Tajikistan

Economic momentum slowed by normalisation of remittances from the diaspora

Strong economic growth is expected to contract in 2026, hampered by the slowdown in its main driver, namely remittances from expatriate workers (60% of GDP in the first nine months of 2025, 90% from Russia, Kazakhstan and Uzbekistan). This normalisation, which directly affects household consumption, is the result of both the weakening of the rouble and the prolonged stagnation of the Russian economy. At the same time, most sectors of activity – with the exception of agriculture – are expected to show lower levels of growth. Tajikistan will still be able to count on its export base, which is admittedly narrow but buoyed by gold prices that remain very high and are even rising.

To support growth and create jobs, the government is relying on a few flagship projects, even though poor governance and an opaque business environment limit the prospects of such a strategy. The most ambitious is the Rogun dam, set to become the world's tallest, whose repeatedly postponed construction resumed in 2022 and is slated for completion in 2035. With its six turbines – two of which are already in service – the dam is beginning to feed electricity into the grid, representing 10 to 15% of its future capacity. The third turbine, initially expected to operate in 2025, is still not expected to enter into service in 2026. In a country where 70% of the population regularly experiences power cuts, Rogun is set to double electricity production and make Tajikistan a regional exporter. The remaining construction cost is estimated at around USD 6.4 billion. The state, which is financing a large part of this megaproject, is struggling to mobilise external funding, despite support from the World Bank (USD 650 million), several multilateral development banks and, to a lesser extent, a few long-standing bilateral partners (Saudi Arabia, UAE) to cover around 50% of the cost.

The massive financial flows associated with the Rogun project and the expansion of credit to the private sector will contribute to a gradual rise in inflation. However, inflation remains below the central bank's target of 5% (± 2 p.p.). In this context, the institution has continued to ease its monetary policy: its main policy rate was lowered from 7.5% to 7% in February 2026, bringing the cumulative reduction since 2022 to nearly 650 basis points. The key rate is expected to continue falling in 2026, but fears of weakening the somoni should prevent any more aggressive easing. The central bank's capacity continues to be hampered by weak monetary transmission. The banking system is underdeveloped, still heavily dollarised, and marked by fragile governance and corruption, as illustrated by the European sanctions imposed on several local banks in October 2025.

Tight budgetary framework owing to the cost of the Rogun project and uncertainty over external financing

The budgetary situation deteriorated in 2025 and the deficit is expected to remain close to the maximum authorised level of 2.5% of GDP in 2026. The deterioration is mainly due to the sharp increase in investment expenditure (the largest item of expenditure), dominated by the financing of the Rogun dam and other infrastructure projects. The government has also increased social spending, particularly on education and social protection. Revenues have risen slightly thanks to improvements in tax administration – driven by digitalisation and the reduction of exemptions – as well as efforts to reduce losses and arrears in the electricity sector. The government aims to increase revenues to 26% of GDP by 2026. The mining sector also contributes through specific taxes (royalties, export taxes, etc.), which account for around 15% of the sector's profits.

The public deficit is financed by multilateral and bilateral donors, as well as by debt extensions granted by China, the country's main creditor. Public debt is moderate and largely concessional. The only commercial debt, represented by the USD 500 million Eurobond contracted to finance the first two turbines, will be fully repaid in 2027. However, the anticipated loss of “least developed country” status in 2026 is expected to lead to an increase in the cost of borrowing. In addition, public enterprises, particularly the electricity company Barqi Tojik, have heavy liabilities.

After an exceptional year in 2025 driven by record levels of remittances from the diaspora, the current account balance is expected to return to its normal surplus in 2026. The country will continue to post a pronounced trade deficit (30% of GDP) driven by strong imports – consumer goods, electrical equipment and hydrocarbons associated with infrastructure projects – despite robust gold exports, whose high price could continue to rise. As usual, remittances from seasonal and expatriate workers will offset this imbalance. At the same time, the unattractive business environment limits FDI inflows, which mainly come from China and are concentrated in the mining sector, while portfolio investment remains non-existent due to restricted access to international financial markets. Finally, the monetisation of part of the gold acquired by the central bank from local producers, combined with the rise in its price, brought foreign exchange reserves to GBP 6.5 billion at the end of 2025 (compared with GBP 4.4 billion at the end of 2024), representing more than seven months of imports.

Regime locked in the midst of Russian-Chinese rivalries

The March 2025 parliamentary elections – once again neither transparent nor fair – confirmed the expected victory of President Emomali Rahmon's party, which has been in power since 1992. Rahmon maintains an authoritarian and repressive system, while gradually securing his family's hold on power. His eldest son already holds several positions of responsibility – member of parliament, president of the upper house of parliament, mayor of Dushanbe, to name a few – placing him in a good position to succeed his father. Social discontent persists in the Gorno-Badakhshan Autonomous Oblast (GBAO).

China and Russia wield considerable economic and political influence in the country. However, even as a member of the Collective Security Treaty Organisation (CSTO) – which brings together six former Soviet republics under Moscow's leadership – Tajikistan maintains a neutral position on the war in Ukraine. Moreover, Russia's influence is eroding the longer it remains engaged in this war, faced with an increasingly present China (its leading bilateral partner which provides aid, loans and investments) and attempts at rapprochement by the European Union. This competition for influence materialised in 2025 in a series of summits in Tajikistan: first with the EU in April, then one with China in June, and finally the last with Russia in October. Russia could tighten its migration laws that were passed after the Crocus City Hall attack in Moscow in March 2024 (a death count of nearly 150) committed by Tajik immigrants, if Dushanbe moves too close to the EU. Another threat comes from Afghanistan. Tajikistan does not recognise the Taliban regime in power since 2021 and is concerned about the proliferation of terrorist activities in the border area. The porous border facilitates movement between the Tajik communities in Afghanistan and Tajikistan, which makes recruitment by extremist groups easier.

Last updated: February 2025