Increasethe refinancing rateup to 1.0 percentage points.

NBT’s Monetary Policy Committee during its regular meetingthat took place on July 27, 2021 made a decision No. 26 to increasethe refinancing rate up to 1.0 percentage points and set it at 13.0% per annum.

This decision was made taking into account theforecast of external and internal potential risks impact on economy against the backdrop of growing pressures and inflationary expectations. The main purpose of making such decision was to return inflation rate to the level of established indicator in the medium term.

Inflation rate and influencing factors. As expected, in the first quarter of this year, rapid recovery of global economic growth, downward trend in unemployment, world trade development and continuation of loose monetary policy on the part of developed countries led to a balance in the aggregate global supply and demand. These factors have caused the inflationary pressuresgrowth, including shortage of goods and products in world food commodity markets, as well as increase in their prices, increase of tariffs for goods transportation and intensive growth of inflationary expectations in many countries of the world.

The intensity of inflationary processes on the global scale had a negative impact on price level of imported goods in the country. Internal factors that led to price volatility in the first quarter of this year were rapid growth of the country's economy (real economic growth of 8.7%), increase in pace and volume of lending (64.25) including consumer lending (90.7%) as well as seasonal factors, income growth and bad weather.

According to statistics, the annual inflation rate in June this yearwas 9.0% which is 0.6% percentage points higher than in the same periodlast year. This growth was explained by increase in prices for food items by 10.5%, non-food items by 8.4% and cost of paid services to population by 5.1%.

This process was mainly facilitated by increase in prices for essential products such as meat products, vegetable oil, potatoes, carrots, granulated sugar and other food items, the price of which is sensitive to external seasonal factors, as well as supply and demand factors.

The dynamics of growth in prices for essential goods is also observed in most countries of the region where the inflation rate exceeds the forecast indicator.

Expectations and risks. Inflationary pressures are expected to remain in 2021 due to uncertainty of the coronavirus (COVID-19) pandemic and likelihood of a rapid spread of this disease, as well as rising income and aggregate demand in the world, rising world food prices, bad weather, rising fuel prices, negative influence of other factors. At the same time, rapid credit growth and excessive economic growth lead to economic overheating causing increase in inflationary pressures.

The National Bank of Tajikistan, within its mandates with the view of overcoming the impact of potential inflationary risks and promoting stable economic growth, will continue implementation of effective monetary policy using effective instruments, in particular therefinancing rate.

Monetary policy terms. Taking into account the above mentioned factors, especially in relation to improvement of situation and forecast of the world economy, growth of aggregate demand in all countries and inflationary pressures, increase in world prices and inflationary expectations of population, members of the Committee proposed to increase the refinancing rate up to 1.0% from August 2, 2021 and set it at 13.0% per annum.

The National Bank of Tajikistan will continue to implement balanced monetary policy aimed at achieving a stable price level in the long term prospective.