Tajikistan has a fairly open economy, with an export to GDP ratio in 2001 of 61%. The foreign trade regime remains quite free, in spite of an increase in import duties in early 1999 following Tajikistan’s entry into a Customs Union.
Heavy specialization on cotton and aluminum production, which accounts from two thirds of exports, makes the republic dependent on world prices from these two export items, causing fluctuation in foreign currency flows. Significant fluctuation of world for cotton-fiber and aluminum occurred in 2001, created problems certain problems for producers.
Therefore, developing production of finished goods from local cotton fiber which is considered to have the quality in the region is one of the priorities..
Since independence, Tajikistan has had a current balance of payments deficit and has accumulated significant debts. The foreign trade deficit, in effect, replaced subsidies received by Tajikistan while part of the USSR.
Despite its flexible exchange rate policy since 1996, the current balance of payment deficit in 1998 reached 9.3% of GDP. In 2000 and 2001 the deficit increased to 6% and &% of GDP respectively, as the drought affect grain production and raised imports, and fuel prices increased.
With the view to foster trade, the Government took further measures to liberalized foreign trade regime, as a result of which foreign trade balance was positive (1.5% of GDP). In overall trade turnover increased by 8.9% and exceeded $US 1,4 billion.
The CIS countries accounted for 50% in foreign turnover. In 2002 the main importers of Tajik products were the Netherlands (29, 5%), Turkey (16.1%), Russia (11.9%), Uzbekistan (9.8%), Switzerland (9.3%), and Hungary (5.4%).
Major export commodities include aluminum (54.2%) cotton (17.4%) and energy (13.6%). Major exporters to Tajikistan were mainly from the CIS countries, namely Uzbekistan (20.6%), Russia (17.7%), Kazakhstan (10.5%), and Turkmenistan (6.6%). Energy resources accounted for 56.7% of total import to Tajikistan, followed by vehicles, machinery and equipment (17.8%).
Traditionally, foreign borrowing was viewed as an additional to domestic saving to fill the gap between savings and investments with the view to accelerate economic growth.
As of January 1, 2003 the country’s foreign debt reached US$ 989.5 million which is 3% less than in 2002. The main multilateral creditors include the World Bank (19.1% of total foreign debt). IMF ((.5%) ADB (3.4%), EEC (5.3%), IDB (1.6%), OPEC (0.6%) and KFAED (0.1%). Among bilateral creditors the largest is Russia (30.2%) Uzbekistan (10.6%, USA and Turkey (2.0% each), Pakistan (1.3%) and Kazakhstan (1.2%).
IFIs and other donor organizations developed and started implementation of Country Assistance Strategies and projects aimed at rehabilitation of social, infrastructure, agriculture and power sector pursuing an overall objective of macroeconomic stabilization and introduction of structural reforms designed to ease and speed up transition to a market economy. General benchmarks included price and trade liberalization, privatization of state enterprises, land reform, creation of social safety nets, as well as legal an institutional reforms.