World Bank Project Appraisal Document - GAFSP

I. STRATEGIC CONTEXT
A. Country Context
1. Tajikistan is the smallest and poorest of the Central Asian economies, with a population of 7.6
million, of whom 46% live below the poverty line. Robust growth in the last two years has expedited
recovery from the global financial crisis. Real gross domestic product (GDP) grew by 6.5% in 2010
and 7.4% in 2011 in response to a strong recovery of remittance income and increased agricultural
production. Per capita income increased from $US 771 in 2008 to $US 820 in 2010 as a result. The
economy remains highly vulnerable to exogenous shocks nevertheless, including regional trade and
border disputes, volatility in world prices for cotton and aluminum, and the continued crisis in the
euro-zone. Tajikistan’s high dependence on imported fuel and cereal exacerbates this vulnerability,
particularly given the prospect of rising future prices for these commodities and the continued
depreciation of its currency.
2. Prudent fiscal management has ensured that growth in public expenditure remains
commensurate with growth in public revenues, with a budget surplus of 0.5% of GDP (excluding
public investment) in 2011. But with tax revenue of only 20% of GDP the capacity to significantly
increase public expenditure is limited. High levels of external debt, a fragile banking system and low
institutional capacity further constrain the scope for increased public expenditure. Government’s
capacity to respond to adverse events thus remains weak, both in absolute terms and relative to the
needs of the estimated 3.5 million people who live below the poverty line. The capacity to fund public
investment is weak, for the same reasons. This combination of poverty and vulnerability, at both
macro and household level, continues to justify active support from the donor community to achieve
sustainable improvements in food security.
3. With 21% of GDP and 64% of employment, the agriculture sector has a major influence on the
performance of the Tajik economy. The sector accounted for 21% of aggregate economic growth from
2005-2010. 1 But with 77% of Tajikistan’s poor and a high exposure to risk (droughts, floods,
landslides, cotton price volatility, border and trade disputes), agriculture is also one of the most
vulnerable sectors of the economy. Measures to reduce the constraints to agricultural growth and the
sector’s vulnerability to adverse events can thus have a high impact on economic growth and poverty
reduction.
B. Sectoral and Institutional Context
4. Tajikistan’s agricultural resource base is characterized by limited arable land, a heavy reliance
on irrigation for crop production and substantial areas of permanent pasture. Of the 4.1 million
hectares of agricultural land, only 830,000 ha are arable, equivalent to 0.15 ha/capita of the rural
population. Around 85% (720,000 ha) of arable land is irrigated, but only 515,000 ha are currently in
use due to the deterioration of irrigation and drainage infrastructure, water logging and salinization.
Wheat, cotton, fruit and vegetables are the main irrigated crops. Livestock production relies mainly on
forage production and local grazing resources rather than the 3.3 million ha of permanent pasture,
1 World Bank Indicators, measured in constant (2000) $US
1