Tajikistan 'B-/B' Ratings Affirmed; Outlook Remains Stable

27 February 2018 — Marina MAGNAVAL
Tajikistan's strong economic growth is expected to continue in 2018-2021, primarily supported by public investments. At the same time the country's economic base remains narrow, with a high dependency on remittances from Russia and very low GDP per capita, according to the report of S&P.

The S&P ratings on Tajikistan are supported by its resilient growth prospects, underpinned by public investments and are constrained by Tajikistan's narrow export base (primarily cotton, processed alumina, and electricity) and its weak external position due to a trade deficit and a remaining reliance on workers' remittances, largely coming from the Russian Federation. At $805, Tajikistan's per capita GDP is among the lowest of all the sovereigns, despite 7.1% real GDP growth in 2017.

Tajikistan has been politically stable since the late 1990s, when it ended a long civil war and recovered from a substantial economic decline following the collapse of the Soviet Union. This stability as centered on President Emomali Rahmon, who has ultimate decision-making power, and is currently serving his fourth consecutive term, which ends in 2020.

S&P projects that Tajikistan's GDP per capita will remain low, at $900 on average in 2018- 2021, down from $1,106 in 2014, primarily reflecting the sharp depreciation in the local currency, the Tajikistani somoni (TJS), in 2015. The National Bank of Tajikistan (NBT) decreased the scale of interventions to support the local currency in 2016-2017, accumulating some reserves while relaxing a number of constraints on the foreign-exchange operations it had imposed in 2015. During 2017 the somoni depreciated by another 12% against the U.S. dollar (following 13% depreciation in 2016).

In 2017, consumer price inflation stood at 6.7% (compared with 6.1% in 2016) according to official statistics. Tajikistan's economy is reliant on agriculture, mineral resources, remittances from abroad, and key export prices. Given low incomes, consumption is also highly sensitive to key import prices, particularly of food and fuel. S&P projects that inflation will stay within the NBT's target of 7% over the next few years, due to the gradual rise of the oil price, especially in somoni terms, as well as ongoing increases in regulated electricity tariffs.

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