Tajik bond issue is symptom of chronic debt addiction

Subject

Tajikistan's search for loans.

Significance

The government has successfully issued a bond to finance construction of the costly, high-prestige Roghun hydroelectric scheme. With limited capacity to increase revenue, the government finances budget deficits and new projects with loans and grants from international financial institutions (IFIs) and other foreign sources, notably China.

Impacts

• External debt will mount up through persistent borrowing to cover the budget deficit.
• Debt servicing is risky given Tajikistan's vulnerability to fluctuating cotton and aluminium prices.
• Electricity exports are seen as a new foreign currency source but the major new plant is unfinished.
• Officials may view bond issuance as a 'cost-free' way of funding projects when IFIs shy away.