Tajikistan is a small, landlocked, low-income country located in Central Asia. It is the poorest of the Commonwealth of Independent States where 19.5 per cent of the population lives on less than $1.90 per day and 56.6pc lives on less than $3.10 per day.

Its economy is dominated by minerals extraction, metals processing, agriculture and reliance on remittances from overseas workers.

It has one of the lowest per-capita gross domestic products (GDP) among the 15 former Soviet republics. The country is rich in water resources. Large reserves of snow and glaciers are accumulated in the country.

Tajikistan has sought to develop its substantial hydroelectricity potential through partnership with Russian and Iranian investors. The government is pursuing completion of the Roghun dam, which would be the tallest dam in the world.

The energy market is an important area for economic opportunity. It produces hydropower for regional export and is heavily depended on international humanitarian assistance for much of its basic subsistence needs. The poor business climate remains a hurdle in attracting foreign investment.

In 2017, a recovery in remittances contributed to growth as well as narrowed the current account deficit. The economy grew by 7.1pc as the external environment strengthened and public investment continued.

Private consumption was boosted by a 32pc year-on-year increase in remittances from Russia. Strong growth is expected again this year, although it will moderate from 2017’s four-year high to 6pc in 2018 with tighter fiscal policy.

Healthy remittance inflows and higher wages stemming from a tighter labour market should buoy private consumption. The growth in 2019 will slightly recover to 6.5pc on gains in manufacturing and mining, higher remittances and the expanded replacement of imports with local alternatives.

The fiscal deficit hit 9.8pc of GDP in 2016, which narrowed to 2.4pc in 2017. Over the next two years, fiscal policy is expected to remain tight, with the budget deficit projected to remain at 2.5pc of GDP in 2018 and 2019.

Slower growth and constrained imports are projected to limit revenues to 30.2pc of GDP in 2018 and 30.9pc in 2019. Expenditure is forecast to equal to 32.7pc of GDP in 2018 and 33.4pc in 2019 while accelerated debt repayment and demand for public spending forecast to raise outlays.

Public and publicly guaranteed debt increased from 42pc of GDP in 2016 to about 50pc in 2017. Tajikistan’s external debt reached $2.9 billion at the start of 2018, crossing the psychologically important 40pc mark.

The government faces challenges financing the public debt as the National Bank of Tajikistan has aggressively spent its reserves leaving little space for fiscal or monetary measures to counter any additional economic shocks. Recent slowdowns in the Russian and Chinese economies, low commodity prices and currency fluctuations are hampering economic growth.

Turkmenistan

Turkmenistan is a desert-like country with a small population. Its economy depends mainly on oil, natural gas and agriculture.

The country has the fourth-largest reserve of natural gas in the world. Its economy benefits from the regular income from hydrocarbons and its limited exposure to international financial markets.

The public sector and state-owned monopolies continue to dominate the economy and the formal labour market. As the state dominates the economy, an estimated 90pc of workers are state employees.

Tight administrative controls and the public sector’s large overall role in economic activity remain the key obstacles to private-sector development and the economy continues to be characterised by pervasive state intervention and state ownership. Although agriculture accounts almost 8pc of GDP and employs nearly half of the country’s workforce, the agricultural production makes it the second-largest sector in the economy.

The country’s total export revenue dropped to $8-8.5bn in 2016-17, about half of what it was receiving between 2000 and 2014. According to the World Bank, the growth further slowed to 6.2pc in 2016. Officially reported 6.5pc growth in 2017 was supported by rising natural gas exports, import substitution and expansionary credit policies.

However, currency depreciation, corruption, isolationist policies and limited spending on public services have resulted in a stagnant economy. Turkmenistan is seen in deep economic recession as the state is running out of cash.

However, despite a 6pc growth rate, the economy faces a range of challenges. Meagre export growth has resulted in foreign exchange rationing by the central bank and heightened exchange-rate pressures.

In 2018, the government will be further pressured to cut costs by ceasing state programmes, ending social benefits and introducing and increasing fees for state-provided services. These changes will primarily affect the general public, which has already started to show its discontent. The World Bank projects 6.3pc growth in 2018. In the short term, economic growth could slow to 5pc in 2019.

Turkmenistan is trying to overcome foreign exchange scarcity by building new gas export routes, export diversification and import substitution. It plans to open new gas export markets by end-2019 via a pipeline to Afghanistan, Pakistan and India, currently under construction.

However, these effects will take time. Fiscal pressures prompted the government to set both revenues and expenditures of the 2018 state budget significantly lower than those budgeted for 2017. Public debt, which is relatively low at 25.9pc of GDP in 2017, is expected to rise to 30.2pc and 34.6pc in 2018 and 2019, respectively.

Published in Dawn, The Business and Finance Weekly, July 16th, 2018

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