DUSHANBE, August 4, 2014, Asia-Plus -- The World Bank Group (WBG)’s Country Partnership Strategy (CPS) for Tajikistan designed for 2015-2018 notes that Tajikistan has reached an important turning point in its economic, political, and social development.  Looking ahead, the authorities’ goals for 2020 are reportedly ambitious: to double GDP, to reduce poverty to 20 percent, and to expand the middle class.  During the previous CPS, poverty declined from 47 percent in 2009 to an estimated 36 percent in 2012, enabling the incomes of the bottom 40 percent of society to grow faster than the population at large.  However, poverty reduction for women was lower than for men and MDGs for maternal and child health and access to clean water and sanitation will not be achieved.  Moreover, other non-monetary indicators of poverty increased in urban areas, particularly access to heating and sanitation, affecting the welfare of the growing middle class.

This CPS notes that Tajikistan will not achieve its goals for 2020 without fundamentally altering its current consumption-driven growth model, which is ultimately unsustainable.  Fuelled by the remittances of migrant workers now totaling nearly half of GDP, as well as higher wages in state-owned enterprises (SOEs), the service sector is expanding while the small industrial sector is contracting.  Job creation is insufficient to absorb the youth bulge and wage growth has outpaced that of labor productivity.

This CPS would meet country and the WBG’s corporate goals—to reduce extreme poverty and promote shared prosperity—by supporting the expansion of opportunities for private firms and poor and vulnerable groups.

This CPS would meet country and the WBG’s corporate goals—to reduce extreme poverty and promote shared prosperity—by supporting the expansion of opportunities for private firms and poor and vulnerable groups.  To increase shared prosperity, the CPS targets interventions to benefit new private firms, small farmers, youth and women.  Specifically, through a mix of lending, analytical and advisory services (AAA), and technical assistance, it would: strengthen the role of the private sector (by reducing business transaction costs, increasing access to finance, improving electricity supply, and promoting agribusiness); promote social inclusion (by improving delivery of public services, particularly education, health, social assistance, water supply and sanitation, and citizen engagement); and expand regional connectivity (through better access to markets and knowledge through information and communications technology (ICT), institutional cooperation, and learning networks).

At the same time, investments in climate adaptation and climate-smart practices would help create jobs and thus reduce migration as a coping strategy.  To address extreme poverty, the CPS would support government plans to adopt and implement nationwide a targeted poverty benefit.

Within this framework, the CPS’ indicative program includes a programmatic series of three development policy loans (DPOs) commencing FY16 designed to achieve three ‘stretch’ goals.  Proposed ‘stretch’ goals to achieve higher growth would be: (a) to expand credit for the ongoing commercialization of agriculture through the resolution of Agroinvestbonk (AIB)—preferably involving a foreign investor and management contract.  This would be the first step towards modernizing the banking system, leading to increased public trust and savings; (b) to increase the reliability of electricity supply through measures to improve the financial viability of Barqi Tojik, the state-owned energy utility; and (c) to boost regional connectivity and reduce transport and transaction costs by the further liberalization of aviation and telecommunications.

In summary, this CPS seeks to help lay the foundation for Tajikistan to transition to a new growth model led by investment and exports.  It will involve assisting the authorities to define and then implement during the next few years a new, more sustainable growth model that allows more space for the private sector.  If conditions to implement ‘stretch’ goals through DPOs do not materialize, the CPS would nevertheless contribute to a greater role for the private sector by foundational reforms and to poverty reduction and shared prosperity through investment in basic human needs, social services, and infrastructure.