TOPIC OF THE WEEK: Tajikistan sees large improvement in CA in 3Q23, thus allaying fears related to ability to repay debt

CAUCASUS / CENTRAL ASIA - Report 02 Feb 2024 by Ivan Tchakarov

Questions about fast-declining FX reserves in Tajikistan over the course of 2023 led us to investigate in more detail the reasons behind this development back in Nov. We concluded then that the precipitous decrease in FX reserves was almost exclusively driven by the steep deterioration of the current account position, whereby robust GDP growth spilled over to higher imports while remittances from Russia moderated. We, however, stressed that we were seeing some green shoots of improving external flows and, ultimately, argued that public external debt service is still manageable.

We had reached this conclusion on the basis of a more limited set of data, with the current account available only as of 2Q23 and FX reserves until Oct. The constant delay in reporting macro data is, unfortunately, always presenting challenges in analyzing the country in a timely fashion. The central bank has finally reported on the 3Q23 BoP data and end-2023 FX reserves, and they lend strong support to our view that, currently, Tajikistan does not face high risk of a debt default.

Hence, in this short note we review the latest CA data, which shows that it moved to a surplus of 4.8 percent of GDP in 3Q23 following the recorded deficits of 9.4 percent of GDP of GDP in 1Q23 and 1.2 percent of GDP in 2Q23. FX reserves also improved significantly later in the year as FX reserve cover has now inched up to lag only that of Uzbekistan in the CCA space.

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