Tajikistan raises rate 4th time as inflation still rising

     Tajikistan's central bank raised its benchmark interest rate for the fourth time this year, saying this is in response to the potential risks to the economy from inflationary pressures and inflation expectations, with the purpose of the hike to ensure inflation returns to the bank's target.
     The National Bank of Tajikistan (NBT) raised its refinancing rate by another 25 basis points to 13.25 percent and has now raised it 2.50 percentage points following rate increases in February, April and July.
     Inflation in Tajikistan rose for the fourth consecutive month to 9.4 percent in August from 9.1 percent in July and the central bank said inflation this year is expected to be in the upper limit of its target range of 5.0 to 9.0 percent around a 7.0 percent midpoint.
     For the first 9 months of the year, NBT said inflation was 5.3 percent, with food prices up 3.8 percent, non-food prices 5.8 percent.
     Tajikistan, a former Soviet Union republic, is at the crossroads of Central Asia, bordering China to the east, Kyrgyzstan to the north, Uzbekistan to the west, and Afghanistan to the south.
     The economy relies heavily on remittances and tourism, with about one-third of its gross domestic product coming from money sent back from Tajiks working abroad, mainly in Russia.
     NBT said it was noteworthy that the outbreak of the COVID-19 pandemic last year, which led to a drop in tourism, services  and transport had "radically changed the structure of the world economy," along with the balance of supply and demand.

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Tajikistan raises rate 3rd time amid rising inflation

     Tajikistan's central bank raised its key interest rate for the third time this year, saying this move is in response to growing inflationary pressure and expectations, and aims to return inflation to its target range.
     The National Bank of Tajikistan (NBT) raised its refinancing rate by another 100 basis points to 13.0 percent and has now raised it 2.25 percentage points following earlier rate hikes in February and April.
     NBT is one of only three central banks, along with the Kyrgyz Republic and Kazakhstan, to have raised rates in the months leading up to the COVID-19 pandemic, but then quickly switched course as the global economy practically shut down and cut its rate twice to soften the impact.
     But by late January this year inflationary pressures were beginning to build and the central bank's first move was to raise reserve requirements and then followed this up with rate hikes.

     Tajikistan is the 4th central bank to raise its rates this week to curb inflation - following Kazakhstan, Kyrgyzstan and Hungary - and so far this year 20 central banks have raised their rates 36 times.

     NBT noted the global economy recovered rapidly in the first half of this year with the continued easy monetary policy by central banks in developed economies leading to a shortage of goods and raw materials in global markets, boosting prices and thus inflationary pressures and inflationary expectations.

     The rise in prices of goods imported to Tajikistan has boosted inflation at the same time that economic activity has recovered rapidly from the pandemic, the bank added.

     Inflation in the Central Asian republic, which borders China, Afghanistan, Kyrgyzstan and Uzbekistan, rose to 9.0 percent in June after easing to just above 8 percent in April and May from over 9 percent in the months from November through March.

     NBT targets inflation of 7.0 percent, plus/minus 2 percentage points.

     The central bank said the rise in inflation was mainly due to higher prices for basic necessities, such as meat, vegetable oil, potatoes, carrots, sugar and other products that are influenced by seasons, demand and supply. 

     With the level of aggregate demand worldwide expected to continue to improve, despite the continued spread of the pandemic, along with a recovery of the domestic economy, the central bank expects inflationary pressures to rise.

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Tajikistan raises rate on inflation after RRR also raised

     Tajikistan's central bank, one of the three central banks worldwide to have tightened monetary policy in the months prior to last year's outbreak of the COVID-19 pandemic, has raised its rate in response to rising inflation, the week after reserve requirements were raised.
     The National Bank of Tajikistan (NBT) raised its refinancing rate by 25 basis points to 11.0 percent in the first rate hike since January 2020 at a meeting on Feb. 5 by its monetary policy committee.

     "The decision is based on the prospect of the impact of the potential risks for the economy taking into account the increase in inflationary pressures and expectations," the bank said, adding the tightening aims to ensure inflation returns to its target range.

      Just before the pandemic broke out, NBT raised its rate by 50 points but then quickly reversed that tightening in April and July last year, cutting the rate by a total of 200 points.     

     The rate increase comes after the policy committee at an extraordinary meeting on Jan. 28 approved raising the reserve requirement for banks' domestic currency liabilities by 200 basis points to 3.0 percent, also citing the threat to its inflation target from rising pressure on prices.
      In April last year NBT temporarily cut banks' reserve requirement by 200 basis points to 1.0 percent from April 1 to Dec. 31, 2020, along with cutting the reserve requirement for foreign currency liabilities to 5.0 percent from 9 percent to provide immediate support for banks' need for liquidity.
     At its meeting on Jan. 28 the foreign currency reserve requirement was also raised back to 9 percent,

     NBT has frequently changed its interest rates in recent years and the most recent rate hike is the 8th change in rates -3 rate hikes and 5 rate cuts - since January 2018.

      In January and March 2018 NBT carried out two quick rate cuts by a total of 200 basis points but then in February 2019 the rate was raised 75 points. 

      But a few months later, in May 2019, NBT began easing again with a 150-point rate cut and continued again in November with another 100 point cut, followed by the 50-point hike in January 2020.

      Inflation in the Tajikistan, which borders China, Afghanistan, Kyrgyzstan and Uzbekistan, rose to 9.4 percent in December, topping NBT's target range of 7.0 percent, plus/minus 2 percentage points.

      The central bank noted that food prices had risen 13 percent and non-food prices 5.8 percent.

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Tajikistan cuts rate 2nd time as inflation decelerates

     Tajikistan's central bank lowered its key interest rate for the second time this year, citing a stabilization of global and domestic inflation expectations, and to support economic activity during the negative impact of the coronavirus pandemic.
     The National Bank of Tajikistan (NBT) cut its refinancing rate by another 100 basis points to 10.75 percent and has now cut it by 200 points this year following a similar-sized cut in April.
     But the refinancing rate is only 150 basis points below the start of this year as NBT in January raised its rate by 50 points due to rising inflationary pressures. 
     The central bank said inflation in Tajikistan - which borders China, Kyrgyzstan, Afghanistan and Uzbekistan - was 8.4 percent in June, down 0.3 percentage points from June 2019 after rising earlier this year due to a rise in the prices of basic food items as the outbreak of the virus caused a supply shortage of some items amid a low level of domestic competition and limited international trade.
     NBT targets inflation of 7.0 percent, plus/minus 2 percentage points and inflation eased to 10.0 percent in May from 10.6 percent in April.
     To help meet the needs for some imports, such as flour, wheat, sugar, oil, fuel, medicine and fertilizers, the NBT approved the use of 104.3 million somoni from the international reserves.
     This move helped ease some of the pressures on the exchange rate, the central bank said, along with the price level and since May prices and the exchange rate have been relatively stable.
     The exchange rate of the somoni, which replaced the Tajikistani ruble in 2000, has been depreciating since 2014 and on March 30 the central bank made what it said was a one-time correction in the official exchange rate to the U.S. dollar of up to 5 percent to ease market pressure.
    Today the somoni was trading at 10.2 to the dollar, 4.9 percent below its level at the start of 2020.
    Tajikistan's economy grew 3.5 percent in the first half of this year, boosted by a 9.2 percent rise in industrial production and an 8.2 percent rise in agricultural output, 4.0 percentage points below the same period last year due to the negative impact of the pandemic, which mainly hit services, construction and retail trade, NBT said.
     It added monetary stimulus worldwide and low inflation will lead to higher demand and a resumption of global growth in coming years. 
      Inflationary risks in Tajikistan, however, are likely to ease due to a relatively good harvest, lower demand from a decline in remittances, slower exports and slower economic growth, stable inflation in major trading partners, lower interest rates and a relatively stable foreign exchange market due to a decline in imports.
    NBT, which is moving toward inflation targeting, began lowering its key interest rate in January 2018 from 16.0 percent but then had to reverse course after a second rate cut and raise the rate in February 2019. 
     But in May last year it returned to the easing path and continued with another rate cut in November 2019 before it had to reverse course in January this year, shortly after the International Monetary Fund said tighter monetary policy might be needed to mitigate possible second-round effects from a rise in inflation.
     NBT is one of only six central banks to have raised rates this year in stark contrast to the 92 banks that have cut rates this year in response to the collapse of economic activity in March from measures worldwide to contain the spread of the COVID-19 pandemic.
     In May the IMF's executive board approved a disbursement of US$189.5 million to help Tajikistan meet urgent balance of payment and fiscal financing needs and help prevent severe economic and human disruption from the pandemic.

      The IMF forecast a 2.0 percent contraction in Tajikistan's economy while the budget  deficit could rise to 7.7 percent of gross domestic product.

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Tajikistan reverses course and cuts rate 1st time in 2020

    Tajikistan's central bank lowered its key interest rate for the first time this year, more than reversing a rate hike in January, to support the country's economy from damages from the coronavirus pandemic, ensure liquidity in the banking system and achieve stable inflation.
     The National Bank of Tajikistan (NBT) cut its refinancing rate by 100 basis points to 11.75 percent, its first cut this year after raising the rate in January by 50 basis points.
     NBT was one of only five central banks to raise rates this year but three of these - the Czech Republic, Kazakhstan and now Tajikistan - have more than reversed the earlier cuts and switched to accommodative monetary policy to ease the negative economic impact of the virus.
     Inflation in Tajikistan rose to 9.3 percent in March from 7.8 percent in February but NBT said the risks of inflation in the next quarter are now lower.
     Just as the spread of COVID-19 has negatively impacted the global economy, Tajikistan's economy has also been affected from reduced trade and investment, the limitation of cross-border relations, lower income, higher financial risks in financial institutions along with a deprecation of the somoni currency.
     Tajikistan's currency, the Somoni, which replaced the Tajikistani ruble in 2000, has been steadily deprecating since 2014 and on March 30 NBT made what it said was a one-time correction in the official U.S. dollar rate by up to 5.0 percent to ease the pressure in foreign exchange markets.
     Today the somoni is trading around 10.25 to the dollar,  down just over 5 percent from around 9.70 at the start of the year.
     NBT has been steadily lowering its rate since January 2018 in synch with falling inflation but a pickup in inflationary pressures last year forced the central bank - which is moving toward inflation targeting - to pause in its easing and raise the rate in February 2019.
    It then lowered the rate a few months later, in May and then November last year.
    But once again, inflation began trending upwards in the first quarter and in January this year the central bank raised the rate 50 basis points.
     The hike came a few weeks after the International Monetary Fund (IMF) said tighter monetary policy might be needed to mitigate possible second-round effects from a rise in inflation due to base effects and higher food prices.
     On April 8 NBT lowered its reserve requirements for financial institutions temporarily by 200 basis points to 1 percent from April 1 to Dec. 31, injecting 241.7 million somoni into the banking system.
    The reserve ratio for foreign currencies was lowered by 400 points to 5.0 percent.

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Tajikistan cuts rate another 100 bps as inflation eases

     Tajikistan's central bank cut its benchmark refinancing rate by another 100 basis points as inflation continued to decline in October due to the short-term drop in the price of domestic food products.
     The National Bank of Tajikistan cut its rate to 12.25 percent and has now cut it by a net 175 basis points this year following a 150-basis point cut in May when it reversed course after raising the rate by 75 points in February.
     The central bank said it expects an increase in capital flows and thus the exchange rate partly due to the U.S. Federal Reserve's policy stance which should strengthen the national currency and help stabilize inflation, which is expected to remain within the target level in the medium term.
     Tajikistan's inflation rate accelerated in the first half of this year to hit 8.8 percent in May and remained high until September until it dropped to 8.1 percent and then 7.3 percent in October.
     Tajikistan's central bank currently targets inflation of 7.0 percent, plus/minus 2 percentage points but has lowered the 2020 target to 6.0 percent, plus/minus 2 percentage points.
     Tajikistan's gross domestic product grew 7.2 percent in the first nine months of the year, down from 7.5 percent in the first six months.
     Tajikistan's currency the somoni, which replaced the Tajikistani ruble in 2000, has been steadily depreciating since 2014 and was trading at 9.69 to the U.S. dollar today, down 2.7 percent this year  and down 9 percent since the start of 2018.
     Dollarization of citizens deposits has been declining in recent years and has fallen to around 50 percent of deposits this year from over 70 percent in 2016.

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Tajikistan cuts rate 75 bps, sees no need for tight policy

      Tajikistan's central bank lowered its benchmark refinancing rate by another 75 basis points to 14.0 percent, saying it no longer needs to continue with a tight monetary policy due to the lower risk of inflation and a gradual stabilization of the external economy.
       The National Bank of Tajikistan has now cut its rate by 200 basis points this year following a 125-point rate cut in January.
        In 2016 and 2017 Tajikistan's central bank raised its rate by a total of 800 basis points - the last hike was in March 2017 - to curb inflation from a sharp depreciation of its somoni.
        Like other former Soviet republics, Tajikistan was hit hard by Russia's economic crises as remittances and exports plunged, weakening the somoni and triggering stress in the banking system and the insolvency of two large banks as non-performing loans soared and banks had open foreign exchange positions and foreign exchange lending to borrowers.
        But inflation has been declining steadily since hitting 9 percent in June 2017 and the central bank forecast inflation will continue to decline in the first half of 2018 and then remain within its target range of 7.0 percent, plus/minus 2 percentage points.
        Inflation in Tajikistan - located west of China, north of Afghanistan and east of Uzbekistan - fell to 5.2 percent in February from 6.5 percent in January and 6.7 percent in December on lower prices of basic consumer goods, such as flour, rice, vegetable oil and vegetables.
        Due to a more balanced monetary policy and limited pressure on inflation from the exchange rate, the central bank said core inflation was 1.9 percent.

        The potential risks to inflation are mainly related to seasonal supply shocks, a possible fluctuation in the exchange rate along with external factors, such as the monetary policy of the U.S. Federal Reserve and the geopolitical situation, the central said.

        The exchange rate of Tajikistan's somoni has been stable since May last year and was quoted at 8.82 to the U.S. dollar, unchanged this year but down 10.6 percent since the start of 2017.
        Tajikistan's Gross Domestic Product grew by an annual 7.1 percent in the fourth quarter of last year, up from 6.8 percent in the third quarter.

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Tajikistan raises rate another 350 bps to support somoni

    Tajikistan's central bank raised its benchmark refinancing rate by a further 350 basis points to 16.0 percent to reduce the potential risk of higher inflation, curb the depreciation of the national currency, lower the level of U.S. dollars used in the economy and maintain economic stability.
    The National Bank of Tajikistan has now raised its rate 500 basis points this year following a 150-point hike in February as the somoni has continued to drop.
    Last year the national bank raised its rate 300 points between April and July for a total increase of its benchmark rate of 800 points - a doubling of rates - from the start of 2016 until now.
    In a statement from March 20, the central bank also raised the ratio of required reserves in somoni deposits by 150 basis points to 3.0 percent and the ratio on foreign currency deposits by 200 points to 9.0 percent.
    To ease the negative impact on the amount of cash in circulation, the central bank established a 6-month refinancing rate of plus 2 percentage points and said it would establish a benchmark interest rate based on interbank rates.
    The somoni has been declining this year and was trading at 8.14 to the U.S. dollar today, down 3.2 percent this year while inflation eased to 5.3 percent in January from 6.1 percent in December.
    Last year Tajikistan's finance ministry forecast the somoni would depreciate in coming years to average of 9.6 in 2017, 10.4 in 2018 and 11.2 in 2019 with inflation at 7 percent in those years.
    In March 2016 Russia's central bank said the amount of money transferred to Tajikistan had fallen to $1.28 billion in 2015 from $3.8 billion in 2014 and $4.16 billion in 2013.
    Just as some of the other former Soviet republics, Tajikistan has been hit hard by Russia's economic crises and remittances have fallen sharply.
    There have been reports of liquidity shortage in Tajikistan's banking system and the country's government is in talks with the International Monetary Fund (IMF) and other international lenders about financial assistance.

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Tajikistan raises rate 100 bps on inflationary pressures

    Tajikistan's central bank raised its benchmark refinancing rate by 100 basis points to 6.90 precedent "due to the increased impact of inflationary pressures on the economy."
     But the National Bank of Tajikistan, which has raised its rate by 140 basis points this year, most recently by 110 points in May, added that it would also reduce the average interest rate on loans in the banking system and maintain a stable money supply.
     Inflation in September in the former-Soviet state of Tajikistan rose by 0.2 percent to 6.6 percent for cumulative inflation this year of 5.7 percent, according to the central bank.
     Tajikistan's government has said it expects consumer prices to rise by up to 7.5 percent this year from 3.7 percent in 2013.

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Tajikistan cuts rate 70 bps to 4.8 percent

    Tajikistan's central bank cut its benchmark refinancing rate by 70 basis points to 4.8 percent, reflecting lower inflationary pressures and the impact of external factors.
    The National Bank of Tajikistan, which cut rates by 100 basis points in 2013, said the cut should help lower the average rate of loans in the banking system.
    The central bank said on its website that monthly inflation in December was 0.3 percent for an annual rate of 3.7 percent.
    Tajikistan's Gross Domestic Product expanded by an annual 7.4 percent in the third quarter, slightly down from the second quarter's rate of 7.5 percent. The government had forecast 2013 growth of 7.4 percent following growth of 7.5 percent in 2012.

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Tajikistan cuts rate 60 bps to 5.5% as inflation drops

    Tajikistan's central bank cut its benchmark refinancing rate by 60 basis points to 5.5 percent, its second rate cut this year, reflecting lower inflationary pressures.
    The National Bank of Tajikistan, which has now cut rates by 100 basis points this year following a total cut of 330 basis points in 2012, also said the change in policy was aimed at lowering the average interest rate on loans in the banking system.
    Inflation in the central Asian country of Tajikistan fell to 4.6 percent in July from 6.10 percent in June and May.
    Tajikistan's Gross Domestic Product expanded by an annual 7.3 percent in the first quarter of this year, slightly down from 7.5 percent in the previous quarter. The government has forecast growth this year of 7.4 percent following 7.5 percent growth in 2012.

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Tajikistan cuts rate by 40 bps due to lower inflation

    Tajikistan's central bank cut its refinancing rate by 40 basis points to 6.1 percent in light of a decline in inflationary pressures and the impact of external factors.
    The National Bank of Tajikistan, which last cut its rate by 30 basis points in August last year, also said in a statement from July 9 that the rate cut should make implementation of monetary policy more effective and lead to a decline in average interest rates on loans in the banking system.
    Tajikistan's inflation rate eased to 5.6 percent in May from 5.9 percent in April while its Gross Domestic Product expanded by an annual 7.3 percent in the first quarter of 2013, down from a pace of 7.5 percent in the previous quarter.

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