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Burdened with an excessive foreign debt amidst a severe humanitarian crisis Tajikistan will have to repay about $47.4 m for breaching the International Monetary Fund (IMF)’s reporting rules.

The IMF Executive Board met on Thursday to come to a conclusion that Tajikistan’s central bank has provided the international body with "inaccurate information" related to credits issued to companies in the cotton sector. The "inaccurate information" refers to the data on size of international reserves, the net domestic assets and credit policy of the National Bank of Tajikistan.

"The Board agreed that the Republic of Tajikistan shall be expected to repay the Fund the three non-complying disbursements that were not discharged under Multilateral Debt Relief Initiative (MDRI) relief," reads the IMF Thursday statement. The abovementioned non-disbursements amount to around $47.4 million plus any interest accrued. The money should be repaid in six equal monthly instalments commencing from September 5, 2008. The final instalment should reach the IMF no later than February 5, 2009.

The IMF Executive Boards underlines the fact that normally repayment expectation period under the misreporting framework is 30 days, but the Fund has made use of its discretion to extend it to the poorest Central Asian country. All five non-complying disbursements to Tajikistan, about $15.8 million each, were made between January 2004 and February 2006 under the three-year Poverty Reduction and Growth Facility arrangement.

Tajikistan has agreed for having its National Bank audited by a recognized international firm. The IMF urged Dushanbe authorities to make the audit results public.

The fund expressed its regret over the "nature and extent of misreporting", especially because reclaiming additional resources for Tajikistan now seems impossible. Those resources were issued to Tajikistan under MDRI scheme for poor countries in January 2006. Then the IMF Resident Representative in Tajikistan issued a statement to announce a 100 percent debt relief on all debt incurred by Tajikistan before January 1, 2005 that amounted to around $99 million. "Tajikistan has qualified for IMF debt relief because of its overall satisfactory recent macroeconomic performance, progress in poverty reduction, and improved in public expenditure management," Sarmad Khawaja said in the statement.

According to some observers, in October 2007 the IMF representatives started seeing the picture differently and suspected the authorities of misinforming the Fund. An IMF mission was dispatched shortly to verify suspicions. As a result, Tajikistan joined the IMF list of misinforming countries like Ghana and Hungary.

The resident representative of the International Monetary Fund has suggested in an interview to Moscow’s Nezavisimaya Gazeta that the problem "could be a reflection of Tajikistan’s feeble foreign debt management." But several analysts in Moscow have expressed a more politicized interpretation of Tajikistan’s financial embarrassment. "It is absolutely probable that the recent IMF statement is merely a means of pressure on Tajikistan in order to turn their loyalty towards Washington rather than Moscow", Nezavisimaya Gazeta quotes the Director of Russia’s Globalization Institute Mikhail Delyagin.

But would the IMF put Dushanbe under enormous strain for the sake of political intrigues by consequently embarrassing itself, as London’s Financial Times maintains? "The Tajik cotton problem is embarrassing for the IMF because it helped set up Creditinvest, the Tajik company through which most of the loans have been steered," writes the paper. "The company was initially designed to take over non-performing assets from Agroinvest, the state agriculture bank, which was then undergoing privatisation. Since its establishment in 2003, Creditinvest has become the main conduit for borrowing by the cotton sector."

Meanwhile, donors forecast that the sector will require additional $80 million to keep it afloat. "The cotton sector is Tajikistan’s biggest employer, but the country’s export revenues from cotton are expected to slump this year because of indebted farmers’ inability to purchase quality seed and fertiliser or repair decrepit irrigation systems.", add the paper. Lack of competition among processors is considered as yet another problem of the cotton sector.

However, speculations on the cotton sector crisis started circulating a couple of months ago. Last January Avesta news agency published Tajik analyst Abdughani Mamadazimov’s view on the matter who suggested that the latest cabinet reshuffle was triggered by the very ‘cotton crisis’. Rahmon has created an ‘anti-crisis troika’, he stated. Muradali Alimardan, the former chief of the National Bank (currently a Deputy Prime-Minister); Qasim Qasimov, the former head of the Soghd Region (the new Agriculture Minister) and Abdurrahman Qadiri, the former Agriculture Minister (the new head of the Khatlan Region) constitute the troika.

"They face a task to lead the country out of its cotton sector crisis," elaborates Mamadazimov. "Taking up his new post of a Deputy Prime-Minister, Alimardan with his enormous financial expertise will try to resolve the financial part of the problem. Qasimov as the former head of the largest cotton region of the country has been selected as the troika’s direct executor…"

Quoting the Avesta analysis, TajEconomy weblog wonders why the government’s revolutionary measures introduced in the cotton sector have been kept secret so far, and how the state banking system is going to withstand as the sole financier of cotton growing expenditure. Perhaps the same questions are bothering the alleged ‘troika’ right now.