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Document of The World Bank FOR OFFICIAL USE ONLY Report No. 38150 TJ Public Disclosure Authorized - INTERNATIONAL DEVELOPMENT ASSOCIATION PROGRAM DOCUMENT FOR A SECOND PROPOSED GRANT IN THE AMOUNT OF SDR 6.7 MILLION OJSS10 MILLION EQUIVALENT) Public Disclosure Authorized TO THE REPUBLIC OF TAJIKISTAN FOR A PROGRAMMATIC DEVELOPMENT POLICY GRANT June 15,2007 Public Disclosure Authorized Poverty Reduction and Economic Management Unit Central Asia Country Unit Europe and Central Asia Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. REPUBLIC OF TAJIKISTAN Government Fiscal Year: January-December Currency Equivalents (Exchange Rate Effective as ofJune 5,2007) Currency Unit Tajikistan somoni US$l.oo 3.44 TJS 1.00 0.29 Weights and Measures: Metric System ABBREVIATIONS AND ACRONYMS CFAA Country Financial Accountability Assessment CIS Commonwealth ofIndependent States DFID UK Department for International Development DSA Debt Sustainability Analysis EBRD European Bank for Reconstruction and Development GDP Gross Domestic Product IDA International Development Association IFC International Finance Corporation IMF International Monetary Fund MDGs Millennium Development Goals MIGA Multilateral Investment Guarantee Agency MTEF Medium-Term Expenditure Framework NE3T National Bank ofTajikistan PDPG Programmatic Development Policy Grant PEFA Public Expenditure and Financial Accountability PEP Private Enterprise Partnership PPIAF Public-Private Infrastructure Advisory Facility PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper SAC Structural Adjustment Credit SME Small and MediumEnterprises Vice President: Shigeo Katsu Country Director: Annette Dixon Sector Director: Cheryl Gray Sector Manager: C. Felipe Jaramillo Task Team Leader: R. Sudharshan Canagarajah FOR OFFICIAL USE ONLY CONTENTS 1. Country Context...................................................................................................................... 1 Recent Macroeconomic Developments ..................................................................................... 2 2 . Tajikistan’s Poverty Reduction Strategy .............................................................................. 8 3. Development Policy Program .............................................................................................. 10 A . Pillar 1: Promoting Private Sector Development 10 .. ............................................................... (i) Maintaining macroeconomic stability ................................................................. 10 (ii) Improving the investment climate ...................................................................... 10 (iii)Regulatory reform in key strategic sectors ........................................................... 13 B. Pillar 2: Public Sector Reform and Improving Public Service Delivery ........................... 15 (i) Public sector management reform ...................................................................... 15 (ii) Public service delivery ........................................................................................ 19 4 . Proposed Operation .............................................................................................................. 27 A . Description ofthe Operation.............................................................................................. 27 B. Objectives. Themes. and Policy Areas .............................................................................. 27 C . Linkages to Country Partnership Strategy ......................................................................... 28 D. Collaboration with the IMF and Other Donors .................................................................. 29 E. Relationship with Other Bank Operations ......................................................................... 30 F. Lessons Learned................................................................................................................. 30 5 . Operation Implementation................................................................................................... 32 A . Poverty and Social Impact ................................................................................................. 32 Implementation. Monitoring. and Evaluation .................................................................... 34 B. .. C . Fiduciary Aspects ............................................................................................................... 35 D. Disbursement and Auditing ............................................................................................... 36 E. Environmental Aspects ...................................................................................................... 37 F. Risks and Risk Mitigation.................................................................................................. 39 Boxes Box 1: Governance in Tajikistan: Challenges and efforts to improve outcomes ........................... 6 Box 2: Good practice principles on conditionality ....................................................................... 32 Tables Table 1: Medium-term macroeconomic outlook ............................................................................... 3 Table 2: Dealing with licenses (2006) ............................................................................................ 11 Table 3: Agreed changes in PDPG 2 prior actions and milestones ................................................. 22 Table 4: Prior actions and triggers for Programmatic Development Policy Operations 2 and 3 .... 28 This document has a restricted distribution and may be used by recipients only in the performance of their official duties . Its contents may not be otherwise disclosed without World Bank authorization. Annexes Annex 1: Letter ofDevelopment Policy ........................................................................................... 42 Annex 2: Policy Matrix .................................................................................................................... 69 Annex 3: Link between the Program, Analytical and Advisory Assistance, and other Bank and Donor Programs ................................................................................................................ 79 Annex 4: Relations with the International Monetary Fund .............................................................. 80 Annex Tajikistan Millennium Development Goals.. 5: ... .................................................................... 85 Annex 6: Tajikistan at a Glance ........................................................................................................ 86 Annex 7: Joint IMF-World Bank Debt Sustainability Analysis (Summary) .................................... 88 Annex 8: Linkages between the PDPG operation and the country assistance strategy .................. 100 Map LBRD 33493 The proposed Programmatic Development Policy Grant was prepared by an IDA team consisting of R. Sudharshan Canagarajah, Jariya Hoffman, Utkirdjan Umarov, Tony Verheijen, Svetlana Proskurovska, Khursheda Nazirova, Kathy Lalazarian (ECSPE); Emesto Cuadra, Dina N. Abu-Ghaida, Sarbani Chakraborty, Rekha Menon, Anne Bakilana, Peyvand Khaleghian, Saodat Bazarova (ECSHD); Sudhee Sen Gupta (CICIC); Norpulat Daniyaraov, Naushad Khan (ECSPS); Bekzod Shamsiev, T. V. Sampath (ECSSD); Raghuveer Sharma (ECSIE); Aziz Khaidarov (ECCTJ); Andrea Dall’Olio (IFC); Wendy S. Ayres, Martin Brownbridge, Mehmet Gokay, Marc Sadler, and Firuz Kataev (Consultants). Peer reviewers included Amparo Ballivian (LCCNI) and Sarah Cliffe (OPCFS). The team benefited from the inputs and guidance of Felipe Jaramillo (ECSPE) and Jan Walliser (OPCCE). The team gratefully acknowledges the excellent close collaboration of the Tajikistan authorities, development partners, as well as the support and guidance of Annette Dixon, Cheryl Gray, Cevdet Denizer, and Mehrnaz Teymourian. Damika Somasundaram and Takhmina Jumaeva assisted the team. REPUBLIC OF TAJIKISTAN Second Programmatic Development Policy Grant Summary Borrower Republic of Tajihstan Implementing Agency Government ofTajikistan Amount US$10 million in IDA Grant. Terms To be provided as a grant, not subject to repayment. Tranching USSlO.0 million in IDA Grant will be disbursed in a single tranche following effectiveness. Description The proposed Second Programmatic Development Policy Grant is the second in a programmatic sequence that support the Government’s reform program outlined in the poverty reduction strategy paper. The operation will support a strategc set of policy reforms in private sector development, public sector management and social service delivery. Proposed policy actions ofthis second operation continue with the strong cross cutting emphasis on public and private sector governance. This operation is also very closely aligned with investments and technical assistance programs ofthe Bank and other development partners in related areas. The proposed program is divided into two pillars with the following components: Pillar 1. Promoting Private Sector Development 0 Component 1: Maintain macroeconomic stability. 0 Component 2: Improve investment climate through reform of licensing and inspections, increasing transparency ofthe privatization process and promoting market competition.
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