance of the 2005 parliamentary election.

The IRP is finding it difficult to carve out a role for itself in Tajik politics. On theone hand, it needs to attract new supporters and to market itself as a viablepolitical party; on the other hand, it risks losing its traditional supporters, whowant the party to remain overtly religious in its aims, to radical religiousmovements such as Hizb ut-Tahrir (Party of Freedom). Hizb ut-Tahrir is lessactive in Tajikistan than in neighbouring Uzbekistan, but has reportedlyincreased its support base beyond its original strongholds in the north of thecountry to the capital, Dushanbe, and further south. It has also begun to attractyoung ethnic Tajiks initially ethnic Uzbeks were its core supporters amongwhom the high rate of unemployment and bleak economic prospects havecreated a receptive audience to Hizb ut-Tahrir s message.

President's party dominatesthe political system

Secular opposition is weakand relatively uninfluential

IRP is struggling to establishnew role in Tajik politics

10 Tajikistan


Main political figures

Imomali Rahmonov

A kolkhoz (collective farm) leader during the Soviet era from the Kulob region ofsouthern Tajikistan, Mr Rahmonov was first appointed head of state in November1992, when the former communists and their supporters known as the PopularFront toppled the short-lived opposition-dominated government that had declaredindependence from the Soviet Union. Mr Rahmonov subsequently won thepresidency in two heavily disputed and possibly flawed elections in 1994 and 1999.For several years after the end of the civil war in 1997, Tajikistan s political stabilitywas jeopardised by political assassinations, kidnappings and corruption, as well assevere economic hardship for much of the population. Nevertheless, helped by hisrelative success in ensuring improved security in the country, Mr Rahmonovcontinues to secure high approval ratings. Politically astute and adept at sidelining orco-opting his opponents, he has gradually consolidated his position, with a view toensuring re-election in 2006.

Mahmadsaid Ubaidulloyev

Chairman of the National Council (the upper house of parliament) since 2000 andmayor of Dushanbe, Mr Ubaidulloyev, like Mr Rahmonov, is from the Kulob region.An erratic and unpredictable politician, Mr Ubaidulloyev served in the governmentin 1992-96, and was then appointed mayor of Dushanbe. As well as his leadingposition in the political hierarchy, he also has extensive business interests.Considered by some to be the second most powerful man in the country,Mr Ubaidulloyev is known to have enemies and, like Mr Rahmonov, has survived atleast one assassination attempt.

Sayed Abdullo Nuri

An ethnic Tajik from the Gharm region, and a cleric by profession, Mr Nuri was a co-founder of the Islamic Renaissance Party (IRP) in 1990. Mr Nuri was the leader of theIslamist-dominated armed opposition, the United Tajik Opposition (UTO), thatbetween 1992 and 1997 waged a civil war against the government. During the warMr Nuri lived in Afghanistan and Iran, whose governments supported the UTO.Since the end of the war Mr Nuri s negotiation skills and reputation for integrityhave meant that he has played an important personal role in contributing toTajikistan s fragile stability. However, support for the IRP, particularly since it becamea government coalition party, has remained weak.

Akbar Turajonzoda

A Soviet-sanctioned Muslim cleric (qazi) trained in Jordan, Mr Turajonzoda wasdeputy leader of both the UTO and the IRP in the 1992-97 civil war. However, he didnot endorse the 1997 peace accord until he was assured the post of first deputy primeminister as part of the conditions of the accord, which required 30% of governmentposts to be filled by members of the opposition. Only then did he return from hisself-exile in Iran. In the 2000 presidential election Mr Turajonzoda surprised manyobservers by refusing to support the IRP candidate and openly endorsing thecandidacy of the standing president, Mr Rahmonov. He subsequently resigned fromthe IRP. A native of Kofarnihan to the east of Dushanbe, a predominantly Islamistregion, Mr Turajonzoda may have aspirations to the presidency.

Tajikistan 11


International relations and defence

By virtue of its location and historical ties, Russia has played a dominantmilitary and economic role in Tajikistan since the collapse of the Soviet Union.Tajikistan has provided Russia with an important foothold in Central Asia,while Russia has acted as Tajikistan s main security guarantor: Russia s 201stMotor Rifle Division, with about 8,000 troops, is stationed in Tajikistan, andRussian officers control Tajikistan s border guard service. Following prolongednegotiations the two sides concluded an agreement in June 2004 that willstrengthen bilateral military ties. Under the terms of the agreement, the statusof the rifle division will be upgraded to that of a permanent military base, andRussia will gradually withdraw its border troops by 2006, transferring control toTajik officers. Russia also gains control of a space surveillance system at Nurek,which is of particular strategic importance for Russia s ability to conductintelligence and surveillance activity in the region.

The June 2004 agreement will also reinforce economic relations between thetwo sides, as Russia is due to write off the majority of Tajikistan s US$300mdebt to Russia, and has agreed to increase investment in the Tajik economy.Russia already plays an important economic role by providing employment forhundreds of thousands of Tajik labour migrants each year, most of whom workillegally. Poor treatment of labour migrants in Russia has periodically causedtension between the two sides, and Russia has maintained a degree of politicaland economic leverage over Tajikistan through threats to make it more difficultfor Tajiks to work in Russia. This pressure was another factor driving the Tajikgovernment toward an amicable agreement in the June 2004 negotiations; theloss of remittances and effect on unemployment in Tajikistan should Russiadecide to downgrade Tajik workers access to Russia would be highlydetrimental to the Tajik economy.

Mr Rahmonov has also recently cultivated closer links with the US. Tajikistanwas cautious in offering its support for the US-led operations in Afghanistan inlate 2001, but opened up the country s air bases to the international coalitionfor humanitarian and military missions once Russia had granted its assent.About 100 French soldiers are based in Dushanbe as part of the coalition sOperation Enduring Freedom in Afghanistan. Since 2001, Tajikistan has soughtto strengthen ties with the US Mr Rahmonov paid an official visit toWashington, DC in 2002, the first such visit to the US by a Tajik head of state.The US is Tajikistan s single largest donor, providing about 50% of the country stotal financial assistance in 2003, both in humanitarian aid and in a variety ofprojects to support market reforms, and improve law and security. The US isalso training Tajik army officers and border guards, and is involved in efforts torevitalise trade links between Afghanistan and Tajikistan, providing most of thefunds for the construction of a bridge between the two countries.

Tajikistan is a member of several regional security and trading organisations(see Regional overview: Membership of organisations), but these have provedlargely ineffective in co-ordinating common policies, or in boosting intra-regional co-operation. The presence of international military forces in Central

Russia still plays a dominantrole in Tajikistan

Tajikistan also maintainsstrong relations with the US

Relations in the region remainstrained

12 Tajikistan


Asia and the speed with which most of the governments of the region agreedto open up their facilities to the US-led coalition highlighted the weakness ofthe security structures set up under the auspices of the Commonwealth ofIndependent States (CIS). Moreover, Uzbekistan and Kazakhstan have in thepast both used security concerns as a pretext to impose restrictions on tradewith Tajikistan.

Although Uzbekistan gave military support to the Tajik government in 1992,relations between the two countries have since been strained, owing in part topersonal hostility between Mr Rahmonov and his Uzbek counterpart, IslamKarimov. Uzbekistan s hostility to what it perceives as political Islam in theregion, and its consequent concern over the UTO s prominent role in Tajikpolitics, were behind Uzbekistan s covert support of Colonel Khudoiberdiyev sarmed incursion into the Soghd province in 1998. Bilateral relations have alsobeen strained by a decision by the Uzbek government to place landminesacross the countries shared border, to deter guerrilla insurgencies, which hasresulted in the deaths of Tajik civilians. Tajik travellers are required to possess avalid Uzbek visa to cross the border, and flights between the two capital citiesof Tashkent and Dushanbe, which were halted by the Uzbek leadershipbecause of the civil war in Tajikistan, have yet to resume.

Relations with Afghanistan, by contrast, have improved somewhat in recentyears; the two countries share strong cultural links, and the inhabitants ofsouthern Tajikistan and northern Afghanistan have close ethnic ties. Togetherwith Russia, Tajikistan supported the mainly ethnic Tajik Northern Alliance inits opposition to the Taliban. With the removal of the Taliban in Afghanistan in2001, diplomatic relations and trade links between the two countries havestrengthened. Although the flow of drugs into Tajikistan has accelerated sincethe fall of the Taliban, the change in regime in Afghanistan has, on the whole,proved positive for Tajikistan, not least by reducing the threat of incursions byIslamic guerrillas into the country.

Relations with Iran have also improved considerably since 1992, when the Tajikgovernment accused Tehran of fomenting unrest among the Islamic opposition.Iran joined Russia and the UN as one of the main mediators leading to the 1997peace accord between the Tajik government and the UTO. Cultural linksbetween the two countries are strong. The Tajik language is a close variant ofPersian, unlike the Turkic languages spoken in the rest of Central Asia. However,the majority of Iranians are Shia Muslims, whereas the majority of Tajiks areSunni. Trade with Iran has increased in recent years and Iran is becoming animportant investor in the Tajik economy. As well as providing assistance for theconstruction of the Anzob tunnel in the north, Iran looks set to participate in aninternational consortium, along with Russia, to complete the Sangtudahydroelectricity plant, which has lain unfinished since the Soviet era.

Tajikistan s strategic location and improved security situation have resulted inits being regarded as an increasingly important partner by China and India.Relations with China are mainly conducted through the forum of the ShanghaiCo-operation Organisation (SCO), and China is a potentially valuable economic

Relations with Iran arefriendly

Tajikistan develops relationswith Asian powers

Removal of Taliban improvesTajik-Afghan relations

Tajikistan 13


partner for Tajikistan, particularly as a trade route. The completion of a roadlinking central Tajikistan, via the Kulma pass, with the Xinjiang region of north-western China should improve trade opportunities for Tajikistan. Constructionof the road began in April 2000 and was completed in May 2004.

Relations with India are also strengthening. In November 2003 the then Indianprime minister, Atal Behari Vajpayee, visited Tajikistan the first visit toTajikistan by an Indian prime minister since the collapse of the Soviet Union.Many of the Indian army s hardware supplies came from the former SovietUnion, and efforts to improve energy and defence co-operation form animportant component of India s relations with Central Asia. India has extendeda US$40m credit line for various infrastructure and industrial projects. Thedefence ministries of the two countries are also co-operating: Tajik militarypersonnel are receiving training in India, and Indian military engineers haverenovated a former Tajik military base at Aini, close to Dushanbe.

The army is underfunded and poorly maintained. However, as part of the 1997peace agreement most divisions of the former UTO armed forces were mergedwith the Tajik military. Tajikistan s regular army comprises around 6,000 armytroops and 1,200 border guards, with about 100 armoured vehicles, aroundone-third of which are tanks. It also operates around 20 helicopters.Conscription into the Tajik army is frequently avoided by bribing militaryofficials. Much of the Tajik army is therefore made up of conscripts fromeconomically disadvantaged families. The armed forces have also been accusedof complicity in drug trafficking. In 2003 the Tajik government substantiallyreduced the number of cadets it sent to Russia for training owing to a lack offunding. However, other countries are now training Tajikistan s military forces,including the US, China, France and India. Over the next two years Tajikofficers will gradually replace the Russian officers currently commanding theborder guard service that protects the country s border with Afghanistan.

Resources and infrastructure

Population

The population of Tajikistan in mid-2002 was 6.38m. The 1992-97 civil warforced up to 1m people to flee their homes, and become either internallydisplaced or economic and political refugees in other countries. Nearly all ofthe 70,000 inhabitants who fled to Afghanistan during the civil war havereturned. Hundreds of thousands more who sought refuge in other parts of theCommonwealth of Independent States (CIS) mainly Russia are less likely toreturn, principally for economic reasons. The International Organisation forMigration has put the number of Tajik migrants in Russia at close to 500,000,whereas unofficial estimates are as high as 1m.

Ethnic Russians, who once constituted 8% of Tajikistan s population, have alsoleft in large numbers owing to their growing marginalisation. Since the end ofthe civil war, some Russians have returned, and the rate of Russian emigrationhas slowed. Russians now account for some 2% of the total population of

Civil war leads to populationdisplacement

The army is underfunded andpoorly maintained

Military is outmoded andunderfunded

14 Tajikistan


Tajikistan (compared with 30% in Kazakhstan), many living in the northern cityof Khujand.

As a result of the Soviet demarcation of Central Asia, there are substantialUzbek and Tajik minorities in Tajikistan and Uzbekistan, respectively, such thatmost ethnic Tajiks do not live in Tajikistan the majority are in Afghanistan andUzbekistan. However, it is often difficult to distinguish between the two groups,particularly in the Ferghana valley, because of widespread intermarriage andbilingualism. Complaints of discrimination by both sides have beenexacerbated by the fact that the governments of Uzbekistan and Tajikistan havepursued nationalist agendas that have been heavily biased in favour of theirnominal majorities, and have to some extent suppressed the cultural rights oftheir respective minorities.

Since independence, the long civil war and the disruptions stemming from thecollapse of the Soviet system have contributed to widespread social tensionand poverty in Tajikistan. The average annual income per head in 2003 wasestimated at just US$180, making Tajikistan one of the poorest countries in theworld. Despite considerable international assistance, a combination ofcorruption and poor administrative capacity has prevented significantimprovements in social welfare. This problem appears to have been furthercompounded by insufficient co-ordination between the Western non-governmental organisation (NGO) sector and Tajikistan s traditional civicnetworks, such as the mahalla (neighbourhood) groups.

Owing to its mountainous terrain, Tajikistan s population density is about488 people per sq km of arable land equivalent to about 0.13 ha/head one ofthe highest population density ratios for arable land in the world. Furthermore,contrary to the trend in most developing countries, Tajikistan s rural population,which makes up about 75% of the total and relies on agriculture as its mainstay,is increasing rather than decreasing. The increase in the rural population reflectsthe traditionally higher fertility rate in the countryside and reducedemployment opportunities in urban centres.

Education

The state-funded educational system has suffered from a severe decline inavailable resources, and years of social and economic dislocation. Althoughschool attendance is in theory compulsory for nine years, in practice manychildren have to work to alleviate family hardship. Many school teachers alsosupplement their meagre salaries by working in agricultural fields, raisinganimals or selling goods at local bazaars. Tajikistan has approximately 15 highereducation institutions but, as in the schools, the learning environment hasdeteriorated owing to the weak infrastructure and a shortage of teachers. Thedeterioration of the education system has also led to worsening skills andsignificant youth unemployment, which is estimated to exceed 60% in the worst-hit (rural) areas. As in some of the other former Soviet republics, Tajikistan isnow facing a situation where the younger generation is less skilled or educatedthan the older generations that were brought up under Soviet state socialism.

Poverty remains widespread

Education system facesinexorable decline

Tajikistan 15


Figures from the UN Children s Fund (UNICEF) suggest that in 2001 pre-primaryenrolment was under 6% of the child population. This low attendance ratereflects in part concerns over security, especially in ethnically mixed locationssuch as the Qurghonteppa region, as well as widespread impoverishmentmany families require children to work, or else are unable to afford the necessaryclothing, shoes or books. The UN World Food Programme (WFP), in partnershipwith local and international non-governmental organisations (NGOs), hassought to address families concerns through a food programme for schools. Inrecent years these efforts have provided food aid to nearly 1,600 schools (roughly50% of the total) in rural parts of the country. The government faces fundingshortfalls as well. According to the education ministry, at least US$11m is neededto publish the new textbooks for public schools, but the government was onlyable to allocate nearly 1% of that figure about US$134,000 to the ministry in2003. Lack of funds has also led to a severe crisis in staffing levels, with anestimated 13,000 teachers needed to make up the shortfall.

Tajik is the main language of instruction, and there are also Russian and Uzbekschools. Private schools and colleges have appeared, mainly in Dushanbe,Khujand and Khorog, where the Aga Khan University is based. A strong highereducation institution is the Slavonic University in Dushanbe, funded by theRussian government. There are seven Turkish lycées (secondary schools)operated by Gewlen, a Turkish NGO, the top graduates of which are regularlysent to universities in Turkey with scholarships.

Secondary and higher education rates are also low, but compare morefavourably to other countries in the region. UNICEF data suggest highersecondary and higher education enrolment as a percentage of the relevantpopulation than in several other countries in the region. Government spendingon education (as a percentage of GDP) is roughly in line with regional averages,although still well below figures in the more advanced transition economies.

Health

Provision of medical services in Tajikistan is well below average for a formerSoviet republic. World Health Organisation (WHO) data suggest that Tajikistan stotal spending on health in 2001 3.3% of GDP was the third-lowest in theWHO s "European" region, above only Kazakhstan and Azerbaijan. According tothe UN, the infant mortality rate was estimated at 54 deaths per 1,000 livebirths in 1999, the second-highest among the countries of eastern Europe andthe former Soviet Union after Kyrgyzstan (where the rate was 55 per 1,000). Thisrepresents a fall from an estimated 89 deaths per 1,000 live births in 1993, butfurther improvements have been hampered by the deterioration of publichealth services after the sharp fall in national income after independence. Thepercentage of childbirths attended by skilled personnel fell from almost 90% in1989 to around two-thirds in 2001. The UN also estimated Tajikistan s maternalmortality rate at 65 deaths per 100,000 live births, the second-highest in theformer Soviet Union, together with the Kyrgyz Republic and Turkmenistan, afterKazakhstan (at 70). The country s elderly dependency ratio over-60s as apercentage of the working age population has fallen steadily in the pastdecade, suggesting worsening conditions for pensioners, but at the same time a

The healthcare system remainsweak

16 Tajikistan


smaller burden on the health system. Life expectancy has been on a downwardtrend, owing to poor nutrition, deteriorating water supplies, and thereappearance of diseases such as typhoid, cholera, tuberculosis (TB) andmalaria. Average life expectancy fell from 68.4 years in 2000 to 63.7 in 2002,according to WHO statistics, with females likely to live for 66.5 years, comparedwith 61 for men. Given the continued dilapidated conditions of the healthcareand sanitation systems, exacerbated by unreliable potable water and periodicflooding in some areas, the risk of epidemics remains high.

Natural resources and the environment

Tajikistan has a continental high mountain climate. Winters are mild andsummers are generally hot except in high mountain areas. The south-west ofthe country is semi-arid. About 93% of Tajikistan s territory is covered bymountains, and more than 50% is at a height of 3,000 metres or more. NorthernTajikistan includes part of the densely populated Ferghana valley. Farming inthe valleys is the principal activity for most of the population. The agriculturalplains in the south-west of the country are the main cotton-producing areas,but cotton and silk are also cultivated in the northern parts of the country.Tajikistan has rich deposits of minerals, including gold and silver, in themountainous areas, as well as huge hydroelectricity potential, owing to a densenetwork of rivers. However, despite an abundance of water resources, most ofthe population either lacks regular access to water or cannot rely on the safetyof its drinking water, as a result of poor resource management and insufficientinvestment since independence.

Tajikistan lies in an active seismic belt, as a result of which earthquakes arecommon. The country also suffers from a number of environmental problems.The use of mountainous lands for farming and overgrazing by animal herds hasled to increased soil erosion, and a rise in the frequency of mudslides andflooding. Moreover, intensive farming in the Soviet era has led to high levels ofpollution, while the development of the irrigation network to raise cottonoutput has led to water shortages and widespread salination of the soil.

Transport, communications and the Internet

Tajikistan has an estimated 30,000 km of road network. Nearly all of thisnetwork was built during the Soviet era, and much of it is now in a state ofdisrepair owing to insufficient investment. The main arterial road connects thecity of Khujand in the north with the capital, Dushanbe, but it is closed in thewinter when the 3,000-metre-high Anzob pass is blocked by snow. Severalambitious infrastructure projects are under way. One such project, dating backto Soviet days, is the Anzob Tunnel, which would link the south and north ofTajikistan by bypassing the Anzob pass. Construction of the tunnel has beenslow: only 3 km out of a total of 5 km were completed by the end of 2003 aftersix years of work, but the government has secured from Iran a grant ofUS$10m, alongside a loan of US$25m, to speed up the completion of the lastportion. Another important route is a road linking Dushanbe with the town of

Over 90% of Tajikistan'sterritory is mountainous

Transport infrastructure suffersfrom underinvestment

Tajikistan 17


Khorog, the capital of Badakhshan, and then running north to Osh in theKyrgyz Republic, or towards eastern Badakhshan and into China.

The railway system is only 480 km long and connects several of the maintowns to the Uzbek and Turkmen railway networks. A major project completedin September 2000 was the construction of a railway from Qurghonteppa toKulob, the two largest towns in the south. International rail travel hasfrequently been interrupted owing to claims by Tajikistan s neighbours inparticular Kazakhstan that Tajik Railways has not paid the required transittariffs. Passenger travel by Tajik railways, especially when crossing internationalboundaries, is generally considered unsafe.

Air travel is also limited. Since 1993 nearly all flights to and from Uzbekistan havebeen suspended. This makes travel to and from Tajikistan difficult, as the nearestairport to Dushanbe with frequent flights to major European cities is Tashkent,the Uzbek capital. Although there are airports in Dushanbe, Khujand and Kulob,planes fly to few international destinations and the safety standards of TajikistanAirlines are questionable. Tajikistan Airlines has, however, begun regular weeklyflights to Germany and other flights to surrounding Central Asian and Asianstates, and has recently resumed flights to Afghanistan on a temporary basis.

The fixed-line telephone network is in a state of disrepair, following years ofunderinvestment. Between 1997 and 2002 the number of main telephone linesper 100 inhabitants fell, and at 3.73 per 100 is among the lowest in the world. Inlate 2001 the European Bank for Reconstruction and Development (EBRD)approved a US$13m loan to Tajiktelecom aimed at improving access to, and thequality of, telecommunications services in Tajikistan. Internet technology isslowly expanding, and in 2004 around 14 e-mail and Internet service providers(ISPs) were operating in the country, covering the twelve largest cities androughly a third of the population. Internet cafes have started to open inDushanbe and Khojand, but total usage is still very low, with only someestimated 3,500 users in the country, compared with 250,000 in Kazakhstan, orthirty times the per-capita usage. Tajikistan s first cellular telecoms network waslaunched in 1996, and there are now several cellular networks of limited rangein operation. However, mobile telephony remains a rarity in the country;subscribers make up just 5% of total telephone users, and in 2002 there wereonly 0.21 mobile phone users per 100 inhabitants. Three satellite stations havebeen installed by Gilat (Israel) in eastern Tajikistan. The Soghd province hasalso benefited from the launch of Somoncom, a US-Tajik joint venture betweenMCTR (US) and a Tajik company, Tajik Hakas, providing Global System forMobile Communications (GSM) telephony.

The print and broadcast media are heavily controlled by the state. Few indepen-dent newspapers, television or radio stations are allowed to operate, withrecurring reports of government harassment of journalists. The governmentroutinely denies permission to launch private TV and radio stations, although itclaimed in 2004 that 26 private television and radio stations were in operation. Ithas also used its licensing and regulatory powers to ensure the proliferation ofpro-government media in the country. Russian television channels broadcastingfrom Moscow are widely available. Broadcasting and publishing in the Uzbek

The cellular network and theInternet are expanding

Media are heavily restrictedand controlled by the state

18 Tajikistan


language is highly restricted and barely available. There are, in effect, no dailynewspapers in Tajikistan, although since mid-2001 just over 200 non-dailynewspapers and 55 magazines have been registered. Self-censorship is the normand there is scant political news or analysis in the available publications. Medialegislation has also come under fire for its draconian nature, under whichjournalists have little freedom to criticise state officials or policies.

However, in response to heavy international pressure, in early 2004 thegovernment moved to increase efforts to crack down on violence on journalistsand solve the range of outstanding murder cases in the industry. It alsosuggested that it would consider exempting some media outlets from value-added tax (VAT) beginning in 2005. Nonetheless the environment forindependent media remains harsh: in early 2004 the government initiatedproceedings to shut down four independent newspapers.

Energy provision

Tajikistan ranks third in the world in terms of water resources per head.Owing to its mountainous terrain, it has the potential to generate more than300bn kwh of hydroelectricity annually, which would make it one of theworld s largest producers of hydroelectricity. However, because of a lack ofinvestment Tajikistan s communist-era hydropower stations currently generateonly a small portion of the country s full capacity. Output of electricity in 2003was 16.4bn kwh up by 8% year on year, but still representing just 5% ofTajikistan s total potential capacity. Most hydroelectricity typically more than11bn kwh/year is generated at the Nurek dam. Tajikistan also has 25 smallhydroelectricity generating plants, and the government is consideringconstructing a further ten such plants, including what would be the world stallest dam (at 335 metres) in Rogun.

Tajikistan s electricity network runs mainly from east to west a legacy of itsmountainous topography as well as its Soviet history preventing the transferof energy in a north-south direction. Electricity is therefore both exported (toUzbekistan) and imported (from Uzbekistan and Turkmenistan), mainly onbarter terms, and Tajikistan is currently a net importer of electricity. Exports toRussia resumed in mid-2003 for the first time in 13 years, and Tajikistan alsoaims to increase exports of electricity to northern Afghanistan.

A lack of investment and the build-up of substantial payment arrears haveimposed severe constraints on Tajikistan s energy sector, and water shortages atthe generating stations force the government to ration electricity supplies in thewinter months. The government has long advocated the completion of theRogun and Sangtuda dams (which have lain unfinished since the Soviet era) aspriority areas for investment, but securing the international interest necessaryto finish the dams has proved difficult. New agreements with Russia and Iran,concluded in the first half of 2004, could result in the Sangtuda plant s securingthe necessary investment. However, doubts over the commercial viability ofboth the Sangtuda and Rogun facilities remain, particularly in the absence of aregion-wide agreement on water use, and trade legislation governing thecustoms regime for electricity exports.

Hydroelectricity production iswell below potential

Government seeks investmentto complete dams

Tajikistan 19


The government s plans to develop Tajikistan s hydroelectric potential facestrong opposition from Uzbekistan. Under Soviet-era agreements still in effect,Uzbekistan and other downstream states receive water from Tajikistan atalmost no charge in order to meet their substantial irrigation needs. The Uzbekauthorities are concerned that development of Tajikistan s hydroelectric sectorwill restrict the water available for Uzbekistan s agricultural sector, especiallyduring the summer period, and could use the threat of power and gas supplycut-offs as retaliation for any disruption to water flows.

The state-owned power company, Barqi Tojik, controls all power generation,transmission and distribution facilities in Tajikistan. Barqi Tojik is due to berestructured into a joint-stock corporation, Energiya, which will encompass allof the country s functioning hydroelectric plants, as well as the heating andpower stations in Dushanbe and Yovon. The transmission of power will beconducted by National Electric Grids, another joint-stock company. The Russianenergy monopoly, Unified Energy System (UES), has reportedly expressedinterest in investing in the energy sector in Tajikistan, via a joint venture withBarqi Tojik. UES has already acquired stakes in electricity companies in Georgiaand Armenia, as part of a project to reintegrate the Commonwealth ofIndependent States (CIS) energy grid.

Tajikistan is almost entirely dependent on outside sources mainly Uzbekistan,Kazakhstan and Turkmenistan for gas and oil. Domestic gas output amounts toabout 25m cu metres annually, whereas Tajikistan imports about 500m cumetres each year from Uzbekistan and Turkmenistan. In the hope of increasingdomestic output, the government has signed a 25-year co-operation agreementwith the Russian gas giant, Gazprom. Gazprom is due to carry out exploratorywork at the Rangan gasfields close to the Tajik capital, Dushanbe, where gasreserves total an estimated 65bn cu metres. Although output from these fieldswill probably not be sufficient to cover domestic needs, it should reduceTajikistan s heavy reliance on Uzbek imports. The country also receives some70% of its oil imports from Uzbekistan.

Despite measures taken to minimise subsidies and to collect payment arrearson electricity and natural gas, the quasi-fiscal subsidy of the energy sector wasan estimated 7% of GDP in 2002, according to data from the IMF. Barqi Tojikalone was owed about S130m (US$43m) in payment arrears as of October 2003,and has started to suspend supplies to non-paying customers. In order toeliminate arrears and de facto subsidies, the government doubled consumerprices for natural gas in July 2003 and harmonised tariffs for household andindustrial users to cost-recovery level. The charges that it levies on householdsare based on a fixed assumption of gas use, although the installation of gasmeters is under way to record gas use more effectively. A compensation schemeis in force for those households that are unable to meet the new tariffs.Nevertheless, in the winter months, owing to a lack of indigenous fuel suppliesand periodic supply cut-offs by Uzbekistan, gas supplies to households are stillrationed in most areas outside Dushanbe.

Domestic gas productionremains minimal

State-owned power companywill be restructured

New measures to reducequasi-fiscal deficit

20 Tajikistan


The economy

Economic structureMain economic indicators, 2003Real GDP growth (%) 10.2Consumer price inflation (av; %) 16.3Current-account balance (US$ m) -5

External debt (US$ m) 1,016a

Exchange rate (av; S:US$1) 3.06

a Economist Intelligence Unit estimate.

Sources: IMF, International Financial Statistics; Economist Intelligence Unit.

During the Soviet era, Tajikistan s GDP per head was among the lowest in theSoviet Union. Thus, of the 15 constituent republics of the Soviet Union,Tajikistan received the highest transfers from the federal budget as a percentageof its total government revenue (47%). It was also dependent on the otherrepublics for food imports, mainly in exchange for raw cotton and aluminium.These transfers and subsidised imports ceased at the time of independence in1991. The disruptions caused by the collapse of the Soviet Union andTajikistan s 1992-97 civil war had a devastating effect on the country s alreadyweak economy: in 1991-96 GDP contracted by an average of 17% annually inreal terms, before returning to minimal growth (averaging 4%) in 1996-99. Thereturn to relative political stability following the end of the civil war and therecovery of selected industrial subsectors have had a positive impact on theeconomy, spurring average annual real GDP growth of some 10% in 2000-03.Nevertheless, Tajikistan remains one of the poorest former Soviet republics,with a largely rural and agricultural society.

Cotton and aluminium production dominate Tajikistan s economy, althoughincreased international interest in the country since 2001 has resulted in sectorssuch as services making more of a contribution to growth. Beforeindependence Tajikistan produced about 11% of the Soviet Union s total cottonharvest: output at its peak was more than 900,000 tonnes/year. However,cotton output collapsed in the 1990s, owing to a combination of sluggishagricultural sector reforms, a lack of investment in irrigation infrastructure, anda series of droughts in the latter years of the decade (see Economic sectors:Agriculture). The cotton sector has been recovering since 1999, but output stillremains below two-thirds of pre-independence levels.

Aluminium is the mainstay of the industrial sector and Tajikistan s principalsource of export revenue. Production of aluminium fell sharply during the civilwar, to a post-independence low of 183,000 tonnes in 1997, but has sincebegun to recover. Nevertheless, output in 2003, at just under 320,000 tonnes,was only equivalent to about two-thirds of the 1990 level (see Economicsectors: Manufacturing).

Other sectors are starting to register growth, including light industry andconstruction. Construction in particular has been boosted by new infrastructureprojects and increased demand for Western-standard accommodation and

Tajikistan's economy recoversafter long period of decline

New sectors such as servicesare expanding rapidly

Tajikistan 21


office buildings in the capital, Dushanbe. An increase in foreign visitors toTajikistan since 2001 has also underpinned an expansion of services outputtelecommunications and catering are among the fastest growing sectors in theeconomy, albeit from a negligible base. Growth in the services sector as awhole was almost 15% in 2003, and, according to the government, servicesaccounted for one-third of the growth in Tajikistan s total output betweenJanuary 2002 and September 2003.

An increase in domestic demand in recent years, mainly thanks to stronggrowth in private consumption, has provided a strong impulse to GDP growth.According to the World Bank, domestic demand grew by an annual average of15% in 2000-01 (the latest confirmed data available). Growth in workersremittances probably played a large role in boosting private consumption,which rose by an annual average of 24% in real terms in the same period.Figures for retail trade and production of consumer goods since then suggestthat this positive growth trend has continued. Retail trade grew by 25% in 2003,and output of consumer goods was up by 14%.

Comparative economic indicators, 2003Tajikistan Uzbekistan Kyrgyz Republic Russia Kazakhstan

Real GDP growth (%) 10.2 0.3a 6.7 7.3 9.2GDP (US$ bn) 1.6 8.7a 1.9 433.5 29.8

GDP per head (US$) 239 a 339a 379 2,997 1,995a

Consumer price inflation (av; %) 16.3 13.1a 3.5 13.7 6.6Exports of goods fob (US$ m) 906 3,130a 582 135,929 13,233

Imports of goods fob (US$ m) -1,026 -2,367a -717 -75,436 -9,144Current-account balance (US$ m) -5 388a -108 a 35,905 -69

Current-account balance (% of GDP) -0.3 4.4a -5.6 a 8.3 -0.2External debt (US$ m)a 1,016 4,138 1,915 173,165 22,769Exchange rate (LCU:US$1; av) 3.06 971.26 43.65 30.69 149.30

a Economist Intelligence Unit estimate.

Source: Economist Intelligence Unit.

Economic policy

As in the other former Soviet republics, Tajikistan s main post-independencepolicy objective was to move from a command system to a market economy. Abasic reform strategy was drawn up in 1992, but the start of the civil war in thatyear led to the annulment of much of the legislation designed to ease thetransition. New laws were formulated in 1995 and 1996, but it was not untilafter the civil war ended in 1997 that the government could devote its attentionto the economic reform process. Initial progress in implementing structuralreforms and stabilising the economy was mixed, and the government wasunable to complete the final two reviews of its third IMF poverty reduction andgrowth facility (PRGF) in 2001. The government s record in macroeconomic andfiscal stabilisation since then has been much more successful, althoughproblems such as weak corporate governance, corruption and the prevalence ofvested interests remain constraints, particularly to attracting much-neededinvestment. Current government policy, in line with IMF and World Bankadvice, aims to reduce quasi-fiscal activities, particularly in the energy sector,

Private consumption growthhas accelerated

Stability is a prerequisite foreconomic reform

22 Tajikistan


speed up land reform; complete small- and medium-scale privatisation andbegin large-scale privatisation; and strengthen public-sector institutions.

The government s limited control over much of Tajikistan during the civil waryears led to chronic revenue shortfalls, which in turn gave rise to wage, pensionand other arrears typical of many transition economies. Between 1996 and1998, however, the government made a stronger commitment to adhere to anIMF-recommended fiscal programme. Its tighter fiscal policy in these yearsresulted in a steady decline in the consolidated government budget deficit, fromjust under 6% of GDP in 1996 to less than 4% of GDP two years later. Thegovernment introduced a new tax code in January 1999, which sought tobroaden the tax base and boost tax revenue. Several important tax reformswere implemented after 2001. In 2002 the government introduced a progressiveincome-tax scheme, which cut the rate from a uniform 40% to a set of taxbrackets between 10% and 20%. In the same year it established a new Ministryof National Incomes and Duties (which combined the tax and customscommittees), and recent computerisation of taxpayer data has enabled theauthorities to widen the tax net.

Conservative macroeconomic policies and ongoing improvements in taxcollection and administration enabled the government to consolidate its fiscalperformance in 1999-2001, before 2002 saw a sharp widening of the fiscaldeficit driven by strong growth in current expenditure. However, in 2003 thegovernment recorded a budget surplus equivalent to 1% of GDP. (This isexcluding expenditure under the public investment programme, much of whichis foreign-funded.) Tighter management of expenditure stabilised the fiscalposition, led by the government s only moderate increases in public-sectorwages. At the same time, higher than targeted economic growth, combinedwith high global prices for Tajikistan s main exports cotton and aluminiumhave inflated revenue. However, tax revenue still remains low as a percentageof GDP, at just over 16% in 2003, compared with a target of 17.7%. Despite thestrong rate of real GDP growth, much of the growth in recent years has been inthe services sector, which is difficult to tax.

The civil war which itself was partly a struggle for control over the country seconomic assets proved a serious setback to the privatisation process. Morebroadly, the process has been burdened by problems with asset valuation andtransparency. The privatisation programme has been dominated by insiders:factory workers and employees were not given sufficient instruction on thenature of the vouchers that they received in the early 1990s, whereas influentialbusiness and political figures enjoyed preferential treatment and were awardedlucrative state assets at below-market prices.

Despite the near completion of privatisation of small and medium-sizedenterprises (SMEs), development of the private sector has been slow to take off.This is partly attributable to the government s focus on developing large-scaleenterprises a legacy of the Soviet-era mentality rather than job-creatingsmaller enterprises. This has contributed to delays in the introduction oflegislation related to microfinancing (which was finally approved in early2004), as well as relatively high taxes on private-sector businesses (equivalent

Fiscal position has stabilised

Progress in privatisation hasbeen mixed

Tajikistan 23


to about 30% of profits). Given difficult investment and business climateconditions, owners of SMEs have engaged in widespread asset stripping, furtherimpeding development of the private sector.

Government concern that this will be repeated with the large-scale enterpriseshas been one factor behind the slower pace of privatisation of large companies.However, in mid-2003 the government adopted a new privatisation strategy,covering the period 2003-07, in which it envisages the sale of more than 500enterprises, through auction or international tender, as well as the restructuringof 37 of Tajikistan s most important companies. The government is currentlyconsidering a number of different potential foreign partners for investment inthe electricity company, Barqi Tojik, and hopes to attract investment in severalof the largest companies in Tajikistan in the coming year, including the state aircompany, Tajikistan Airlines; the state railway company, Tajik Railways; theTadAZ aluminium smelter; and the Rogun hydroelectricity-generating plant.

Nonetheless, privatisation revenue is only a minimal source of financing eitherfor the budget or for capital investment the government earned about S94m(US$31m) from privatisation in 2003, roughly comparable with the level in2002. In the absence of sufficient domestic sources of finance to supportinvestment and reform, Tajikistan depends heavily on the support of the majorinternational lenders and donor agencies. Since 1993 Tajikistan has beenallocated around US$320m in World Bank credit and grants althoughadministrative capacity restraints and delays in reform have meant that onlysome US$200m has been disbursed. Other multilateral lending has come fromthe Asian Development Bank (ADB), the Islamic Development Bank and theEuropean Bank for Reconstruction and Development (EBRD).

Aid agencies are starting to shift their focus in Tajikistan away from emergencypost-conflict support towards more development-oriented aid, includingeducation, infrastructure and agricultural reform. Regular donor conferences inrecent years have pledged substantial amounts of money towards developmentprojects. The most recent, in May 2003, attracted pledges of US$900m for thesubsequent three years. However, past experience suggests that, despite theimproved security situation, much of this aid will not be forthcoming, in partowing to Tajikistan s weak absorptive capacity, as well as ongoing concernsabout corruption and mismanagement.

Tajikistan s relations with the IMF have not been smooth, but have improvedin recent years. The government came under criticism from the Fund in early2002 for misreporting the extent of its external arrears at the time that threecredit tranches, worth a total of US$31.6m, were disbursed in 2000-01. InDecember 2002 the Fund approved a new, three-year PRGF credit worthUS$87m. The focus of the programme is on enhancing the operations andindependence of the National Bank of Tajikistan (NBT, the central bank);strengthening the commercial banking sector; reducing the quasi-fiscal deficit inthe energy sector (estimated at 7% of GDP in 2002); improving fiscal operations;promoting development of the private sector; enhancing debt-managementcapabilities; and accelerating reforms in the agricultural sector. The Fund hasalso urged the government to increase expenditure on health and education. To

Tajikistan depends heavily oninternational financial support

Tajikistan's relations with theIMF have improved

24 Tajikistan


this end, it has recommended that the government limit infrastructure-relatedspending under the public investment programme to the equivalent of 3% ofGDP in 2004-06 about two-thirds of the proposed investment under theprogramme in that period had been set aside for the energy sector, roadnetwork and agricultural infrastructure.

Economic performance

Tajikistan s independence from the Soviet Union, and its transition fromcommand to market economy, came with significant economic costs, includingdisruption to traditional trading links, sharp increases in energy and other inputcosts, and loss of subsidies on independence. These resulted in a sharp declinein Tajikistan s economy: by 1992 the economy was just 60% of its size in 1988.The 1992-97 civil war, which devastated the industrial sector, prolonged thedecline in output. Real GDP fell by a further 50% between 1992 and 1996, andthe total volume of industrial production contracted by nearly 70% between1990 and 1997. The turning point came in 1997, with the end of the civil war.Moderate growth prevailed in the late 1990s, as traditional industries such asthe aluminium sector began to increase output. Growth has accelerated since2000 to an annual average of 9.5% in 2000-03 aided by greater politicalstability and an increase in international investment in Tajikistan. Growth hasalso started to diversify away from the traditional sectors aluminium andcotton with sectors such as construction and light industry reporting strongoutput. Nevertheless, real output in 2003 was still only 50% of the level in 1989.

Consumer price inflation has fallen sharply since 1995, when the year-end ratewas more than 2,100%. The relative stability of the Tajik rouble, after an initialperiod of volatility following its introduction in 1995, was an important factorbehind the rapid disinflation in 1996: year-end inflation in that year dropped tojust over 40%. By end-1999 the rate had fallen to a record low of under 30%.Since then, however, the authorities record in controlling inflation has beenmixed. In response to an upturn in inflation in 2000, the NBT maintained arelatively tight monetary policy in 2001. Combined with nominal currencystability (following the introduction of the somoni in October 2000), thiscontributed to fairly rapid disinflation in the latter half of 2001.

In subsequent years, however, the government has missed its inflation targets,recording year-end rates of 14.5% and 13.7% in 2002 and 2003, respectivelysome 6 percentage points above target in both years. A combination ofloosening monetary policy, food shortages (in particular of wheat, following theregion-wide drought in 2003) and higher energy tariffs contributed to theabove-target price growth. In the Commonwealth of Independent States (CIS),only Belarus and Moldova recorded higher year-end inflation in 2003.

The strong growth rates that Tajikistan has recorded since 2000 reflect for themost part base-period effects, and have yet to deliver an appreciable rise inliving standards. Although a nascent private sector is emerging, particularly inthe services sector, most of the labour force is still employed by thegovernment and is paid extremely low wages. According to the Ministry of

Post-independence decline hashalted

Authorities' inflation recordsince 1998 is mixed

About 70% of the populationlive below the poverty line

Tajikistan 25


Economy and Trade, the average monthly wage in 2003 was S42.55 (US$14), upby some 40% in nominal terms, and the minimum wage was raised by 40% toS7 in January 2004.

Estimates of the share of the population living below the poverty line vary, butthe World Bank has put the proportion at around 70%. As in other formerSoviet economies, wages vary widely between sectors. Those areas of theeconomy that are growing rapidly, such as telecoms, are able to pay theiremployees notably higher wages than the average. For example, the averagemonthly wage in the telecoms sector was S123 in July 2003, but was just S22 inthe agriculture sector the economy s largest employer.

Few households rely solely on income from official wages. Farming, both forsubsistence and for sale, and small- and micro-scale trading, offer a furthersource of household income for a large portion of the population. Manyhouseholds also supplement their monthly incomes through remittances fromrelatives working abroad. Remittances have been increasing over the years, andare estimated to have reached at least US$230m in 2003, equivalent to about15% of GDP. A conservative estimate puts the number of Tajik citizens seekingwork abroad (mainly in Russia) at one in ten. A survey of almost 4,000 peopleconducted by the International Organisation for Migration (IOM) and the Tajikresearch centre Sharq found that up to 530,000 Tajiks had found jobs indifferent regions of Russia over the past two years. Many travel on an annualbasis, working, for example, as builders or farm labourers in the summermonths, whereas others stay for years at a time.

The main factors behind the high rate of labour migration include a shortage ofjobs and the low wages offered for the jobs that are available. In turn, theemigration of the young, able-bodied workforce has resulted in shortages oflabour in parts of Tajikistan, and is leading to increasing problems in recruitingpublic-sector staff such as teachers.

Regional trends

Tajikistan s varying geography has contributed to the emergence of strongregional identities, which has had a significant impact on the development ofpolitical life in the country over the past decade. Since independence, Kulobisfrom the south of the country have dominated the government, which hasweakened the hitherto dominant role in the political elite of the northernSoghd (formerly Leninabad) province. The government s unwavering positionon the prohibition of independent political organisations in Soghd hasweakened the stability of the country and has further marginalised thenorthern region, which is already geographically isolated. Soghd is cut off fromthe centre during the winter and is much closer to Samarkand and the capitalof Uzbekistan, Tashkent, than Dushanbe and the southern part of Tajikistan.Soghd includes a significant number of ethnic Uzbeks, bilingual Tajik-Uzbekinhabitants and large numbers of ethnic Russians. Construction of a roadtunnel to link Dushanbe with northern Tajikistan, which has been stalled formany years, but is now slowly making progress, should go some way towardseasing tensions between the north and south.

Strong regional identitieshave emerged

Rate of labour migrationis high

26 Tajikistan


Nevertheless, the post-independence economic contraction was comparativelyless severe in the Soghd province. It suffered less from the effects of the civilwar, and has always been the most economically active province of Tajikistansome 70% of Tajikistan s industrial enterprises are in this region, as well asmuch of the agriculture. By contrast, the southern Khatlon provinceexperienced the most damage during the civil war. Little industry is basedthere, and the area has traditionally recorded the country s highest rates ofunemployment. However, most cotton cultivation is concentrated in Khatlon,thereby easing rural unemployment to some extent. According to a 1998 survey,the Kulob zone of Khatlon is the poorest region of the country and has thelargest average household size, at 10.1 members per household, compared withan average of 8.2 members per household for Tajikistan as a whole. The Kulobzone also has a relatively low rate of functional literacy.

Economic sectors

Agriculture

The agriculture sector remains an important part of Tajikistan s economy,contributing about 30% of GDP annually in the past five years and employingas much as two-thirds of the active labour force. However, this reflects more theslow pace of diversification in other sectors of the economy than the strengthof the agriculture sector. Agricultural output recorded 9.6% growth in 2003,down from 15% growth in 2002. Annual average growth in the sector has beenaround 10% over the past five years.

Tajikistan has about 840,000 ha of arable land (irrigated and rain-fed), of whichabout one-third is sown to cotton an irrigated crop mostly in the valleys inthe west, south and north of the country. Severe droughts and unseasonablyheavy rains have affected the cotton harvest in recent years, which remainswell below pre-independence levels of more than 850,000 tonnes. In 2003Tajikistan s cotton crop reached over 530,000 tonnes a post-independencerecord, but still well short of the government s long-standing goal of an annualyield of 600,000 tonnes. Cereal crops are Tajikistan s other main agriculturalproduct, although the mountainous terrain prevents the country s farmers fromgrowing sufficient wheat to meet Tajikistan s annual domestic consumptionrequirement of about 1m tonnes. The government has estimated the 2003 grainharvest at 884,000 tonnes, up by more than 25% year on year. Tajikistanimports about 100,000-120,000 tonnes of flour and wheat annually fromUzbekistan and Kazakhstan, and also receives wheat as humanitarian aid.

Restructuring in the agriculture sector has proceeded only slowly sinceindependence. The government faces two inter-related challenges in reformingthe sector: the stalled farm privatisation process and the high level of debtowed by Tajikistan s farms to external creditors. The government began toreform the farming sector in 1998, and between then and 2003 about 500 of thestate s 863 farms were restructured. However, farms that had been restructuredand privatised were still subject to state constraints over production and

The pace of restructuring hasbeen slow

Cotton and wheat are themain crops

Farm privatisation has beensluggish

Tajikistan 27


harvesting, meaning that most of the cotton sector is still under state control. Asa result, the restructuring has not in many cases resulted in greater autonomybeing given to individual farmers, and has thus not had the expectedimprovement on efficiency in the sector.

The privatisation process has been blighted by corruption and a lack oftransparency at the local administration level. Extensive vested interests in thegovernment have proved reluctant to relinquish control over what has becomea lucrative source of tax revenue. However, the government has embarked on anew privatisation drive in the farming sector in 2004, which includes legislativechanges that will remove the right of local officials to interfere in either thefarm privatisation process or in the operations and decisions of farms. Propertyrights have also been problematic, and the government is issuing land sharecertificates to ensure that the privatised farms have clearly-defined propertyrights. Some international agencies are assisting private farmers through avariety of projects. The Swiss government, for example, has launched aprogramme the Tajikistan farmer ownership model that aims to providefarmers with access to agronomic inputs, marketing services and technicalsupport, and to assist with the creation of joint-stock agricultural companies.

The government has estimated the total debt owed by Tajikistan s farms atS765m (US$258m) in 2003, equivalent to about 16% of GDP. Just over S500mwas owed to foreign creditors the equivalent of some 130% of cotton exportrevenue in that year. The bulk of the rest is owed to the government and state-owned enterprises. The debt accrued following the signing of futures contractswith Western companies in the mid-1990s, under which the cotton sector wascharged high interest rates for the provision of inputs such as fertiliser andequipment. Global cotton prices subsequently fell sharply, as a result of whichmany farms owed far more than they were earning for the cotton. With theassistance of the Asian Development Bank (ADB) the government has beenworking on plans to restructure the debt, including the sale of the farmsexternal debt in exchange for temporary rights to market cotton.

Growth in the sector has also been inhibited by the dilapidated state of theSoviet-era infrastructure. According to the IMF, between 20% and 30% of arableland is not in use because of steady deterioration of the irrigation and drainagesystems. This has contributed to persistent concerns about food security, withmuch of the population still reliant on food aid from international donors.Multilateral organisations such as the ADB are working with the governmentto improve the irrigation network, including the reconstruction of canals,repair of drainage networks in silted lands and replacement of dilapidatedwater pumps.

Mining and semi-processing

Tajikistan has rich deposits of minerals, although a lack of foreign investmenthas held back exploration of the mining sector. Deposits of silver are estimatedat around 60,000 tonnes, mostly at the Great Mansur mine in Soghd, and thereare at least 30 known gold deposits. Zeravshon Gold Company (ZGC), a joint-

Tajikistan has richmineral deposits

High debt levels impederestructuring

New investment ininfrastructure is required

28 Tajikistan


venture company in which UK-based Avocet Mining holds a 49% interest, withthe government of Tajikistan holding the remaining 51%, has been mining theJilau deposit in the Soghd region. Avocet has initiated a significant investmentprogramme, although facilities at the mine remain substandard and its output issubject to regular stoppages. Annual gold production in 1997-2002 was around2.5 tonnes, compared with under 500,000 tonnes in the first half of the 1990s.

Apart from gold and silver, Tajikistan has some of the richest mineral reservesin the former Soviet Union, in particular strontium and salt. Tajikistan is theleading producer in Central Asia of lead, zinc and fluorspar, and has someuranium resources, which used to be mined during the Soviet era. Reserves ofmercury and antimony are mined by the Anzob plant in the west. The Ministryof Energy has estimated coal reserves at up to 3.6bn tonnes, with the largestfield believed to be that at Fan Yagnob, in Soghd province. Coal production in2002 is estimated to have exceeded 30,000 tonnes.

Manufacturing

The industrial sector is dominated by aluminium production at the Tursonzodasmelter, located to the west of Dushanbe near the border with Uzbekistan. Thesmelter s capacity exceeds 500,000 tonnes/year, making it one of the largest inthe world the plant alone consumes some 40% of the country s electricityoutput every year. Aluminium production remains the largest contributor tooverall industrial growth, accounting for over 40% of total industrial output inthe first half of 2003, up from just 8.5% in 1991. This reflects the near totalcollapse of the rest of the industrial sector, as production still remains belowpre-independence levels. The Tursonzoda smelter suffers from the majordisadvantage of having no domestic source of raw input (aside from electricity),and is therefore dependent on imports of aluminium oxide from Ukraine,Azerbaijan and Kazakhstan. The Tursonzoda plant is Tajikistan s main exportrevenue earner, accounting for some 60% of the country s export revenue alone.

Until government troops regained control of the smelter in 1997, it was thecause of frequent clashes between local warlords keen on personal benefitfrom sales. Annual production plummeted from a peak of 450,000 tonnes in1990 to 188,850 tonnes in 1997, or just over 40% of the 1990 level. Benefitingfrom an increase in hard-currency inflows, as well as improved management,output from the smelter has increased steadily since then, with production in2002 reaching 307,000 tonnes, up by about 6% year on year. Aluminiumproduction in 2003 amounted to just under 320,000 tonnes, with some 95% ofthe total production exported.

Owing to the strategic significance of the plant and its substantial contributionto Tajikistan s industrial output, the government has been reluctant to pressahead with its privatisation. Debt arrears to foreign creditors and other stateutilities, which according to a World Bank official stood at US$100m in mid-2003, would in any case reduce the plant s potential attractiveness to investors.Nevertheless, a Russian company, RusAl, has showed some interest in thepossibility of purchasing the smelter as part of a debt-for-equity deal, and thegovernment denied claims in early 2004 that RusAl had invested US$45m in

Aluminium productiondominates industrial output

Tajikistan 29


the plant. The smelter has begun to face capacity constraints on productiongrowth, however, which will make future investment a necessity unless themanufacturing sector can be better diversified. The European Bank forReconstruction and Development (EBRD) is currently working with the WorldBank and the Tajik government on a restructuring plan for the smelter, toimprove its attractiveness to outside investors in preparation for an anticipated2007 privatisation.

Manufacturing activities centre on agro-processing, but a limited number ofvehicles and machinery are also manufactured. Most products fromagricultural enterprises used to be exported to the former Soviet republics.Since the collapse of the Soviet Union markets have dwindled, and items suchas fruit, tobacco, hides and a small proportion of cotton output are increasinglyused in barter trade with Pakistan and China. Tobacco trade with Russia hasalso picked up, with much of the production coming from the Aini district ofSoghd province.

Construction

A large portion of the construction work in Tajikistan official sources suggestabout half is carried out by state-held enterprises. Years of underinvestmentand the effects of the civil war have left their legacy on the country scommercial and housing infrastructure, and a shortage of funds has left manylarge construction projects incomplete, including the Anzob mountain tunneland the Rogun and Sangtuda hydroelectricity plants. Moreover, much of thework carried out by Tajik construction companies falls short of internationalstandards. The low quality of construction work has contributed to the sector sfinancing difficulties, as clients withhold payment for construction services.Nonetheless, output in the construction sector grew by over 50% year on yearin 2003. Growth in the sector reflects the ongoing improvements to Tajikistan sinfrastructure that are under way, as well as the demand for new housing,particularly in Dushanbe, the capital. This is partly related to the increasedforeign presence in Tajikistan, which has resulted in a rise in demand forWestern-standard accommodation, as well as for office buildings.

Financial services

The banking system consists of the National Bank of Tajikistan (NBT, the centralbank) and 13 commercial banks, although in early 2004 the NBT announced thatit would revoke the banking licences of three of the country s weakest banks.The NBT also plans to raise the minimum capital requirement from US$1.5m toUS$2m by the end of 2004, which will lead to further consolidation in the bankingsector. The sector is already highly concentrated, with the top four banks holdingsome 85% of the sector s assets and 70% of household deposits. The three mainprivate banks are Agroinvestbank (AIB), Orienbank and Tojiksodirotbonk(Tajikvneshekonbank), with the state-held Amonatbank rounding out the toptier. The commercial banks have generally limited themselves to channellingcredit from the NBT to state-owned enterprises in the agricultural and industrial

Manufacturing activities centreon agro-processing

Construction sector operatesat a low standard

Banking sector is illiquid andhampered with bad loans

30 Tajikistan


sectors. The World Bank estimates total banking assets of some US$172m in2002. However, most banks are technically insolvent and hampered by largeamounts of non-performing loans. Although in theory most banks areprivatised (having been transformed into joint-stock companies), they are stillclosely controlled by the state through the shareholdings of state-ownedenterprises. The NBT is the main regulatory and supervisory authority, and hasreceived support from the IMF and the World Bank in restructuring the sector.The EBRD and the IMF are currently working with the government on a plan torestructure AIB by separating it into two entities, one responsible for cotton-related financing and one for all other commercial business. However, as ofmid-2004 that plan had not yet been implemented.

It is estimated that only around 10% of the money supply in Tajikistan goesthrough the banking system. This reflects lingering memories of the experienceof the early post-independence years when savings disappeared and of thelate 1990s during the region-wide financial crisis. The government s inability tokeep its own finances in order, owing to weak institutional checks andbalances, combined with a relatively entrenched system of patronage andcorruption, and a regime of high taxes, has kept public confidence in thebanking sector low. Confidence aside, most banks offer very low and in manycases negative real interest rates on deposits, further discouraging savers fromusing the banks to store their funds.

Banks are not geared towards fulfilling the needs of small business owners, andborrowing from banks by small businesses remains extremely rare. Manybusinesses borrow from family and friends or from the black market (at highinterest rates) instead. One successful loan programme has been the EnterpriseSupport Facility of the Aga Khan Foundation (AKF), active in the Badakhshanprovince and Gharm region where, since 1995, it has issued several thousandlow-interest loans of between US$50 and US$5,000 to small businesses. TheAKF claims a 95% success rate on repayment by borrowers in this programme.The ADB announced in mid-2003 a US$9bn assistance package to improve theprovision of microcredit in Tajikistan. The funds are expected to be used todevelop a country-wide strategy for the microfinance sector as well asstrengthening the regulatory framework, and to help convert two non-governmental organisations (NGOs) into fully-fledged microcredit institutions.There are a number of small insurance companies and one pension fund. Asecurities market has been established, but is not yet functioning.

Other services

The outbreak of civil war in 1992 led to the collapse of the country s smalltourism industry. Tajikistan has much potential for tourism, owing to itsimpressive mountains and rich cultural heritage. However, the weakness of thetransport network, cumbersome visa regulations, inadequate security, and thelack of tourism infrastructure will continue to present major barriers to growthin the sector for some time to come.

The civil war leads to collapseof the tourism industry

Tajikistan 31


The external sector

Trade in goods

The break-up of the Soviet Union in 1991 and the outbreak of civil war in 1992resulted in a near collapse of Tajikistan s international trade. The trade deficitwidened to about 25% of GDP in 1993, but contracted in subsequent years aslimited finances forced a cutback in imports, and as global aluminium andcotton prices picked up. Together, cotton and aluminium contribute almost 80%of Tajikistan s total export earnings, a proportion that has remained roughlyconstant over the past ten years. The recovery of aluminium exports over thepast two years has contributed to high rates of economic growth, although thetrade balance has remained in deficit. In 2003 the trade balance recorded asmall deficit of US$83m on a customs basis.

However, such heavy reliance on aluminium and cotton exports reflects a lackof diversification, and has left Tajikistan highly vulnerable to fluctuations inglobal commodity prices and terms of trade. Both domestic and external factorshave hampered diversification of the export structure. The slow pace ofrestructuring has resulted in the continued weakness of most of the industrialsector and the non-cotton agricultural sector. In addition, foreign directinvestment (FDI) inflows have been among the lowest in the Commonwealthof Independent States (CIS) and other former communist countries, furtherimpeding the regeneration of the bulk of Tajikistan s productive capacity.

Electricity remains Tajikistan s third largest export, and is traded mainly withUzbekistan on a barter basis. However, Tajikistan is usually a net importer ofelectricity, as the structure of the electricity grid which runs from east to westmakes it hard to transfer energy in a north-south direction and forces Tajikistanto import electricity, mainly from Uzbekistan. Total trade in electricity inJanuary-October 2003 was valued at US$95m.

Through an agreement with Russia s Unified Energy System (UES), electricityexports to Russia resumed in June 2003 for the first time in 13 years. Tajikistansupplied southern Russia with 5m kwh of electricity daily in late 2003, mainlyfrom the Nurek hydroelectric power station. Tajikistan also aims to increaseexports of electricity to northern Afghanistan. An agreement between the stateelectricity company, Barqi Tojik, and the government of Kuwait is set to lead tomaintenance improvements in Tajikistan s electricity system, including thelaying of 3,200 km of new cable.

Of total trade exports plus imports in 2003, Tajikistan conducted 56% withcountries outside the CIS, worth just over US$940m. This is because most ofTajikistan s exports of aluminum and cotton are directed to non-CIS markets,enabling it to run a substantial surplus with these countries. Countries such asLatvia, Switzerland and Iran are important markets for Tajikistan s exports ofcotton fibre, and Turkey and the Netherlands are leading markets for itsaluminum exports. In line with its increasingly high profile as an investor intoTajikistan, Iran has become a more significant trade partner in recent years.

Export revenue is driven bynon-CIS trading partners

Exports dominated by cottonand aluminium

Electricity is a major export,but Tajikistan is a net importer

32 Tajikistan


Trade with Iran nearly doubled year on year in 2003, to more than US$65m.Trade with China is much lower, and was worth just US$32m in 2003.However, the long-awaited opening of a new road linking Kulob and Kulma in2004 is expected to boost trade between Tajikistan and China.

By contrast, Tajikistan runs a substantial trade deficit with the CIS. Total tradewith the CIS amounted to just under US$740m in 2003. Tajikistan buys most ofits food and energy imports from the CIS, and Russia is its leading CIS exportmarket. Tajikistan s trade with the CIS is hampered by a lack of regionalco-operation, and by the imposition of extensive tariff and non-tariff barriers totrade, particularly by Uzbekistan. The Asian Development Bank (ADB) plans toprovide US$100m in 2004-08 to promote regional co-operation, throughmodernisation of the customs system and the rehabilitation of transport links.

The government has begun taking steps toward harmonising its trade regimewith that of the Eurasian Economic Community (EEC) Belarus, Kazakhstan,Kyrgyzstan, Russia and Tajikistan which would entail raising the number ofdifferent tariff rates from the current three to five, and a likely increase in theaverage tariff rate.

Invisibles and the current account

Before independence in 1991, Tajikistan conducted most of its trade throughbarter with the rest of the Soviet Union. Together with budgetary transfers, thiskept the current-account deficit low. Following independence, Tajikistan s termsof trade rapidly deteriorated and the current-account deficit surged to about30% of GDP. In the early 1990s prices for Tajikistan s energy and grain importsrose sharply as suppliers throughout the CIS lifted artificial price ceilings. Evenafter narrowing in 1995, as a result of favourable cotton and aluminium pricetrends, the current-account deficit still equalled more than 15% of GDP.

A steady contraction in import expenditure underpinned by liquidityproblems during the second half of the 1990s brought the current-accountdeficit down to 3.4% of GDP in 1999. In 2001 higher imports of aluminiumoxide, a shortfall in domestic hydroelectricity production and buoyantinternational energy prices contributed to a widening of the current-accountdeficit, to an estimated 7.1% of GDP. However, since then the current-accountdeficit has narrowed steadily, and the current account was close to balance(with a deficit of US$5m, or 0.3% of GDP) in 2003. The decline in the deficitsince 2001 has been attributable mainly to strong export growth (underpinnedby high commodity prices), a rise in humanitarian assistance, and higherworkers remittances inflows from workers abroad were estimated atUS$230m in 2003, bringing current transfer credits up to US$285m, comparedwith US$202m in 2002.

In the absence of further structural reforms, the recent improvement inTajikistan s external balance will be difficult to sustain in the long term. Muchof the improvement has been driven by high global commodity prices, whichare unlikely to be sustained in the medium term. Endogenous factors are also

Tajikistan runs a trade deficitwith CIS

Current-account deficits havenarrowed since 1995

External competitiveness hassuffered in recent years

Tajikistan 33


likely to hamper the country s competitiveness in the short term, including asteady rise in real wages without corresponding improvements in productivity.Moreover, the real appreciation of the local currency, the somoni, against theUzbek som has affected Tajikistan s competitiveness in the Uzbek market.External factors also place constraints on further improvements in the sector.For example, regional trade co-operation is limited, with Tajikistan s neighboursfrequently resorting to the imposition of trade barriers and high import tariffs,which affect export revenue.

Capital flows and foreign debt

Although a few foreign entities have invested in Tajikistan, political andeconomic instability and the country s geographic isolation have discouragedsubstantial amounts of FDI. Investors are deterred by corruption and the lackof democratic reforms, and the slow pace of the privatisation process inparticular of medium- and large-scale enterprises has also kept investmentinflows low. Other factors deterring investors include limited access to financeand the weakness of the public administration. Inward FDI was estimated bythe IMF at just US$32m in 2003, down from US$36m in 2002, and Tajikistan sannual average FDI over the past decade is the lowest of all the members ofthe CIS.

Given low levels of FDI and weak privatisation revenue, the government hasfinanced the fiscal and current-account deficits over the past decade throughexternal borrowing and grants from multilateral organisations. The governmenthas also relied on external borrowing to finance its public investmentprogramme. This has resulted in a rapid rise in Tajikistan s external debt stock,from zero at independence to an estimated US$1bn in 2003. As a result of thelimited development of the private sector, most of Tajikistan s external debtstock (almost 80% in 2002, according to the latest figures from the World Bank)is owed or guaranteed by the public sector. About 45% of Tajikistan s debt isowed to multilateral creditors, much of which was contracted on concessionalterms. External debt as a percentage of GDP, however, has fallen steadily since1999, from a peak of 124% of GDP to below 100% of GDP in 2002.

In mid-2003 the Tajik parliament ratified an inter-governmental agreementsigned with Russia in December 2002 relating to the restructuring of Tajikistan sUS$300m debt to Russia, its single largest bilateral creditor. However,Tajikistan s debt-service costs remain a substantial burden on the government sfinances. After a grace period as part of the rescheduling agreement, debtservice to Russia will resume in 2005, and according to the IMF, debtrepayments in 2005 alone will account for about 25% of state budget revenue.

Foreign reserves and the exchange rate

Since 1997 the government s attempts to stabilise the economy and raise foreign-exchange reserves by pursuing tight monetary and fiscal policies have beeninterrupted by several external and internal shocks. Rising oil prices, fluctuatingterms of trade, economic instability in Russia, domestic political instability, a

Government concludes debt-rescheduling deal with Russia

Reserves remain low

Capital inflows have beenamong the lowest in CIS

34 Tajikistan


severe drought and the extension of large amounts of credit to governmententerprises have affected the ability of the National Bank of Tajikistan (NBT, thecentral bank) to accumulate foreign reserves. The IMF estimates that grossreserves excluding gold at the end of 2003 were US$112m, up slightly from end-2002 and equal to less than two months of import cover. In early 2004 themonetary authorities revised the country s foreign-exchange regulationsremoving all remaining restrictions on international payments and transfers inorder to bring the regulatory framework into line with IMF requirements.

After the collapse of the Soviet Union Tajikistan continued to use the Sovietrouble, even after Russia had issued its own new currency in 1994. The Tajikrouble was introduced in May 1995 at a rate of TR1:Rb100 and TR50:US$1. Afteran initial period of fluctuations in value the currency depreciated by nearly 100%in the first eight months the Tajik rouble was comparatively stable until theRussian crisis in August 1998, following which it resumed a trend ofdepreciation. In October 2000 the government introduced a new currency, thesomoni, at a rate of S1:TR1,000. Initial lack of confidence in the new currencyresulted in a nominal depreciation of the exchange rate by more than one-thirdin 2000. The maintenance of a tight monetary policy by the NBT in 2001 keptthe somoni relatively stable. However, to maintain the competitiveness ofexports, the currency was allowed to depreciate gradually, reaching S3:US$1 bythe end of 2002, before firming slightly in 2003 on the back of increased NBTactivity in the foreign-exchange market. Despite efforts by the NBT to promotethe new currency throughout the country, many of the larger businesstransactions are still conducted in US dollars. Furthermore, in the Soghdprovince, the Russian rouble and the Uzbek som are commonly used.

The somoni has only partlydisplaced the US dollar

Tajikistan 35


Regional overview

Membership of organisations

The Commonwealth of Independent States (CIS) was established on December8th 1991 by the Minsk Agreement signed by the heads of state of the Republicof Belarus, the Russian Federation and the Republic of Ukraine. The Agreementbetween the three republics sealed the end of the Soviet Union. The formalclause stating the dissolution of the Soviet Union was included in thesubsequent treaty signed in Almaty, Kazakhstan, by all former Soviet republicsexcept the Baltic states and Georgia. Azerbaijan initially refused to ratify thetreaty, but by December 1993 both Georgia and Azerbaijan had joined thecommonwealth. The CIS therefore includes all the former Soviet republicsexcept the Baltic states.

The CIS sought to fill the institutional vacuum resulting from the disintegrationof the Soviet Union. The main organ of the CIS is the Council of the Heads ofState, the supreme body of the organisation; it is convened no less than twice ayear. The Council co-ordinates the co-operation of the executive authorities ofthe states in economic, social and other spheres. The activities of the CIS arelogistically supported by the Executive Committee, which acts as a secretariatand has its seat in Minsk, Belarus. The organisation also has an Inter-parliamentary Assembly. The perception of the CIS and its role variesconsiderably among the participating states. Those that have an alternative toRussian leadership and prospects for economic independence tend to favour aloose framework. States that are reliant on Russia are more inclined to want theCIS to be a close alliance. Belarus, as an exceptional case, follows a policy ofcloser integration with Russia.

The CIS introduced a certain order into post-Soviet affairs, and has served as auseful forum for discussion and "networking" of the former Soviet elites.However, the overall record of the CIS has been disappointing. Integration andlevels of co-operation have lagged behind some initial expectations. Manymembers remain wary that a closer union could become the instrument ofRussia s post-imperial ambitions. Moreover, Russia has been reluctant andincapable of bearing the costs of a more ambitious reintegration process. TheCIS has also been unable either to prevent or resolve numerous regionalconflicts. The main security component of the CIS is the Collective SecurityTreaty Organisation (CSTO), which developed out of the CST founded in 1992 bysix member states Armenia, Belarus, Kazakhstan, the Kyrgyz Republic, Russiaand Tajikistan. The CSTO was formally established in April 2003 with the aim ofproviding a more effective response to issues such as terrorism and drugs-trafficking. A rapid deployment force is based at Kant in the Kyrgyz Republic.

On the economic front, the CIS has fallen short of the expectations of many ofits members. After 12 years of existence, the CIS has not implemented afunctioning customs union or a free-trade area covering all member states. In1995 Belarus, Kazakhstan, the Kyrgyz Republic and Russia formed a CustomsUnion, which was joined by Tajikistan in 1999. This nevertheless proved largely

Commonwealth ofIndependent States

36 Tajikistan


ineffective in boosting trade relations between the five states. A treaty on thesetting up of a Eurasian Economic Community (Eurasec) which augments thecustoms union with sanction and enforcement powers was signed by the fivecountries in October 2000, and entered into force in May 2001. Like thecustoms union, however, the organisation has had little success in encouragingcloser trade relations between its members. Armenia, Moldova and Ukrainehave observer status at Eurasec.

Four CIS member states launched a new initiative to broaden trade andeconomic co-operation at the organisation s summit in Yalta (Ukraine) in 2003.Russia, Belarus, Kazakhstan and Ukraine signed an agreement to create a SingleEconomic Space, to be established in three stages. The countries will firstimplement a free trade regime and simplify customs procedures. This will befollowed by the establishment of a customs union and a common competitionpolicy, while the final stage envisages the abolition of all customs controls, aswell as the introduction of freedom of movement for services, capital andlabour between the four countries. However, the agreement is likely to bedifficult to enforce, as it is incompatible with Kazakhstan s aim of joining theWorld Trade Organisation (WTO) before 2005. Ukraine has similar concernsand does not want any trade deal that would conflict with its bid to join theWTO in 2004.

The European Bank for Reconstruction and Development (EBRD) was set up in1991 to help finance the development of central and eastern Europe after thefall of communism. By contrast with most other multilateral organisationsinvolved in the region, the EBRD s mandate compelled it to focus on the privatesector, as it was allowed to commit no more than 40% of its funds to public-sector projects. It received an initial capital of Ecu10bn (US$12bn at 1991 averageexchange rates), which was doubled in 1997. The EBRD initially found it difficultto carve out a niche for itself, and was in its early years beset by scandals and aleadership crisis. Although it recovered from these, in 1998 the Russian financialcrisis resulted in heavy losses for the Bank. Russia has been the EBRD s largestclient, accounting for just over one-fifth of all funding in 1991-2003.

Over the past decade the EBRD has invested substantial sums in the region andhas helped to encourage private-sector investors. The EBRD s clientele hasgrown from just a handful of transition countries in the early 1990s to 27countries today, with Yugoslavia (now Serbia and Montenegro) added to the listof potential beneficiaries in January 2001. The EBRD has funded hundreds ofprojects, ranging from bank privatisation to road-building. By 2000 it hadrecovered from its 1998 losses, and by the end of that year had disbursed

12.1bn (US$11.5bn). Disbursements rose strongly in 2001-02, at an annualaverage of 2.4bn, falling slightly to 2.1bn in 2003, although this decline wasattributable in large part to the weakening US dollar. The bank s commitmentshave also risen robustly since 2000, up from 2.67bn in 2000 to 3.72bn in2003. This reflects the increase in the number of viable investments across thetransition region, as well as the bank s efforts to develop new business. If co-financing from other lenders and the private sector is added, in 1991-2003 theEBRD was involved in projects worth a total of 69bn.

European Bank forReconstruction and

Development

Tajikistan 37


Funding of the eight EU accession countries is to remain constant after theyhave joined the EU in May 2004, at around 1bn per year, but most newbusiness will be directed to the Commonwealth of Independent States (CIS)and the Balkans. In 2003 new commitments to these countries amounted to

2.55bn, up from 2bn in 2001, whereas those to the advanced EU accessioncountries (including Croatia) totalled 1.17bn, down from 1.6bn in 2001.

The Organisation of the Islamic Conference (OIC), an intergovernmentalorganisation with 57 members, was established in 1969 in Morocco. Among thetransition countries, Azerbaijan joined in 1991; Albania, the Kyrgyz Republic,Tajikistan and Turkmenistan in 1992; and Kazakhstan and Uzbekistan in 1995.Bosnia and Hercegovina (BiH) has observer status. The OIC s aim is to promoteIslamic solidarity by fostering co-operation in the political, economic, social,cultural and scientific fields. The main organ of the OIC is the Conference ofKings and Heads of State and Government (the Islamic Summit Conference),which meets every three years. The activities of the OIC are implemented bythe Conference of Foreign Ministers, which meets annually, and by apermanent General Secretariat.

The OIC aims to facilitate political co-operation among member states, inaddition to mediating in international events in which Muslim communitiesare affected; it has also been a strong supporter of the Palestinian cause.Another OIC aim is the co-ordination and facilitation of economic co-operationamong member states. The OIC supports education in Muslim communitiesand work for the preservation of Islamic cultural heritage. It has a web ofspecialised and affiliated institutions whose activities range from broadcastingto upgrading the standards of public services.

Initially a non-institutionalised multilateral forum for cold war East-Westdialogue, the Conference for Security and Co-operation in Europe (CSCE)gradually expanded in aim and strengthened its organisational structure in the1990s. Established in 1972, the CSCE served for almost 20 years as a convenientand flexible arrangement for easing cold war tensions. After the end of the coldwar the role of the CSCE started to change quickly, and in December 1994 theconference was officially renamed the Organisation for Security and Co-operation in Europe (OSCE). With 55 member states, the OSCE is the onlyinclusive pan-European security organisation. Canada and the US are alsomembers of the organisation.

The OSCE has played a key role in conflict prevention and resolution, as wellas post-conflict reconstruction in Europe. Its activities embrace threedimensions: security, economy, and human rights. The OSCE is engaged inpreventive diplomacy, arms control and confidence-building activities. Itundertakes fact-finding and conciliation missions, and crisis management. TheOSCE is a component of the European security architecture. It is a "regionalarrangement" in the sense of Chapter VIII of the UN Charter, which gives itauthority to try to resolve a conflict in the region before referring it to the UNSecurity Council. Since the early 1990s the OSCE has been heavily involved inthe Balkans and the Transcaucasus.

Organisation of the IslamicConference

Organisation for Security andCo-operation in Europe

38 Tajikistan


The activities of the OSCE are performed by a web of specialised agencies. TheHigh Commissioner on National Minorities, based in The Hague, is the primarysource of "early warning", with responsibility for identifying ethnic tensions thatmight endanger peace. The Office for Democratic Institutions and Human Rights(ODIHR), based in Warsaw, focuses on promoting human rights, democracy andthe rule of law. It monitors elections, assists at developing national electoral andlegal institutions, promotes the development of non-governmental organisations(NGOs) and civil society, conducts meetings, seminars and special projects. TheOffice of the Representative on Freedom of the Media, based in Vienna, assessesthe implementation of the member states commitments concerning freedom ofjournalism, broadcasting and access to information.

Tajikistan 39


Appendices

Sources of information

The state statistical agency, Goskomstat, is the main source of much of the datacited by various publications within Tajikistan and abroad. With the advent ofthe Internet in Tajikistan, information about the government and privateorganisations can increasingly be found on the Internet.

The IMF produces reports on Tajikistan normally on a biannual basis. Its data,gathered from the state statistical agency and government ministries and offices,are still the most comprehensive and reliable available. Data are also availablein the Annual Transition Report published by the European Bank forReconstruction and Development (EBRD), and the Asian Development Bank(ADB) produces an annual outlook for the region, including Tajikistan.

EBRD, Transition Report; Tajikistan Investment Profile; available at www.ebrd.org

IMF, country reports providing data and analysis, available at www.imf.org.Also some data available in International Financial Statistics

UN Development Programme, www.undp.tj

UN Food and Agriculture Organisation, www.fao.org

World Bank, Global Development Finance; Statistical Handbook: States of theFormer USSR; available at www.worldbank.org

Shirin Akiner, Central Asia: Conflict or Stability and Development?, MinorityRights Group International, London, 1997

Ali Banuazizi and Myron Weiner (eds), The New Geopolitics of Central Asia andits Borderlands, I B Tauris, London, 1994

Mohammad-Reza Djalili, Frédéric Grare and Shirin Akiner, Tajikistan: The Trialsof Independence, Curzon, Richmond, 1998

A Ehteshami, From the Gulf to Central Asia, Exeter University, 1995

Payam Foroughi, Tajikistan: Nationalism, Ethnicity, Conflict, and Socio-EconomicDisparities—Causes and Solutions, Journal of Muslim Minority Affairs, Vol. 22,No. 1, 2002

Ahmed Rashid, The Resurgence of Central Asia: Islam or Nationalism? OxfordUniversity Press, Karachi, 1994; Jihad: the Rise of Militant Islam in Central Asia,Yale University Press, London, 2003

Oliver Roy, The New Central Asia: The Creation of New States, New YorkUniversity Press, New York, 2000

Ronald Sagdeev and Susan Eisenhower (eds), Central Asia: Conflict, Resolution,and Change, Centre for Political and Strategic Studies, Chevy Chase, 1995

National statistical sources

International statistical sources

Select bibliography andwebsites

40 Tajikistan


Shahrbanou Tadjbakhsh, Economic Regionalism in Tajikistan, Royal Institute ofInternational Affairs, London, 1996

www.asiaplus.tajik.net Asia Plus is a Dushanbe-based news service producingdaily and weekly economic and political news on Tajikistan for subscribers

www.bisnis.doc.gov U.S. Department of State, Business Information Service forthe Newly Independent States

http://www.eurasianet.org EurasiaNet, a New York-based news service fundedby the Soros Foundation

http://www.freedomhouse.org Freedom House compiles annual reviews of27 former communist nations and rates their social, economic and politicalprogress

http://www.hrw.org Human Rights Watch, with its professional staff in thefield, is considered the most reliable source of human rights developments inthe region

http://www.icg.org International Crisis Group, Tajikistan: An Uncertain Peace,ICG Asia Report No. 30, Osh/Brussels, 2001; Tajikistan: A Roadmap forDevelopment, ICG Asia Report No. 51, Osh/Brussels, 2003; Tajikistan's Politics:Confrontation or Consolidation?, ICG Asia Briefing, Dushanbe/Brussels, 2004.

http://www.iwpr.net the Institute of War and Peace Reporting produces aweekly e-newsletter on developments in Central Asia

Reference tables

These reference tables provide the most recent data available at the time ofpublication.

Population('000 unless otherwise indicated)

1997 1998 1999 2000 2001Population (year-end) 5,876 6,001 6,127 6,250 6,376 % change, year on year 1.9 2.1 2.1 2.0 2.0

By locationRural 4,310 4,407 4,502 4,590 4,685Urban 1,566 1,594 1,625 1,660 1,691

By ageWorking agea 2,929 3,025 3,127 3,247 3,397Non-working age 2,946 2,976 3,000 3,003 2,979

a Men aged between 15 and 59; women aged between 15 and 54.

Source: IMF, Republic of Tajikistan—Selected Issues and Statistical Appendix, January 2003.

Tajikistan 41


Employment by sector('000 unless otherwise indicated)

1997 1998 1999 2000 2001Agriculture 1,145 1,090 1,118 1,135 1,167 % of total 63.9 60.7 64.4 65.0 63.8

Industry 164 148 133 121 131 % of total 9.2 8.2 7.7 6.9 7.2

Construction 52 52 43 36 31 % of total 2.9 2.9 2.5 2.1 1.7Transport & communications 44 53 44 42 43 % of total 2.5 3.0 2.5 2.4 2.4Trade 56 129 89 81 140 % of total 3.1 7.2 5.1 4.6 7.7

Government 22 20 22 27 26 % of total 1.2 1.1 1.3 1.5 1.4

Education & culture 191 188 178 179 178 % of total 10.7 10.5 10.2 10.3 9.7Health & social services 85 84 75 82 72 % of total 4.7 4.7 4.3 4.7 3.9Total incl others 1,791 1,796 1,737 1,745 1,829


Government finances(S m unless otherwise indicated; consolidated general government budget)

1998 1999 2000 2001 2002Total revenue incl grants 123.5 181.7 245.7 381.9 559.9 Tax revenue n/a n/a 232.4 353.1 500.1 Income & profit tax n/a n/a 33.3 47.1 60.1 Payroll tax n/a n/a 28.9 44.8 64.6 Property tax n/a n/a 11.5 14.8 18.9 Internal taxes on goods & services n/a n/a 70.4 128.5 231.4 Value-added tax n/a n/a 44.5 86.0 159.3 International trade & operations tax n/a n/a 86.3 114.4 122.9 Sales taxes n/a n/a 58.9 62.8 63.2 Import duties n/a n/a 27.4 51.6 59.7 Other taxes n/a n/a 2.0 3.5 2.7 Non-tax duties n/a n/a 11.7 28.8 51.2 Grants n/a n/a 1.7 0.0 8.0Total expenditure & loans minus repayments 162.2 223.6 257.1 384.0 641.5a

Current expenditure n/a n/a 207.9 307.9 459.2 Wages & salaries n/a n/a 66.5 82.4 107.9 Goods & services n/a n/a 81.6 139.6 182.4 Interest payments n/a n/a 6.6 13.8 63.0 Transfers to households n/a n/a 40.0 59.9 89.2 Subsidies n/a n/a 13.3 12.2 16.8 Capital expenditure n/a n/a 47.8 73.6 102.2 Net lending n/a n/a 1.4 2.5 1.4Balance (cash basis) -38.7 -41.9 -11.3 -2.1 -81.6a

% of GDP -3.8 -3.1 -0.6 -0.1 -2.4a

a Includes externally financed public investment programme.

Sources: IMF, Republic of Tajikistan—Selected Issues and Statistical Appendix, January 2003; Second Review under the Three-year Arrangement under the Poverty Reduction and Growth Facility,

January 2004.

42 Tajikistan


Money supply(S m unless otherwise indicated; end-period)

1999 2000 2001 2002 2003Money (M1) incl others 69.9 102.7 128.8 173.2 222.2 % change, year on year 17.7 46.9 25.4 34.5 28.3Quasi-money 20.5 44.9 70.5 106.8 172.3Money (M2) 90.4 147.6 199.3 280.0 394.5 % change, year on year 24.5 63.3 35.0 40.5 40.9

Source: IMF, International Financial Statistics.

Interest rates(%; period averages)

1999 2000 2001 2002 2003Lending interest rate 26.2 25.6 21.1 14.2 16.6

Deposit interest rate 5.2 1.3 5.2 9.2 9.7Money market interest rate 20.1 20.6 20.0 24.8 15.0

Source: IMF, International Financial Statistics.

Gross domestic product(market prices)

1999 2000 2001 2002 2003Total (US$ bn)At current prices 1.0 1.0 1.1 1.2 1.6

Total (S bn)At current prices 1.3 1.8 2.5 3.3 4.8At constant (1997) prices 0.7 0.7 0.8 0.9 1.0 % change, year on year 3.7 8.3 10.2 9.1 10.2Per head (S)At current prices 220 289 394 525 732At constant (1997) prices 113 120 129 141 152 % change, year on year 1.6 6.2 8.0 9.1 8.0

Sources: IMF, Republic of Tajikistan—Selected Issues and Statistical Appendix, January 2003; IMF, Country Report No. 03/222, July

2003; Economist Intelligence Unit.

Tajikistan 43


Nominal gross domestic product by expenditure(S m at constant 1997 prices; % real change year on year in brackets)

1997 1998 1999 2000 2001Private consumption 489 560 512 631 787 (33.3) (14.6) (-8.5) (23.3) (24.6)

Government consumption 76 63 69 61 73 (35.3) (-16.2) (8.1) (-10.6) (18.8)

Gross fixed investment 102 103 120 87 64 (10.9) (0.6) (16.5) (-27.6) (-26.2)Stockbuilding 0 0 0 0 0 (0.0)a (0.0)a (0.0)a (0.0)a (0.0)a

Exports of goods & services 436 247 299 322 293 (-2.5) (-43.3) (20.9) (7.8) (-9.1)

Imports of goods & services 470 523 541 598 568 (-5.7) (11.1) (3.4) (10.6) (-5.0)

GDP 632 665 690 747 824

a Contribution to real GDP growth.

Source: World Bank.

Gross domestic product by origin(S m unless otherwise indicated; at current prices)

1997 1998 1999 2000 2001Industry 124.5 206.1 291.5 431.7 566.8 % of total 19.7 20.1 21.7 23.9 22.6Agriculture 171.3 255.4 341.5 487.9 670.0 % of total 27.1 24.9 25.4 27.0 26.7Construction 13.3 39.5 72.9 61.1 103.7 % of total 2.1 3.9 5.4 3.4 4.1

Trade 64.5 226.4 265.3 330.0 483.9 % of total 10.2 22.1 19.7 18.3 19.3

Transport 8.8 42.6 99.0 88.0 112.6 % of total 1.4 4.2 7.4 4.9 4.5Supplies 2.5 5.4 4.7 4.2 3.3 % of total 0.4 0.5 0.3 0.2 0.1Procurement 1.9 2.0 n/a n/a n/a % of total 0.3 0.2 n/a n/a n/a

Other material sectors 35.4 10.2 4.8 5.8 7.5 % of total 5.6 1.0 0.4 0.3 0.3

Non-material services 116.3 159.7 167.1 248.2 334.0 % of total 18.4 15.6 12.4 13.7 13.3Indirect taxes 93.5 77.8 98.0 149.7 230.0 % of total 14.8 7.6 7.3 8.3 9.2Total 632.0 1,025.2 1,344.9 1,806.8 2,512.1


44 Tajikistan


Prices and earnings(year-end unless otherwise indicated; % change)

1999 2000 2001 2002 2003Consumer prices (av) 27.5 32.9 38.6 12.2 16.3Wholesale prices 64.0 33.9 9.4 n/a n/a

Average wages 26.6 34.1 61.0 n/a n/a

Sources: IMF, Republic of Tajikistan—Selected Issues and Statistical Appendix, January 2003; International Financial Statistics;

Economist Intelligence Unit.

Agricultural production('000 tonnes)

1999 2000 2001 2002 2003Seed cotton 313 335 453 515 533

Cereals 474 545 487 440 711Potatoes 240 303 318 357 300

Vegetables 469 450 495 573 559Fruits 130 280 263 246 252Rice 47 82 40 29 40

Source: UN Food and Agriculture Organisation (FAO) website.

Yields of major crops(kg/ha)

1999 2000 2001 2002 2003Seed cotton 1,264 1,405 1,759 1,913 1,875Cereals 1,218 1,323 1,279 1,308 2,097

Potatoes 11,712 11,904 13,233 15,522 13,044Vegetables 10,192 11,092 12,063 12,792 12,602

Fruits 1,184 2,024 2,408 2,203 2,335Rice 2,710 4,115 2,796 2,900 4,000

Source: UN FAO website.

Livestock numbers('000 head unless otherwise indicated)

1999 2000 2001 2002 2003Cattle 1,037 1,037 1,062 1,091 1,095Sheep 1,494 1,472 1,478 1,490 1,708

Goats 701 706 744 779 632Pigs (head) 1,200 1,100 600 700 700Horses 67 72 72 71 72

Chickens 675 770 1,062 1,320 1,336

Source: UN FAO website.

Tajikistan 45


Industrial production by sector(at constant prices; 1990=100)

1997 1998 1999 2000 2001Electricity 104.4 107.0 119.7 107.4 108.3Fuel & refinery products 8.8 7.0 7.5 7.9 8.7

Non-ferrous metals & metallurgy 39.6 42.9 50.1 59.4 66.2Wood-working & paper 4.7 4.5 5.6 5.1 7.6

Construction materials 2.3 2.0 3.4 3.6 4.3Light industry 32.0 33.3 33.9 35.2 37.6

Food industry 14.8 17.7 16.4 16.8 25.4Total incl others 32.3 35.0 37.0 40.6 46.6


Main exports(US$ m)

1998 1999 2000 2001 2002Total exports fob 586 666 788 652 699 Aluminium 234 284 424 398 399 Cotton fibre 112 93 92 71 128 Electricity 103 175 181 79 n/a

Sources: IMF, Republic of Tajikistan—Selected Issues and Statistical Appendix, January 2003; Second Review under the Three-year

Arrangement under the Poverty Reduction and Growth Facility, January 2004; Interfax, Statistical Report.

Main imports(US$ m)

1998 1999 2000 2001 2002Total imports cif 756 714 861 801 853 Aluminium oxide 118 139 212 198 n/a Oil & natural gas 120 98 103 105 n/a Electricity 117 179 203 98 n/a

Sources: IMF, Republic of Tajikistan—Selected Issues and Statistical Appendix, January 2003; Press reports.

Main trading partners(US$ m)

1998 1999 2000 2001 2002Exports to:Turkey 0.4 1.0 58.4 75.1 118.5Russia 47.8 115.1 258.8 104.7 87.5Uzbekistan 125.7 181.0 97.8 87.2 72.9Switzerland 94.9 75.1 72.2 52.2 68.7Hungary 1.0 0.0 1.0 38.8 39.9

Imports from:Russia 102.2 92.4 105.1 129.4 163.5Uzbekistan 227.3 264.4 185.6 150.7 132.4Ukraine 16.6 37.7 84.3 63.6 80.5Kazakhstan 51.9 78.8 82.4 89.1 72.3Azerbaijan 1.8 15.6 63.1 33.5 41.1

Source: IMF, Direction of Trade Statistics.

46 Tajikistan


Balance of payments(US$ m unless otherwise indicated)

1999 2000 2001 2002 2003Exports of goods fob 666 788 652 699 906Imports of goods fob -693 -834 -773 -823 -1,026

Trade balance -27 -47 -121 -124 -120Net services 11 4 -7 -36 -33

Net income -55 -57 -29 -41 -70Net transfers 35 37 84 186 218

Current-account balance -36 -62 -74 -15 -5Disbursements 10 36 22 28 n/aAmortisation payable -9 -19 -40 -25 n/a

Foreign direct investment 21 24 9 36 32Change in commercial banks' net

foreign assets (- indicates increase) -35 24 20 8 n/aOther capital 23 -28 16 n/a n/a

Change in gross reserves 7 -29 -8 -2 -28Capital & financial account balance 42 63 65 72 63Overall balancea 6 1 -9 -2 -28Financing -13 28 18 -21 n/a IMF 4 16 3 -24 -3 Purchases 9 26 15 11 n/a Repurchases 5 10 12 35 n/a Other reserve liabilities 0 2 0 0 n/a Debt-service account (- indicates

increase) 0 0 0 0 n/a Arrears -18 11 -41 -23 n/a Rescheduling 1 0 55 0 n/a

Memorandum itemsCurrent-account balance (% of GDP) -3.4 -6.5 -7.1 -1.4 -0.3Total reserves minus gold 55 93 93 90 112

a Including errors and omissions.

Sources: IMF, Republic of Tajikistan—Selected Issues and Statistical Appendix, January 2003; IMF, Country Report No. 03/222, July

2003; International Financial Statistics.

Tajikistan 47


External debt, World Bank series(US$ m unless otherwise indicated)

1998 1999 2000 2001 2002Public medium- & long-term 703 741 755 762 912 Official creditors 643 686 704 762 842 Bilateral 539 529 518 497 407 Multilateral 104 157 186 264 436 Private creditors 60 55 51 0 70

Private medium- & long-term 294 331 91 107 87Total medium- & long-term debt 997 1,072 846 869 999Short-term debt 147 102 77 79 60 Interest arrears 35 41 45 27 9Use of IMF credit 99 100 111 110 94

Total external debt 1,243 1,275 1,034 1,058 1,153Principal repayments 61 53 37 58 67

Interest payments 31 26 25 23 12Ratios (%)Total debt servicea (paid) 14.4 11.3 7.8 11.5 10.2Total external debt/GDP 98.4 123.6 110.7 108.1 99.9

a Debt service as a percentage of exports of goods and services.

Source: World Bank, Global Development Finance.

Exchange rate(annual averages)

1999 2000 2001 2002 2003S:US$1a 1.28 1.83 2.37 2.76 3.06S:Rba 0.05 0.06 0.08 0.09 0.10

a The somoni replaced the Tajik rouble in October 2000 (S1:Tr1,000).

Sources: IMF, Republic of Tajikistan—Selected Issues and Statistical Appendix, January 2003; International Financial Statistics;

Economist Intelligence Unit.

Editors: Matthew Shinkman (editor); Anna Walker (consulting editor)Editorial closing date: July 20th 2004

All queries: Tel: (44.20) 7830 1007 E-mail: [email protected]

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