Country Risk Rating

A high-risk political and economic situation and an often very difficult business environment can have a very significant impact on corporate payment behavior. Corporate default probability is very high. - Source: Coface

Business Climate Rating

The business environment is very difficult. Corporate financial information is rarely available and when available usually unreliable. The legal system makes debt collection very unpredictable. The institutional framework has very serious weaknesses. Intercompany transactions can thus be very difficult to manage in the highly risky environments rated D.


  • Abundance of natural resources (hydroelectric potential, cotton, aluminium, gold)
  • Untapped agricultural and tourism potential
  • Transit corridor between Uzbekistan, Kyrgyzstan, Afghanistan, Pakistan and China
  • Young population (50% under 25 years old)
  • Financial support from multilateral and bilateral donors, including China
  • Member of China's Belt and Road Initiative (BRI)


  • High dependence on the Russian economy, via transfers from expatriate workers (25% of GDP), and on China (7th largest export market, creditor and provider of 2/3 of total FDI)
  • High dependence on raw materials (cotton, aluminum) and low diversification of the economy
  • Tight control of the foreign exchange market and trade
  • Fragile and concentrated banking system, and expensive, poorly developed, directed and dollarized credit (50% of total)
  • Difficult geography (landlocked and 90% mountainous) and high vulnerability to natural disasters
  • Inadequate infrastructure (energy, water, transportation, health)
  • High poverty (26% of the population in 2019), poorly educated and unproductive workers
  • Limited role of the private sector, difficult business environment constraining FDI (1.8% of GDP)
  • Poor governance (corruption, organized crime, politicization of the judiciary)
  • Neighborhood with Afghanistan, risk of destabilization (terrorism on the rise, potential refugee flows)

Current Trends

Falling remittances from Russia depress growth

Growth is expected to slow sharply in 2022 due to declining remittances from expatriates working in Russia, a slowdown in investment, and worsening terms of trade. Remittances accounted for about 30% of GDP in 2021, with 58% of the total coming from Russia. The World Bank anticipates that remittances will contract by about 40% in 2022 as the Russian recession reduces employment for migrants, sharply hampering private consumption in Tajikistan (80% of GDP). Public investment, on the other hand, is expected to support domestic demand. However, it will slow, while an unattractive business climate limits private investment, despite a new tax code implemented in early 2022. Inflation will rise, reflecting high prices for energy and other imported commodities (mineral fuels, grain, wood, iron, and steel), wages and pensions, and electricity tariffs. Monetary policy will attempt to contain inflation and somoni volatility. However, a rise in the policy rate is limited by the demand for government budget financing: despite the war in Ukraine, the Central Bank has left its policy rate unchanged. Foreign exchange reserves could fall below USD 2 billion (less than six months of imports), as they would be used to pay for foreign currency interventions to support the somoni. However, gains in industry and emergency measures implemented by development agencies (United Nations, ADB, EBRD) to support consumption should help maintain a slight growth in 2022. Indeed, industrial activity is expected to increase by about 10% thanks to efforts to stimulate power generation, mining, and manufacturing. The contribution of net exports to growth will be negative as gold sales stabilize and oil prices are high.


High debt to China

In January 2022, a new tax code reduced tax rates and created new tax incentives to support entrepreneurship and growth. In addition, the government will continue its expansionary policy through high social spending, albeit decreasing as a percentage of GDP. Spending will increase, particularly in the health, energy, and agriculture sectors. It could be higher if arrears of state-owned enterprises are cleared, the somoni weakens again, or financial assistance is provided to unemployed migrants returning to Tajikistan. In sum, the budget deficit will widen. The government plans to cover any infrastructure-financing shortfall with external borrowing on concessional terms (USD 453 million expected in 2022). As a result, the external debt (48% of GDP), which is entirely public, will increase to about 88% of the total public debt. The debt service burden is already heavy, and the risk of over-indebtedness is high, while international reserves cover only one-third of the total debt. Should this risk materialize, the attitude of the Chinese Eximbank, the main creditor, would be decisive. This is in addition to the current account deficit, as the traditionally large trade deficit will widen due to higher import prices while remittances will decline. However, imports related to the Rogun hydroelectric project will be limited in anticipation of Tajikistan’s reconnection to the Central Asian power grid in 2022.


Maintaining dependence on Russia

Already influential through expatriate remittances, which can be stopped anytime, Russia is trying to strengthen its influence in Tajikistan. On 28 June 2022, Putin visited President Emomali Rahmon to establish a common position in Afghanistan. It is also expanding its cultural presence, as five new Russian language schools, built with Russian funds, are scheduled to open in September. In addition, Russian military base number 201 in Tajikistan is the largest Russia has outside its borders. Regular joint military exercises with Tajik forces show that the Russian troops will step in if problems arise, especially on the border with Afghanistan. However, the United States is trying to position itself as a viable alternative as a security guarantor. The U.S. embassy in Dushanbe will soon oversee work on the new border outpost with Afghanistan. Relations with Iran, once strained, are also improving. On 29 May 2022, Rahmon visited his Iranian counterpart, with whom greater security cooperation is envisaged. Seventeen cooperation agreements have been signed, and contracts worth USD 1 billion have been signed between companies from both countries.


On the domestic front, the President’s priority is to see his family retain power through his son, Rustam Emomali. Rustam was elected speaker of the upper parliament in April 2020, putting him in a prime position to succeed his father, who has ruled the country since the early 1990s. Finally, one of the main risks is in the ethnically Pamirian autonomous region of Gorno-Badakhshan (GBAO) in eastern Tajikistan, where new demonstrations in May were bloodily suppressed because of growing dissatisfaction with local representatives of the central government. The region is linked to cross-border drug trafficking and lies between Afghanistan and China’s Xinjiang region.


Coface (08/2022)