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Tajikistan: IMF Urges Priority Given To Wages, Pensions And Benefits

Washington 23 December 1998 (RFE/RL) -- Tajikistan has been urged by the Executive Directors of the International Monetary Fund (IMF) to give priority to the payment of wages, pensions and social benefits even as the government keeps a tight control on the budget and tries to improve tax collections.

The advice came in Tajikistan's annual member review, called an Article Four consultation, conducted by the directors of the IMF on December 17th. It was publicly released Tuesday.

The 24 executive directors, chosen by the 183 member nations in the IMF either individually by the large countries or in groups of smaller nations, oversee daily operations of the fund.

In it's assessment of Tajikistan, the board welcomed parliament's adoption of the 1999 budget and a new tax code and said that while keeping restraint on outlays overall, wages, pensions and social benefits must be paid. In addition, it said, the inefficiencies of Tajikistan's cash compensation system underlined "the urgency" of a comprehensive reform of the social safety net.

In a background report prepared for the board, the IMF staff said Dushanbe had made good progress in macroeconomic stabilization, cutting inflation in 1998 to 2.1 percent, resuming economic growth in 1997 and strengthening it during 1998. Tajikistan recorded real GDP (gross domestic product) growth of 6.5 percent in the first nine months of the year, driven mainly by a rebound in agriculture, retail trade, and transport services.

However, the staff report notes, Tajikistan has suffered two serious external shocks -- first, the sharp decline of world market prices of cotton, Tajikistan's main export product, and secondly the effects of the Russian financial crisis.

The directors said that the Central Bank had unfortunately made the effects of those two external shocks worse by an expansion of directed credits into domestic industries,

The IMF board said Central Bank authorities have since realized their error and have helped recent steps to stem the deterioration of the country's external balanced by significantly restraining the domestic credits. The IMF directors urged Tajikistan to "persevere" with these and other adjustment efforts to restore confidence in the foreign exchange market and keep inflation under control.

The IMF staff said that implementation of structural reforms had been "mixed," and the directors said reforms had "fallen short." The directors said they stressed to Tajik authorities that now is the time to shift the emphasis in privatization to large scale enterprises where there have been start up problems.

The directors said that new asset revaluation procedures had to be applied transparently and that timely payments on sales contracts must be enforced more vigorously.

Progress in land reform and farm restructuring is also essential, said the IMF directors, if Tajikistan is to achieve it's agricultural potential and support export-led growth.

The directors recommended that Dushanbe accelerate the distribution of land certificates to private farmers in order to improve transparency and equity in the land distribution process.

In the banking sector, the IMF board welcomed steps taken so far in restructuring major banks, but said the authorities must be more Iforceful in revoking bank licenses and liquidating nonviable banks in a timely manner where this was necessary."

The IMF directors also stressed that economic recovery and progress in the peace process are closely related.