Quarterly Report: Economic Reforms to Enhance Competitiveness

The Law was prepared by the National Bank of Tajikistan (NBT) staff in close cooperation with the World Bank and the Economic Reforms to Enhance Competitiveness (EREC) project. The passing of the new law will result in a considerable improvement of the legal framework governing banking activities. As a result, the Banking Supervision and Licensing Department plans to review and change all instructions to reflect the requirements of the new law. The NBT is considering a tightening of the requirements for specific provisions for loans denominated in foreign currency due to further devaluation of the somoni. This increase in provision requirements aims to accelerate the capital recognition of the deterioration of quality of foreign currency loans as businesses that earn in somoni are facing economic difficulties. The implementation of a functional organizational structure is reducing the scope for collusion and corruption, but there is a lack of motivation to implement functional re-organization properly among the staff, who are paid very low salaries. The administrative segment of the budget classification for the republican budget has been finally approved, enabling the 2010 Budget to be prepared based on the administrative classification as agreed between the International Monetary Fund (IMF) and the Ministry of Finance (MoF). The Ministry of Finance (MoF) has approved the budget preparation and reporting formats incorporated in the Treasury Budget System (TBS). The revised budget preparation timetable has also been approved, and the Budget Circular has been finalized and forwarded to line ministries. The Russian version of the TBS User Manual has been finalized and is ready for printing, while the first draft of the English version has also been prepared. The EREC project, implemented by Deloitte Consulting LLC, has been working on various activities to support the development of the financial sector in Tajikistan. The project has conducted training sessions on budget classification for finance and budget staff from the MoF and line ministries. The consultant has also continued working on revisions to the first draft budget instructions and prepared a draft Minister's Order for the approval of the funding classification. The project has also been working on the implementation of the Treasury Budget System (TBS) and has installed the modified TBS on budget analysts' computers. The system has been tested by the staff of the Budget Department of the MoF and has also been installed for testing in three line ministries. The Budget Consolidation Unit has requested further enhancements to the reporting capabilities of the TBS, and the Terms of Reference (ToRs) for the IT specialist have been drafted. In the area of tax administration, the project has worked on the Hissor Tax Inspectorate Handbook, which contains organizational structure, job descriptions, working procedures, and forms. The consultant has also prepared monitoring and reporting forms regarding audit and tax arrears collection. Five brochures have been finalized, and sample registration application forms adopted by different countries have been collected for the First Deputy Chairman of the Tax Committee. The project has also been providing assistance to the National Bank of Tajikistan (NBT) in the areas of off-site analysis and financial crisis monitoring. The project advisor has assisted the off-site unit in the preparation of the 1st quarter analysis of the financial condition of individual banks and the whole banking system. The advisor has also worked with the newly appointed head of the Banking Supervision and Licensing Department (BSLD) to train him in the risk-based CAEL off-site analytical approach. The project has also been providing assistance to the National Bank of Tajikistan (NBT) in the areas of off-site analysis and financial crisis monitoring. The project advisor has assisted