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Tajikistan - Economy and industry overview 2016/2020

Обновлено: 23 февр. 2022 г.

Mining sector, agriculture, transportation and retail sales supported by internal consumption of the households will support the current growth of the country. Renovation of old and setting in operation new power generation assets will help to expand power export potential of the country in several years. Commodity prices (metals) will drive the economy in the next few years.

Tajik economy expanded by TJS61,093.6min nominal terms while in real terms economy increased by 7.1%. Industrial production of the country grew by 21.3%. The major driver of industrial production was mining sector that increased by 22.5% and made up TJS4.5bn. Manufacturing output reached TJS11.7bn and registered 58.5% of growth. Electricity generation and distribution as well as steam, gas and water supply increased by 16.5% and made up TJS3.7bn. Electricity generation amounted to 18.1bn Kwatt/h that evidences 5.3% increase year over year. Agriculture grew by 6.8% and reached TJS24.6bn. Plant growing increased by 7.4% and reached 16.9bn. Cattle breeding made up TJS7.6bn and expanded by 5.6%. Fixed capital investments grew by 4.1% and amounted to TJS11,209m.

In 5M2017, industrial production in Tajikistan expanded by 11.8% yoy and amounted to TJS8.2bn. Fixed capital investments grew by 21% yoy and amounted TJS9.993m. In 1H2018, GDP increased by 7.2% by preliminary estimation.

In 2017, there were lifted the limits on electricity supply that were previously put due to decrepit electricity generating assets. For the furtherance of improving power supply security was decided to re-open nuclear reactor “Argus” in Dushanbe city under the agreement with ROSATOM. The project is worth of USD35m. The first turbines of the Rogun dam is planned to be set in operation in December 2018. The Nurek hydroelectric station is also undergo the reconstruction in the near future. In 2017, Tajikistan concluded a loan agreement with China at the amount of USD79m to reconstruct and construction of electricity transmission lines.

Provision of the energy security, expansion of logistics and transition potential of the country, provision of food security are the principle targets of the National Strategy of Development of Tajikistan until 2030. Currently these aspects of development predetermine the major tracks of current development of the country. Currently, according to the statement of Ministry of transport 12 road projects worth of USD700m is being implemented. There are projects to reconstruct road Dushanbe-Kulma (395km) with the project worth of USD568m, Qal'ai Khumb (80km) worth of USD238m, Vanj-Khorugh (163km) worth of USD200m and building of the road between Tajikistan-Pakistan through the territory of Afghanistan (83km) worth of USD215m.

Forecast: We base our economic projection for Tajikistan for 2018 on assumption that economy of the country will expand on growing global commodity prices (metals mostly). Growing labor migrants’ remittances will support internal consumption of the households. Transition potential of the country will be unlocked by participation in “One belt one road initiative” and CAREC programs. According to our model, the economy will expand by 7.1 percent in 2018 to reach TJS70.8bn. In 2019-2021, the economy will grow by 7.1-7.4% supported by mining, agriculture, expansion of transit transportation and internal consumption supported by remittances.


The major investor of Tajikistan will remain China in few years to come. The main sectors for investments will be mining industry, manufacturing (cement, aluminum, gold), transportation and road building, renovation and construction of the new power generating and transmitting facilities.

In 1H2018 there were invested USD77m in Tajikistan, however the investment income outflow increased to USD251m. Since the fourth quarter of 2016 we evidence an increasing outflow of investment income from the country that reached USD135m and slightly declined in 2Q2018 to USD115.4m. We believe that investment income deficit will expand further.

The development of metal industry in Tajikistan supported by the Chinese investments is a part of China’s investment priority in the country. China transfers its cement production facilities in Tajikistan to meet its internal regulations to fight pollution. Tajikistan uses produced cement to reconstruct transport facilities under China Silk Road Economic Belt (SREB) initiative and under the framework of the CAREC program and sends it for exports. Circa 90 percent of cement exports are produced by three Tajik-Chinese joint enterprises.

Source: NBT, company’s calculations

Tajikistan has produced 5.5 tons of gold in 2017 that was 11.2 percent more than in 2016. Annual gold production in Tajikistan averages 20 percent in the last four years. Tajik-Chinese Joint Venture (JV) Zarafshon produces 70 percent of gold in the republic. There are four gold mining companies in Tajikistan Tilloi Tojik; Tajik-Chinese JV Zarafshon; Tajik-Canadian JV Aprelevka; and China Nonferrous Gold Limited (100 percent belongs to China).

In the end of 2017, a Chinese metallurgical plant worth US57m was set in operation in Sogdiyskaya Oblast. On reaching its full capacity, the plant will produce 50 thousand tons of lead annually. In Tajik-Chinese industrial zone, Tajikistan plans to build other four metallurgical plants that will boost metal exports of the country. The major investor in the country is China that invests mostly in road infrastructure, metal mining, aluminum production, gold production and power generating and transmitting facilities. Almost 47.3% of investments were from China while investments from the Russian Federation accounted for 31.3%. The third largest investor is Switzerland with 6.8% of total investments in 1H2017.

Forecast: We believe that China will continue to dominate as a major investor in Tajikistan in few years to come. The development of mining industry and metallurgy related to the extracted metals as well as transition of Chinese exports to Europe will be the two major sectors of investments in the country. The third sector where China will expand its presence will be power sector (hydroelectricity generation and transmission, gas transit).


Inflationary pressure on the economy will originate mostly through the trade channel with the Russian Federation and Kazakhstan, especially through import of energy products. Growing remittances from the Russian Federation will stimulate domestic demand that will expand further leveraged by retail lending. Internal consumption will more or less stable to cause demand pulled inflation. TJS weakening to USD might produce pressure but it will be limited so far.

The inflationary pressure that resulted from the monetary expansion in the middle of 2017 to salvage the banks “too big to fail” (Tojiksodirotbank and Agroinvestbank) was combated by the NBT by increase of the refinance rate to 16%, introduction of restrictions on foreign currency conversion by individuals as well as by increase of the reserve requirements to 9 % in foreign currency and 3% in local currency. We believe that the vulnerability of the banking system remains and increase in money supply we evidenced in 2017 might occur again as the country is short of foreign currency reserves and has to service its external public liabilities. That might re-produce the inflationary pressure we evidence in 2017. The share of bad debts decreased from 43.3% to 32% in 1H2018.

The NBK’s monetary policy for 2018-2020 will be conducted within the framework of Strategy of monetary and foreign currency policy for the period of 2016-2020. The strategy formalizes the inflationary targeting policy of the NBT and sets inflation rate within 7% with 2% range up and down. The NBT will use refinance rate, money base and money supply as the main monetary instrument to fight inflation.

Source: NBT, company’s calculations

Current inflation by component is rather driven by non-food and payable services than by food prices. Non-food inflation is rather stable and supported by energy prices (+27.4% yoy) imported from the Russian Federation and Kazakhstan, as well as by consumer goods. Payable service prices grow since energy prices relayed to transportation costs (+7.2% yoy). Thus, prices for air-flights increased by 47.5%, especially air flights to Moscow by 60.2%, says the regulator. Food prices, on the contrary, were on decline and as of May-June evidenced deflation. Total consumer price inflation in 7M2018 made up 2.3% yoy.

Since the Russian Federation’s economy is projected to expand in 2018-2021 by 1.5% on average, labor migrants’ remittances will steadily inflow in Tajikistan. However, we do not expect a boost in household consumption since the local foreign currency exchange policy makes it difficult to accumulate hoardings in the foreign currency since there is a lack of it. Thus, the weakening USDRUB will erode the purchasing power as well as wealth of the local population. We believe savings will predominate over consumption. We also do not expect lending expansion in the country since there are a lot of zombie banks in the banking system.

Figure 6 CPI projections 2010-2021, %

Forecast: TJS FX rate will continue crawling devaluation against US dollar. Inflows of remittances as well as growing commodity prices will support the FX rate of the national currency and devaluation effects will not fuel inflation in 2018 provided the NBT will not re-apply monetary expansion to salvage the banking system. We do not expect inflation pass-through effect via international trade since inflation is the Russian Federation (circa 33 percent of imports) will be less than 4% and in Kazakhstan (circa 16 percent of imports), it will be less than 7 percent. Internal consumption will expand by not that much as to cause demand pulled inflation in the country.

FX rate

National currency of Tajikistan will remain under the pressure of expanding trade balance deficit, hefty external public debt that will slowly decrease and internal deficit of the foreign currency. Strict foreign currency rule on free exchange will make unofficial exchange market grow. Commodity prices will support the currency as well as remittances. Russian Ruble will produce wakening effect on USDTJS in 2018-2021.

The major foreign currency inflows go as remittances of labor migrants, as external loans and export proceeds. Remittances of labor migrants mostly go in the Russian rubles from the Russian Federation by wire transfers, therefore weakening of USDRUB affects USDTJS. Thus, in 2017 remittances amounted to USD2,536m (USD1,929m in 2016). Remittances of Tajik labor migrants to GDP ratio in 2017 stood at 34.4%. This is the largest channel of foreign currency inflow in Tajikistan. The second largest inflow of foreign currency is the external public debt that as of 2017 amounted to 47.8% of GDP. The thirds source of the inflows are the export proceeds that in 2017 made up USD1,198m (+33.3% yoy). Despite the copious inflows from labor migrants, external public repayment liabilities and widening trade balance lead to deficit of foreign currency in the country. USDRUB weakening also produces negative effect upon USDTJS exchange rate by aligning it down.

Figure 7 USDTJS foreign exchange projections, 2010-2021

There is foreign currency deficit in the country that becomes more obvious when occurs devaluation of the national currency. Thus, along with the official exchange market there exists black foreign currency market. In the middle of 2018, the NBT weakened the national currency to narrow the difference between official and unofficial exchange rates to 2%. In two recent, the regulator adopted several acts to stabilize the FX rate of the foreign currency. Thus, all money transfers received from the Russian Federation in RUB can be received locally only in the national currency at the FX rate set by the NBT. Under the second act of the regulator all exchange offices were closed in the country and the currency exchange can be done only in financial institutes. Presently, there is an acute deficit of US dollars in the financial system of the country.

Forecast: we believe that USDTJS exchange rate will weaken to by circa 10% to reach 9.2 in 2018F. In 2019-2021, it will weaken to 10.6 Tajik somoni for US dollar. The major drivers of the weakening will be external public debt, widening trade balance and expected devaluation of the Russian ruble. Exports of gold, silver and ores will support USDTJS foreign exchange from excessive weakening in the period.


Trade balance of Tajikistan will widen further since value of Tajik exports will be decreased by downtrend in global prices for precious metals and ores, while energy prices will be relatively high. Expansion of internal consumption supported by labor migrants’ remittances will ask for more consumer imports thus widening trade balance deficit that will expand circa 7% on average in 2018-2021. Weakening of USDTJS will favor exports and restrain excessive growth of imports.

According to the National Bank of Tajikistan, external turnover in 5M2018 made up USD1,684m. Exports reached USD429m while imports amounted to USD1,255m. Trade balance deficit widened from USD622m in May 2017 to USD826m in May 2018. In 2017, exports increased by 33.3% yoy and reached USD1,198m while imports decreased by 8.4% yoy and amounted to USD2,775m. Trade balance deficit in 2017 narrowed and made up USD1,577m (in 2016, USD2,132m).

Figure 8 External trade of Tajikistan, USDm

As of 2017, exports by product in Tajikistan consisted of mostly of ores and slag that amounted 35.1% of the total. The major importers of the Tajik ores and slag in 2016 (no data available for 2017) were Kazakhstan (77), Uzbekistan (12) and China (10). Previously the staple product of Tajikistan was aluminum and its share in exports reached 29-30% of the total. As of 2017, its share amounted 19%. The largest importer of the Tajik aluminum exports in 2016 was Turkey (72.4%), China (21.7%) and Iran (4.2%). The third largest item of the Tajik exports are gold, silver and precious stone that reached 16.4% in 2017. The largest importer of the Tajik gold and silver metals was Switzerland that imported 99.9% of it in 2016 (note: in 2016, the third largest export item was cotton). Cotton was the fourth largest item amounted 10.7% of the total in 2017. In 2016, Tajikistan exported cotton to Turkey (33.4%), Pakistan (21.15), Iran (20.8%) and the Russian Federation (14.6%). The four export items in 2017 amounted to 81.1% of the total while previously its share ranged between 77-80% that evidences growing concentration.

Mineral fuels, mineral oils and products of their distillation in imports made up 11.3% in 2017. In 2014-2017, we have seen the larger concentration of this item that slowly decreased from 18.2% in 2014 to 15.6% in 2016. The Russian Federation imported 59.5% of mineral products in 2016 to Tajikistan, while Kazakhstan and Turkmenistan imports accounted for 27.5% and 10.9%. Imports of electrical machinery and equipment amounted to 7.1% of the total and were expanding within 2014-2017. China was the largest importer of electrical machinery and equipment (61.5%) in the country in 2016 followed by the Russian Federation (11.1%).

Source: ITC, company’s calculations Source: ITC, company’s calculations

The third largest import item was machinery, mechanical appliances that made up 6.5% of imports in 2016 that also went mostly form China (76.8%) and the Russian Federation (4.7%). Articles of apparel and clothing accessories stood at 5.9% of the total and went mostly from China (73.6%) and Turkey (17.4%). Cereals was the fifth largest import item that made up 5.7% of imports in 2016. Kazakhstan was the largest cereals importer in Tajikistan in 2016 with 99.1% of the total. Iron and steel amounted to 5.1% and mostly were imported from China (47.7%), the Russian Federation (33.4%) and Kazakhstan (16.2%). Vehicles other than railway made up 5.0% and went from the Russian Federation (42.2%), China (28.5%) and Germany (14.7%). The above-mentioned items accounted for 46.5% of the total.

Forecast: commodity orientation of the economy will remain; however, development of energy complex and power transmission system will enable the country to export the electricity in the neighboring countries under the regional energy projects. Transition potential of the country will be realized to the full after the reconstruction of the transport arteries of the country.

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