Reduction of refinancing rate by 1 percentage point

In order to take timely measures in connection with possible increase in the impact of risks associated with the COVID-19 pandemic as well as the possible reduction in risks of the internal inflation because of relative increase in supply due to collection of a new crop of agricultural products within the country, restriction of the export of certain food products in order to support the country's economy and implementing the monetary stimulus policy, the Monetary Policy Committee of the National Bank of Tajikistan at its next meeting has decided to reduce the refinancing rate by 1.0 p.p.

Inflation and influencing factors. According to the official figures, the annual inflation rate in March of this year has amounted to 9.3%, having increased by 1.5 p.p. compared to the same period of last year. It should be noted that the change in the price level is due to the influence of seasonal factors as well as supply factors and external pressures.

Expectations and risks. It should be noted that since the end of December 2019 due to the outbreak of the coronavirus epidemic in the People's Republic of China, the number of infected has reached hundred thousand and the number of deaths amounted to tens of thousands of people. The epidemic has already spread to many countries of the world. According to WHO data, before April 27, 2020, more than 2 million 971 thousand are infected with this disease. The number of infected in main trading partners of our country is: Turkey - 110.1 thousand, Russian Federation - 80.9 thousand, Kazakhstan - 2.7 thousand, Uzbekistan - 1.9 thousand, Afghanistan - 1.5 thousand and Kyrgyzstan - 682 people.

In the Russian Federation, which is one of the main strategic partners of Tajikistan, uncertainty, economic instability as well as the depreciation of the ruble and problems in the international trade already was observed due to the influence of the coronavirus. According to the IMF forecasts (April 2020), the growth rate of the Russian economy will decline by 5.5%.

It is also worth noting that on April 26, 2020, the price of Brent crude oil on world exchanges per barrel amounted to an average of USD 25.1 decreasing by 62.0% compared to December 31, 2019. The analysis shows that the price of oil is one of the main indicators of the Russian economy and its decline negatively affects the exchange rate of the Russian ruble. As of April 27, 2020, the exchange rate of the Russian ruble against the US dollar decreased by 20.7% compared to the beginning of the year.

Due to the COVID-19 pandemic, reduced demand, weakening economic activity and other factors, many central banks of foreign countries, in particular the eurozone countries: Russia, Turkey, the USA, Canada, Pakistan, Moldova, China, Armenia, Ukraine, Uzbekistan etc. began to implement a monetary stimulus policy to support their economy.

The spread of the COVID-19 pandemic has had a negative impact on the global economy. It can have a negative impact on the Tajik economy due to an increase in the influence of external factors including limiting the border movement of goods and lowering trade relations, which can cause a rise in prices for imported goods, a decrease in the investments, incomes of the population as well as a weakening of national currency and possible increase in the financial risks in credit financial institutions.

Monetary policy terms. Given the influence of possible above factors, the Committee has decided from May 1, 2020 to reduce the refinancing rate by 1 percentage point and set it at 11.75% per annum.