2013年-世界发展银行全球_Tajikistan_Government_Expenditures___Size_Composition_and_Trends_44页_1mb

Summary of Policy Notes on Public Expenditures in Tajikistan

Core Content

This policy note provides an analysis of Tajikistan's public expenditures, fiscal stance, and management issues, focusing on the country's economic and social development context. It highlights the role of remittances in driving growth and poverty reduction, the challenges posed by external vulnerabilities, and the need for improved fiscal management and public service delivery.

Main Messages

• Poverty reduction and fiscal consolidation are on track, driven by robust growth and significant remittance inflows.
• External shocks remain a major risk to the economy and government budget, especially from fluctuations in remittances, fuel and food prices, and disruptions in transit trade.
• Quasi-fiscal activities in state-owned enterprises (SOEs) and directed lending programs pose a threat to fiscal consolidation.
• Public finance management (PFM) needs strengthening to ensure efficient use of resources and better alignment with long-term goals.
• Capital spending is disproportionately high, particularly in the energy sector, which may crowd out essential social and maintenance expenditures.
• Tax reform is a priority, as the current system is seen as cumbersome and a constraint to private sector growth.

Key Trends in Government Spending

• Government spending has remained relatively stable, averaging around 28.5 percent of GDP in 2011.
• Capital spending is significantly higher than the average for low and lower middle-income countries, reaching 14.4 percent of GDP.
• The domestically-financed capital budget has increasingly focused on power generation, while external financing has been directed toward transport connectivity.
• Current expenditures have risen mainly due to increased wage bills and transfers to households.
• The Rogun Hydropower Project (HPP) accounts for one-third of domestic capital expenditures, raising concerns about the fiscal space being used for this project instead of other essential areas.

Fiscal Risks and Challenges

• Quasi-fiscal deficits in the power sector have been reduced from 6% of GDP in 2007 to 1% in 2011.
• SOE arrears have increased sharply, reaching 18.5% of GDP in accounts payable and 7.4% in accounts receivable by early 2013.
• Directed lending through commercial banks has distorted the market, misallocated credit, and undermined the financial sector's stability.
• The cost of bailing out failed banks reached 2% of GDP in 2012, equivalent to the health sector budget.
• Fiscal buffers need to be rebuilt to enhance resilience to external shocks.
• The fiscal stance is fragile due to SOE and public financial institution quasi-fiscal activities.

Macroeconomic Context

• Remittances have become a key driver of growth, increasing from 5% of GDP in 2002 to 47% in 2012.
• GDP growth averaged 8% over the past decade, with poverty declining from 96% in 1999 to below 40% in 2012.
• Structural reforms and donor support have played a crucial role in maintaining growth and reducing poverty.
• Despite progress, access to and quality of public services—such as education, health, and electricity—remain poor, with low satisfaction and frequent outages.
• Economic and fiscal vulnerabilities persist due to dependence on remittances, fuel, and food imports, as well as transit trade disruptions with Uzbekistan.

Budget Revenues and Tax Reform

• Budget revenues have increased over the years, with tax revenues growing steadily.
• The tax system is seen as cumbersome, hindering private sector development.
• Tax reform aims to simplify the system and increase efficiency, with the new Tax Code providing an opportunity for reform.
• Initial implementation of the tax reform may result in revenue losses, which should be offset by improved tax collection and broadened tax base.
• The impact of tax reform on micro-entrepreneurs is under review, as some large firms are abusing the patent system.

Recommendations

• Maintain macroeconomic stability and build fiscal buffers to withstand external shocks.
• Assess and avoid fiscal risks from SOEs and directed lending programs.
• Strengthen the public finance management system to improve efficiency and effectiveness.
• Review and align public spending with long-term strategy and population needs.
• Link investment and recurrent budgets and ensure that investment programs are coordinated.
• Carefully assess the viability of large-scale investment projects, especially the Rogun HPP, to ensure they do not crowd out other essential expenditures.
• Establish a feedback loop with the private sector to monitor the impact of tax reform and make timely adjustments.

Conclusion

Tajikistan has made significant progress in poverty reduction and fiscal consolidation, but external vulnerabilities and quasi-fiscal risks remain a concern. The government must balance capital spending with core social and maintenance expenditures, and improve the quality of public services. Tax reform and enhanced public finance management are essential for achieving fiscally sustainable development.