DUSHANBE, March 3, 3011, Asia-Plus  -- The National Bank of Tajikistan (NBT) has raised its refinancing rate to 9.0 percent from 8.25 percent set in November 2010.

According to the NBT press service, Tajik central bank adopted an appropriate decision on this subject on February 28, 2011.

The 2010 inflation in Tajikistan stood at 9.8 percent and an average monthly inflation rate in the consumer sector for 2010 was estimated at 0.8 percent.  Larger remittances from Tajik citizens working abroad and higher prices for grain imported from Kazakhstan and Russia are the main factors fuelling Tajik inflation.

We will recall that NBT changed the refinancing rate four times in 2009 and the 8-percent rate set in July 2009 was the lowest refinancing rate over the past six year.  In 2009, the refinancing rate was lowered from 10% on May 12 to 9% in late June.  Before that, the refinancing rate was lowered from 13.5% to 12% on January 28 and to 10 percent on May 12.

In 2008, the central bank changed the refinancing rate three times.  On April, the bank cut it from 16 percent on February 8 to 14.75.  On July 3, the refinancing rate was reduced from 14.75 percent to 14 percent and on November 19, it was reduced to 13.5 percent.

The highest refinancing rate was reported for October 2003 – 18.06 percent and the refinancing rate for December 2003 was 8.22 percent.

Refinancing refers to the replacement of an existing debt obligation with a debt obligation bearing different terms. The most common consumer refinancing is for a home mortgage.  Refinancing may be undertaken to reduce interest costs (by refinancing at a lower rate), to extend the repayment time, to pay off other debts, to reduce one''s periodic payment obligations (sometimes by taking a longer-term loan), to reduce or alter risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to raise cash for investment, consumption, or the payment of a dividend.

In essence, refinancing can alter the monthly payments owed on the loan either by changing the loan''s interest rate, or by altering the term to maturity of the loan.  More favorable lending conditions may reduce overall borrowing costs.  Another use of refinancing is to reduce the risk associated with an existing loan. Interest rates on adjustable-rate loans and mortgages shift up and down based on the movements of the various indices used to calculate them.  By refinancing an adjustable-rate mortgage into a fixed-rate one, the risk of interest rates increasing dramatically is removed, thus ensuring a steady interest rate over time.  This flexibility comes at a price as lenders typically charge a risk premium for fixed rate loans.