Economy of Tajikistan

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Economy of Tajikistan
Currency	1 somoni (TJS) = 100 diram
Fiscal year	calendar year
Trade organisations	IMF, World Bank, CIS, EURASEC, SCO, WTO (Observer)
Statistics
GDP (PPP)	$9.405 billion (2006 est.) (145th)
GDP growth	7% (2006 est.)
GDP per capita	$1,300 (2006 est.)
GDP by sector	agriculture: 22.7%, industry: 28.5%, services: 48.8% (2006 est.)
Inflation (CPI)	7.5% (2006 est.)
Population below poverty line	64% (2004 est.)
Gini index	34.7 (1998)
Labour force	3.7 million (2003)
Labour force by occupation	agriculture: 67.2%, industry: 7.5%, services: 25.3% (2000 est.)
Unemployment	12% (2004 est.)
Main industries	aluminum, zinc, lead; chemicals and fertilizers, cement, vegetable oil, metal-cutting machine tools, refrigerators and freezers
External
Exports	$1.16 billion f.o.b. (2006 est.)
Export goods	aluminum, electricity, cotton, fruits, vegetable oil, textiles
Main export partners	Netherlands 46.6%, Turkey 15.8%, Russia 9.1%, Uzbekistan 7.3%, Latvia 4.9%, Iran 4% (2005)
Imports	$1.513 billion f.o.b. (2006 est.)
Import goods	electricity, petroleum products, aluminum oxide, machinery and equipment, foodstuffs
Main import partners	Russia 19.3%, Kazakhstan 12.7%, Uzbekistan 11.5%, Azerbaijan 8.6%, China 7%, Ukraine 6.2%, Romania 4.6%, Turkmenistan 4% (2005)
Public finances
Public debt	$829 million (2006 est.)
Revenues	$311.2 million (2004)
Expenses	$321.5 million (2004)
Economic aid	recipient: $67 million from US (2005)
Main data source: CIA World Factbook All values, unless otherwise stated, are in US dollars
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Tajikistan was the poorest country in Central Asia following a civil war in 1991. With foreign revenue precariously dependent upon exports of cotton and aluminium, the economy is highly vulnerable to external shocks. In fiscal year (FY) 2000, international assistance remained and essential source of support for rehabilitation programs that reintegrated former civil war combatants into the civilian economy, thus helping keep the peace. International assistance also was necessary to address the second year of severe drought that resulted in a continued shortfall of food production. Tajikistan's economy grew substantially after the war. The GDP of Tajikistan expanded at an average rate of 9.6% over the period of 2000-2004 according to the World Bank data. This improved Tajikistan's position among other Central Asian countries (namely Turkmenistan and Uzbekistan), which have degraded economically ever since.^[1] As of March 2007 57% of Tajikistan citizens live below the poverty line.^[2]

Contents 1 Economic history 2 Gross domestic product 3 Industries 3.1 Agriculture 3.2 Forestry 3.3 Fishing 3.4 Mining and Minerals 3.5 Industry and Manufacturing 3.6 Energy 3.7 Services 4 Labor 5 Currency, exchange rate, and inflation 6 Government budget 7 Foreign economic relations 8 References

[edit] Economic history

This is a chart of trend of gross domestic product of Tajikistan at market prices estimated by the International Monetary Fund with figures in millions of ruling currency.

Year	Gross Domestic Product	US Dollar Exchange
1995	65,000	123.33 Tajikistani Rubles
2000	1,807	1.82 Somoni
2005	7,201	3.11 Somoni

For purchasing power parity comparisons, the US Dollar is exchanged at 0.82 Somoni only. Average wages in 2007 hover around $2-3 per day.

The Tajikistani economy has been gravely weakened by six years of civil conflict and by the loss of subsidies from Moscow and of markets for its products. Tajikistan thus depends on aid from Russia and Uzbekistan and on international humanitarian assistance for much of its basic subsistence needs. Even if the peace agreement of June 1997 is honored, the country faces major problems in integrating refugees and former combatants into the economy. The future of Tajikistan's economy and the potential for attracting foreign investment depend upon stability and continued progress in the peace process.

Current GDP per capita of Tajikistan shrank by 67% in the 1990s.^[3]

Despite resistance from vested interests, the Government of Tajikistan continued to pursue macroeconomic stabilization and structural reform in FY 2000. In December 1999, the government announced that small-enterprise privatization had been successfully completed, and the privatization of medium-sized and large-owned enterprises (SOEs) continued incrementally. The continued privatization of medium-sized and large SOEs, land reform, and banking reform and restructuring remain top priorities. Shortly after the end of FY 2000, the Board of the International Monetary Fund gave its vote of confidence to the government's recent performance by approving the third annual Poverty Reduction and Growth Facility Loan for Tajikistan. Improved fiscal discipline by the Government of Tajikistan has supported the return to positive economic growth. The government budget was nearly in balance in 2001 and the government’s 2002 budget targets a fiscal deficit of 0.3% of GDP, including recent increases in social sector spending.

[edit] Gross domestic product

In 2005 Tajikistan’s GDP grew by 6.7 percent, to about US$1.89 billion, and growth for 2006 was about 8 percent, marking the fifth consecutive year of annual growth exceeding 6 percent. The official forecast for GDP growth in 2007 is 7.5 percent. Per capita GDP in 2005 was US$258, lowest among the 15 countries of the former Soviet Union. In 2005 services contributed 48 percent, agriculture 23.4 percent, and industry 28.6 percent to GDP.^[4]

[edit] Industries

[edit] Agriculture

Although the government has announced an expedited land reform program, many Soviet-era state farms still existed in 2006, and the state retains control of production and harvesting on privatized farms. Privatization of cotton farms has been especially slow, and unresolved debts of cotton farmers remained a problem in 2006. In the early 2000s, the major crops were cotton (which occupied one-third of arable land in 2004 but decreased after that date), cereals (mainly wheat), potatoes, vegetables (mainly onions and tomatoes), fruits, and rice. More than 80 percent of the 8,800 square kilometers of land in use for agriculture depends on irrigation. Tajikistan must import grain from Kazakhstan and Uzbekistan.^[4]

[edit] Forestry

About 5 percent of Tajikistan is wooded, mainly at elevations between 1,000 and 3,000 meters. No forest region is classified as commercially usable; most are under state protection. Wood production is negligible, but local inhabitants harvest non-wood forest products.^[4]

[edit] Fishing

Streams and lakes produce a limited amount of fish, and some fish is produced by aquaculture. In 2003 some 158 tons of fish were caught and 167 tons raised on fish farms.^[4]

[edit] Mining and Minerals

Tajikistan has rich deposits of gold, silver, and antimony. The largest silver deposits are in Soghd Province, where Tajikistan’s largest gold mining operation also is located. Russia’s Norilsk nickel company has explored a large new silver deposit at Bolshoy Kanimansur. Tajikistan also produces strontium, salt, lead, zinc, fluorospar, and mercury. Uranium, an important mineral in the Soviet era, remains in some quantity but no longer is extracted. Fossil fuel deposits are limited to coal, of which about 30,000 tons are mined annually. Tajikistan’s extensive aluminum processing industry depends entirely on imported ore.^[4]

[edit] Industry and Manufacturing

The output of most industries declined sharply during the mid-1990s; despite widespread privatization, in the early 2000s industry rallied very slowly. In 2006 an estimated one-third of Tajikistan’s 700 major industrial enterprises were completely idle, and the remainder were operating at 20 or 25 percent of capacity. The causes are outmoded equipment, low investment levels, and lack of markets. To revitalize the sector, in 2006 the government was considering renationalizing some enterprises. Tajikistan’s only major heavy industries are aluminum processing and chemical production. The former, which provided 40 percent of industrial production in 2005, is centered at the Tursunzoda processing plant, the latter in Dushanbe, Qurghonteppa, and Yavan. Aluminum production increased by 6 percent in 2005. Some small light industrial plants produce textiles and processed foods, using mainly domestic agricultural products. The textile industry processes about 20 percent of domestically grown cotton. The expansion of light industry output contributed significantly to gross domestic product growth in 2005. The construction industry, about half of which is state-owned, has suffered from low investment in capital projects and from shoddy workmanship that has discouraged international contracts. However, new infrastructure projects and increased housing construction brought a 60 percent increase in output from 2004 to 2005.^[4]

[edit] Energy

Tajikistan has great hydropower potential, and has focused on attracting investment for projects for internal use and electricity exports. Tajikistan is home to the hydroelectric power station Nurek with the highest dam in the world.^[5] The latest development is the Russia's RAO UES energy giant working on Sangtuda-1 hydroelectric power station (670 megawatts (MW) capacity) commenced operations on 18 January 2008.^[6][7] Other projects at the development stage include Sangduta-2 by Iran, Zerafshan by Chinese SinoHydro and Rogun power plant with a projected dam height of 335 metres (1,099 ft) to be built by Russia's UES.^[8][9][10] Other energy resources include sizable coal deposits and smaller reserves of natural gas and petroleum.

[edit] Services

Throughout the early 2000s, the overall output of the services sector has increased steadily. The banking system has improved significantly because of strengthened oversight by the National Bank of Tajikistan, relaxed restrictions on participation by foreign institutions, and regulatory reform. The system includes 16 commercial banks and the central bank, or National Bank. The state controls the system, although in principle most banks have been privatized. An internationally assisted restructuring program was completed in 2003. Banks provide a narrow range of services, concentrating on providing credit to state-owned enterprises. Only an estimated 10 percent of the capital in Tajikistan moves through the banking system, and small businesses rarely borrow from banks. Despite substantial potential, the tourism industry, which was eliminated by the civil war, has not re-established itself since the war because of poor infrastructure, lack of promotion, and security concerns. Some small insurance companies began operations in the early 2000s.^[4]

[edit] Labor

In 2003 Tajikistan’s active labor force was estimated at 3.4 million, of whom 64 percent were employed in agriculture, 24 percent in services, and 10 percent in industry and construction. After declining in the early 2000s, the real wages of state employees were raised in 2004 and 2005. Because of the continued dominance of state farms, the majority of workers are government employees, although only a small number rely completely on wages. Driven by high unemployment, in 2006 an estimated 700,000 workers found seasonal or permanent employment in Russia and other countries. Their remittances, estimated at US$600 million in 2005, are an important economic resource in Tajikistan; in 2004 an estimated 15 percent of households depended mainly on those payments. In 2006 the average wage was US$27 per month. The national unemployment rate was estimated unofficially as high as 40 percent in 2006, but in rural areas unemployment has exceeded 60 percent. Unemployment has been higher in the southern Khatlon Province than in the northern Soghd Province.^[4]

[edit] Currency, exchange rate, and inflation

The somoni was introduced in 2000 to replace the Tajikistan ruble, which had been the currency since 1991. Since 2001 the exchange rate has remained relatively stable. In January 2007, some 3.21 somoni equaled US$1.^[4]

Throughout the post-Soviet era, inflation has been a serious obstacle to economic growth and improvement of the standard of living. For the years 2001–3, Tajikistan’s inflation rates were 33 percent, 12.2 percent, and 16.3 percent, respectively, but in 2004 the rate fell to 6.8 percent, and the rate for 2005 was 7.1 percent. In late 2006, inflation approached the 10 percent level. The official forecast for 2007 is 7 percent.^[4]

[edit] Government budget

The year 2004 was the first year of budget deficit after three consecutive years of budget surpluses, which in turn had followed four years of deficits between 1997 and 2000. In 2005 revenues totaled US$442 million (aided by improvements in tax collection), and expenditures were US$542 million, a deficit of US$100 million. The approved 2007 state budget calls for revenues of US$926 million and expenditures of US$954 million, leaving a deficit of US$28 million.^[4]

[edit] Foreign economic relations

In the post-Soviet era, Tajikistan has substantially shifted its markets away from the former Soviet republics; in 2005 more than 80 percent of total exports went to customers outside the Commonwealth of Independent States (CIS), including more than 70 percent to countries of the European Union (EU) and Turkey. However, because most of Tajikistan’s food and energy are imported from CIS countries, in 2005 only about 53 percent of total trade activity was outside the CIS. In 2005 the top overall buyers of Tajikistan’s exports, in order of value, were the Netherlands, Turkey, Russia, Uzbekistan, Latvia, and Iran. Besides aluminum, which accounts for more than half of export value, the main export commodities are cotton, electric power, fruits, vegetable oils, and textiles. In 2005 the largest suppliers of Tajikistan’s imports, in order of value, were Russia, Kazakhstan, Uzbekistan, Azerbaijan, China, and Ukraine. Those import rankings are determined largely by the high value of fuels and electric power that Tajikistan buys from its neighbors. Another significant import is alumina (aluminum oxide) to supply the aluminum industry. The major suppliers of alumina are Azerbaijan, Kazakhstan, and Ukraine.^[4]

Tajikistan has suffered trade deficits throughout the post-Soviet era. In 2003 the deficit was US$97 million, based on exports of US$705 million and imports of US$802 million. In 2004 exports were worth US$736 million and imports, US$958 billion, creating a trade deficit of US$222 million. The deficit increased again in 2005, to US$339 million, mainly because cotton exports decreased and domestic demand for goods increased.^[4]

In 2005 the current account deficit was US$86 million, having shown a general downward trend since the late 1990s. The estimated current account deficit for both 2006 and 2007 is 4.5 percent of GDP, or about US$90 million in 2006. In 2005 the overall balance of payments was US$14 million. The estimated overall balance of payments for 2006 is US$8 million.^[4]

At the end of 2006, Tajikistan’s external debt was estimated at US$830 million, most of which was long-term international debt. This amount grew steadily through the 1990s and early 2000s because of state borrowing policy. In 2004 Tajikistan eliminated about 20 percent of its external debt by exchanging debt to Russia for Russian ownership of the Nurek space tracking station, and by 2006 rescheduling negotiations had reduced the debt by about two-thirds as a percentage of gross domestic product.^[4]

In the early 2000s, foreign direct investment has remained low because of political and economic instability, corruption, the poor domestic financial system, and Tajikistan’s geographic isolation. The establishment of businesses nearly always requires bribing officials and often encounters resistance from entrepreneurs with government connections. To attract foreign investment and technology, Tajikistan has offered to establish free economic zones in which firms receive advantages on taxes, fees, and customs. In 2003 foreign direct investment totaled US$41 million; it increased to US$272 million in 2004 because of the debt-reduction transaction with Russia. In the first half of 2005, the figure was US$16 million. Beginning in 2005, the Russian Rusal aluminum company resumed operations to complete the hydroelectric station at Rogun on the Vakhsh River and expand aluminum production at the Tursunzade plant. That plant was scheduled for possible sale to Rusal in 2007. Also in 2005, Russia and Iran resumed work on the Vakhsh River Sangtuda hydroelectric project. Gazprom, the Russian natural gas monopoly, allocated US$12 million for oil and gas exploration in Tajikistan in 2007 after spending US$7 million in 2006. In 2005 the Russian telecommunications company VimpelCom bought a controlling share of Tajikistan’s Tacom mobile telephone company. As of 2006, Turkey tentatively planned to invest in a luxury hotel and a cotton processing plant.^[4]

[edit] References

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