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Tajikistan Debt Crosses a Red Line

External debt reached $2.9B at the start of 2018, crossing the psychologically important 40% debt-to-GDP ratio.

Tajikistan’s external debt reached $2.9 billion at the start of 2018, crossing the psychologically important 40 percent debt-to-gross domestic product ratio mark.  

While liabilities have increased by $600 million year-on-year, the much smaller amount of $147 million has been set aside this year for paying off outstanding debts. All this notwithstanding, Finance Minister Faiziddin Qahhorzoda said there are plans to raise an additional $200 million worth of loans in 2018, Asia-Plus news website reported on February 16.

“We are mainly getting credit from those financial institutions that are constant partners of our country. The country’s financial potential allows us to abide by our credit obligations in a timely and comprehensive manner,” Qahhorzoda said.

According to the Finance Ministry, as of the end of June, China was Tajikistan’s main creditor, holding half the country’s external debt. Tajikistan owes China’s state-owned Eximbank more than $1.2 billion dollars. Other creditors include the World Bank ($318 million), the Asian Development Bank ($278 million) and the Islamic Development Bank ($112 million).

Tajikistan has also dabbled in the private debt market. In 2017, its maiden eurobond offering raised another $500 million.

While Tajikistan’s 40.3 percent debt-to-GDP ratio might appear quite modest by the standards of profligate Western economies, many experts as a rule advise developing nations not to exceed that threshold. As the World Bank noted in a December update on Tajikistan economy, suggestively titled “Heightened Vulnerabilities Despite Sustained Growth,” a recently conducted Debt Sustainability Analysis “suggests that Tajikistan’s debt distress level rose from moderate to high … as several important indicators passed indicative thresholds.” This, the bank said, “reflects the country’s weakened ability to earn foreign exchange for servicing its external debt which started increasing at an accelerated pace.”

Even the government’s own public debt management strategy specifically states that external debt should remain below 40 percent. There are plans afoot, however, to raise that ceiling to 60 percent.

Just as well, since the crunch is coming, as the World Bank notes.

“Over 40 percent of Tajikistan’s total debt repayments fall due in the next five years, necessitating the continuation of ongoing fiscal consolidation efforts to accommodate these higher debt service obligations,” the bank said in the December report.

Tajikistan Debt Crosses a Red Line

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