Tajikistan needs to strengthen banks through finance reforms — ADB

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DUSHANBE (TCA) — Tajikistan’s economic growth is forecast to moderate in 2017, reflecting losses in the banking sector and weak remittances, says a new Asian Development Bank (ADB) report.

The Asian Development Outlook 2017 (ADO) forecasts growth in Tajikistan to come in at 4.8% in 2017, as high loan losses limit bank lending and weak remittances curb consumption, before picking up to 5.5% in 2018. In 2016, growth reached 6.9% thanks to higher public investment, the ADB country office in Tajikistan said on April 6.

“To support private sector development and sustained growth, Tajikistan needs urgent reforms to revive its banking and financial sectors,” said B. Chansavat, ADB’s acting Country Director for Tajikistan. “Short-run measures may include obtaining a sovereign country rating to promote foreign inflows, strengthening bank supervision, preventing cronyism in lending, and enhancing the affordability and accessibility of financial services.”

Over the medium-term, the country should raise the capital adequacy ratio to enhance confidence in the banking system, establish credit insurance and guarantee schemes to facilitate export financing, introduce more convenient and up-to-date banking facilities, and require banks to disclose their ownership and financial results.

In addition, the authorities should develop an effective stress-testing framework, introduce long-term foreign exchange risk hedging, and take steps to establish inflation targeting that could support the national currency over the medium-to-long term, the report further notes.

Inflation is forecast to accelerate to 8.0% in 2017 — reflecting higher liquidity as troubled banks are recapitalized, rising electricity tariffs and the cost of other public services, and continued currency depreciation — before easing back to 7.0% in 2018. In 2016, inflation reached 6.1%.

Tajikistan joined ADB in 1998. To date, ADB has approved over $1.5 billion in concessional loans, grants, and technical assistance to the country. ADB’s country partnership strategy with Tajikistan focuses on improved infrastructure, investment climate reforms, and improved food security.

Sergey Kwan

TCA