Institutional transformation of banking sector in Tajikistan

On January 17, 2022, the First Deputy Chairman of National Bank of Tajikistan Nuraliev Jamoliddin Kamolovich, as part of a practical seminar organized for students of the Tajik National University, made a presentation titled “Institutional transformations of the banking sector in Tajikistan through challenging economic circumstances. Rebuilding confidence”.

Opening the meeting, the Rector of the Tajik National University Kobiljon Khushvakhtzoda expressed his gratitude to the First Deputy Chairman of National Bank of Tajikistan Jamoliddin Kamolovich for preparing the presentation taking into account theory and experience of the banking system and international standards within the framework of the practical seminar. The professorial-teaching staff, PhD students and other students attended the presentation.

First Deputy Chairman of National Bank of Tajikistan Nuraliev Jamoliddin, in his turn, thanked the management of the Tajik National University for organizing the meeting, which aimed at increasing the level of knowledge and skills, as well as the developing of financial and economic thinking, expanding the economic horizons of youth, taking into account modern theory and practice.

“Today I would like to present you the topic “Institutional transformation of banking sector in Tajikistan through challenging economic circumstances. Rebuilding confidence” and I hope that in the current financial and economic conditions such meetings will undoubtedly contribute to expanding the horizons and thinking, scientific knowledge of our students and youth,” has said Nuraliev Jamoliddin.

At the beginning of the meeting, the First Deputy Chairman of National Bank of Tajikistan, Nuraliev Jamoliddin, introduced the main components of the presentation, which were about effective implementation of monetary and foreign exchange policies, main macroeconomic indicators, banking system development , stable development of the foreign exchange market, anti-crisis strategy, institutional reforms of the National Bank of Tajikistan for 2015-2921, measures taken by the NBT to prevent the impact of Covid-19 pandemic, future vision of the NBT. The presentation consisted of 74 slides, slides contained information on 160 different indicators for the last 11 years and accompanied by analysis and diagrams.

During the presentation, the First Deputy Chairman of National Bank of Tajikistan Nuraliev Jamoliddin talked about main macroeconomic indicators, in particular GDP, real economic growth, inflation and inflation volatility trends over the past 11 years (2011-2021). In part of monetary policy implementation, it was mentioned that there were transition processes from the traditional monetary targeting regime to a qualitatively new monetary policy regime - inflation targeting to ensure price stability and maintain stable inflation rate, which is one of the fundamental macroeconomic indicators to reduce uncertainty and negative expectations of the population, increasing confidence in the national currency. Also, the matters on rational reserves allocation, growth of domestic investment, creating favorable conditions for real economic growth and improve the wellbeing of the population, were touched upon. Moreover, Jamoliddin Kamolovich noted that from 2015 to present the development of a monetary policy strategy for 2016-2020 and 2021-2025 was initiated with the view to switch to inflation targeting regime, several surveys were conducted among the population on inflation expectations, certain work has been done to implement new effective monetary instruments in order to manage short-term liquidity and enhance open market operations, improve analytical capacity and forecasting (using empirical models), transit to new standards and methodologies of international statistics, introduce centralized automated platform for transparency of electronic trading, increase the impact of refinancing rate to inflation rate, ensuring transparency in monetary transactions, etc. As a result of conducted reforms, the inflation rate remained within the projected indicator and the stability of the national currency exchange rate was ensured.

Afterwards, the First Deputy Chairman of National Bank of Tajikistan spoke about the state of the banking system and the improvement of its structure as a result of the “transition from quantity to quality” reforms, which led to the improvement of banking system assets quality, decrease in non-performing loans, increase in adequacy and liquidity ratios, increase in lending volume over the past 6 years. It was noted that as a result of a qualitative improvement in the banking system, main indicators of financial stability, despite the exclusion of problem (insolvent) credit institutions from the banking system, remain at a high level compared to the indicators of some countries.

Trends in interest rates on loans and deposits were also covered during the presentation. Moreover, in was underlined that since 2015 there have been positive qualitative changes in the structure of total income, the share of interest income has increased compared to non-interest income in the total income of credit institutions, and financial intermediation was intensified.

Clarifying modern models for assessing the risk tolerance of the banking system using diagrams, Jamoliddin Kamolovich, using risk maps demonstrated vulnerability of the banking system to external factors in 2016 and a high level of resistance to them under the threat of the Covid-19 pandemic.

In the second part of the presentation, the attention of participants was focused on important institutional reforms, including creation of the National Processing Center on Remittances. The brand-new institutionally balanced model of the transparency of foreign exchange flows of the National Processing Center on Remittances was presented, which is aimed at ensuring institutional transparency, sound competition in the domestic foreign exchange market and development of the banking system at the qualitatively new and modern level.

While demonstrating slides on the National Processing Center on Remittances , Jamoliddin Kamolovich emphasized that establishment of this Center helped to eliminate risks associated with payment system liquidity, ensured healthy competition in the money transfer market, and significantly reduced risks of laundering proceeds from crime and terrorist financing and financing the proliferation of weapons of mass destruction. The center also gave impetus to the growth of the infrastructure of non-cash payments and over the period this center has been operating the number of payment cards increased by 1.3 million units (3.5 million units in total) and the number of electronic wallets increased by 10 times. This data was shown by Nuraliev Jamoliddin, First Deputy Chairman of NBT in diagrams.

During the presentation, detailed attention was given to such issues as the strategy for eliminating the crisis in the foreign exchange market and ensuring its stable development, reforming the units that carry out currency exchange operations, the mechanism for conducting foreign exchange auctions of the NBT, the strategy for allocating assets in the management of international reserves and diversifying their structure, effective exchange rate policy and management of exchange rate fluctuations through the mechanisms of foreign currency interventions , analysis of the volatility of the national currency exchange rate due to changes in the foreign exchange rate and oil prices, etc. over the past 11 years.

It should be noted that the presentation made by the First Deputy Chairman of NBT was presented in three languages - state, Russian and English. Over the presentation, students had the opportunity to discuss questions of their interest. Many questions were asked and students got the answers to all the questions they were interested in. During the discussion, participants asked questions mainly about funds outside the banking system, financial services consumer protection, domestic foreign exchange market, inflation, the impact of Covid-19 pandemic on the banking system, development of artificial intelligence, prudential regulations and the plans of the NBT for 2022.

In the final part of the presentation, the First Deputy Chairman of National Bank of Tajikistan, Nuraliev Jamoliddin Kamolovich, once again emphasized the importance of the tasks related to continuation of NBT’s policy, in particular, implementation of effective monetary policy through the transition to inflation targeting regime, maintaining stability of the inflation rate, effective management of international reserves, implementation of an effective exchange rate policy based on free floating regime, financial inclusion and financial literacy, as well as ensuring stability of banking system.

Then the Rector of the Tajik National University once again expressed his gratitude to the First Deputy Chairman of NBT Nuraliev Jamoliddin. “Today's presentation is undoubtedly different in its content and format, and it is useful for the development of modern economic thinking of young generation. A wide range of economic and banking issues was included in the presentations, as well as the high level of professionalism of the author of the presentation in explaining them, can be considered as an invaluable contribution to the implementation of the instructions and instructions of the Leader of the Nation, the President of the Republic of Tajikistan, His Excellency Mr. Emomali Rahmon, for the development of the country's economy,” has said Kobiljon Khushvakhtzoda, Rector of the Tajik National University. Due to the fact that the participants demonstrated special interest in the presentation and discussions, the Rector proposed to hold regular meetings of NBT specialists with students of economic and financial faculties.

At the end of the meeting, the First Deputy Chairman of National Bank of Tajikistan encouraged students to use university resources, study and follow the advice of experienced teachers and use available opportunities to enhance their knowledge and skills, taking into account modern international practice, and thus contribute to the development of the country's economy. “I would be quite happy if today's presentation has brought you at least a little benefit to increase your knowledge and broaden your horizons,” has said Nuraliev Jamoliddin Kamolovich.

Press division