MINISTRY OF FINANCE REPUBLIC TAJIKISTAN THE GOVENRMENT MEDIUM - TERM EXPENDITURE FRAMEWORK FOR

Transcription

1 MINISTRY OF FINANCE REPUBLIC TAJIKISTAN THE GOVENRMENT MEDIUM - TERM EXPENDITURE FRAMEWORK FOR Dushanbe

2 Government of the Republic of Tajikistan REGULATION Dated «30» June 2010 # 315 On approving MTEF Dushanbe According to article 34 of the Law of the Republic of Tajikistan on State Public Finance of the Republic of Tajikistan, and for effective use of the state finance resources under the purposeful state sectoral programs for medium term, the Government of the Republic of Tajikistan regulates: 1) To approve MTEF and to send it for information to Majlisi namoyandagon Majlisi Olii Republic of Tajikistan 2) Ministries, enterprises and organizations to implement the functioning sectoral program and to send the draft of regulation and order of the Government of the Republic of Tajikistan on new sectoral programs on medium term to implement within the indicators of MTEF for ) Ministry of Finance of the Republic of Tajikistan together with corresponding ministries and enterprises to prepare draft of State budget of the Republic of Tajikistan for 2011 according to indicators of MTEF and on the set deadline to send the draft of the Law of the Republic of Tajikistan on State budget of the Republic of Tajikistan for 2011 for review of the Government of the Republic of Tajikistan. Chairman of the Government of the Republic of Tajikistan 2

3 Contents а) Objectives and tasks of the MTEF b) The structure of MTEF for the period of c) Medium-term priority directions of MTEF. Chapter 1. Macroeconomic Indicators 1. The main Macroeconomic Indicators in the medium- term. 2. The Nominal and Real Gross Domestic Products and its structure. Factors influencing to GDP increase. 3. Inflation- Consumer Price Indexes, GDP Deflator. 4. Foreign Trade Turnover, Remittances, Exchange Rate of the National currency to US Dollar. 5. Achievement to macroeconomic sustainability, etc. Chapter 2. Government Revenues. 1. Total volume of revenues for the medium- term period and the sources of their formations. 2. Analysis of revenues based on the various types of taxes 3. The estimations for tax and non- tax revenues for the medium- term period. 4. Inflow of Grants for the support of the State Budget and Public Investment Programmes for the medium- term period. Chapter 3. Public Expenditures for medium- term period 1. The Policy on the Implementation of the State Budget funds in the mediumterm period. 2. The sources of funding and their directions for utilization. 3. State Budget Expenditures for government debt services, etc. 4. Budget Deficit and the sources of its funding in the medium- term period. Chapter 4. Social Sector Expenditures 1. Education 2. Health 3. Social Protection of the Population 4. Culture and Sport Chapter 5. Economic Sector Expenditures 1. Energy 2. Transportation, infrastructure and communication 3. Agricultural Sector Attachment 1. Macroeconomic Indicators, the Revenues of the State Budget of the Republic of Tajikistan and the maximum level of its expenditure based on the sectors for the period of Attachment 2. The Indicators of the Expentiture of Foreign Investments and the contribution of the Republic of Tajikistan within the framework of implementation of joint investment projects with International 3 Financial Organizations for the period of

4 ADB AIS WB GDP HES OSC PRSP HCS IDB KBO PRC IMF SGBP VAT NGO NDS NSED UNO OPEC PIP HPS GRT USA PCMF DRD RT PRS MTEF TAP FES MDG FMSA SASIP SASPEM ACRONYMS Asian Development Bank Agrarian and Industry Sector World Bank Gross Domestic Product Higher Education Institution Open Stock Company Poverty Reduction Strategy Paper Housing and Communal Services Islamic Development Bank Key Budget Organizations People s Republic of China International Monetary Fund State Guarantee Benefit Package Value Added Tax Non- Governmental Organization National Development Strategy National Strategy for Education Development United Nations Organization Organization of Petroleum Exporting Countries Public Investments Program Hydro Power Station Government of the Republic of Tajikistan United States of America Programme on Centralized Main Funds Direct Rule Districts Republic of Tajikistan Poverty Reduction Strategy Mid- Term Expenditure Framework Tajikistan Aluminum Plant Fuel and Energy Sector Millennium Development Goal First Medical and Sanitary Aid State Agency on Social Insurance and Pension State Agency on Social Protection, Employment and Migration 4

5 Foreword а) Objectives and tasks of the MTEF Sustainable economic development, which is continuing in the Republic of Tajikistan since 1997 and the solid macroeconomic ground and gradually reduction of poverty provided the opportunity for the Government of Tajikistan to start with the economic and social reform, preparation of system of long- term and medium- term development programmes (national development system). One of the strategic documents of the Republic of Tajikistan adopted in 2007 is the National Development Strategy (NDS) for the period up to National Development Strategy in the medium- term period stes the priorities of the main sectors needed for economic- financial reform. One of the directions of NDS is the Poverty Reduction Strategy for the next three years, where within the plan of action it reflects reaching to the goal and implementation of NDS priorities. Mid- Term Expenditure Framework (MTEF) should be the third part and the main part of the National Development Strategy. The Decree on the start of development of MTEF 1 was adopted by the Government of the Republic of Tajikistan on September During the process of implementation of this Decree Ministry of Finance of the Republic of Tajikistan developed the Regulation on Preparation and implementation of MTEF and also developed the Guidance connected to the Budget for the Ministry of Education of the Republic of Tajikistan. NSED in the Republic of Tajikistan is piloted in the Social Sector and gradually is implemented in all areas of the economy. During the Fiscal Year of 2010 due to the World Financial Crisis and its negative impacts to the country s economy, because of the macroeconomic indicators for the Government of the Republic of Tajikistan were below the standard level it was not possible to prepare the State Budget on the basis of Mid- Term Expenditure Framework during this period. It should be noted that in 2010 development of Sector Medium Term Expenditure Framework for the period of temporarily were postponed in the republics of Armenia, Moldova, Kyrgyzstan and Russian Federation with consideration of the situation occurred. In future years with the purpose of continuation of current reform in the state financial system, quality development of State Budget, targetted and efficient use of budget funds, avoid the shortcomings during the budget implementation, the State Budget for 2011 will be drafted with accordance to the Mid- Term Expenditure Framework. 1 The Decree of the Government of the Republic of Tajikistan as of September 07, 2006, #409 on Implementation of Mid- Term Expenditure Framework in the Republic of Tajikistan. 5

6 Mid- Term Expenditure Framework for the period of is prepared on the basis of priorities set in the Annual Message of the President of the Republic of Tajikistan Mr. Emomali Rahmon to the Majlisi Oli (Parliament) of the Republic of Tajikistan, National Development Strategy of the Republic of Tajikistan, Medium- Term Poverty Reduction Strategy in the Republic of Tajikistan and Strategy on Management of Public Finances of the Republic of Tajikistan. Mid- Term Expenditure Framework (MTEF) shows the Fiscal Policy Strategy for the period of three years, which sets forward the general parameters of taxation, strategy for preparation of the budget for the next year and their assessment for the mediumterm period. In accordance with gradual implementation of Mid- Term Expenditure Framework and the Request of the Government of the Republic of Tajikistan as of December 30, 2009, under #133- f for the period of the budget for the sectors of Education, Health, Social Protection, Agriculture, Energy, Transport and Communication, Land Melioration, Water Industry and Culture, which are the priority sectors of the National Development Strategy and Poverty Reduction Strategy, will be developed on the basis of the Mid- Term Expenditure Framework. b) The Structure of MTEF for the periof of The Medium- Term Strategy covers the curret and major expenses directed to state funding of these sectors through the major sectoral ministries on the basis of medium- term budgetary request and the detail explanation sectoral medium- term goals, sectoral expenditure policy, priority programmes and foreseeing of sectoral expenses in accordance with functional grouping of budget for the period of In order to simplify the process of preparation of MTEF the Ministry of Finance of the Republic of Tajikistan established the Inter- Sectoral Working Group for relevant sectoral ministries to develop the Mid- Term Expenditure Framework, starting from February 01, 2010 prepared the Guidance on preparation of the Mid- Term Expenditure Framework for the period of and the Draft of the State Budget for the period of 2011 and presented these documents to the relevant ministries. Therefore, the purpose and the tasks of MTEF for the process of preparation of the State Budget based on the continuous policy of public expenditures consists of the consideration of development of macroeconomic environment, the volume of government resources for medium- term and long- term period. These tasks can be accomplished through MTEF implementation which is basically aimed and result- oriented to increasing the efficiency of public expenditures. MTEF provides the utilization of the following directions: - Aggregated fiscal discipline- The budget resource package should include all government expenditures; it should be formed prior to the allocation of expenditure to certain directions, and substantiated by medium- term macroeconomic forecasts; - Efficient allocation of government expenditures- public expenditures should be consistent with the public policy priorities, and inter- sectoral and intra- sectoral distribution of resources should be carried out on these priorities; 6

7 - Technical (productive) efficiency- sectoral ministries should select for financing only those projects and programmes that can assure the maximum attainable level of efficiency in the sector or sub- sector. Therefore, MTEF implementation provides for: - Improve the microeconomic balance, through formation of a realistic and comprehensive package of resources, including revenues; - Efficient inter-sectoral and intra-sectoral redistribution of budget allocations basing on the predetermined financing priorities; - Assistance in evaluation of existing inconsistencies between state policies and allocation of financing for its further harmonization; - Establish robust budget ceilings for sectors, while creating the conditions and incentives for the targeted and efficient use of available resources by sectoral ministries responsible for sector policies. The planning of the medium-term public expenditure is an on-going process and, in essence, represents a complete logical chain of policy formulation planning budgeting. It enables to mitigate the possible inconsistency between available resources and expenditure needs, as well as to reflect in public expenditure the state policy changes with regard to certain sectors. c) Medium-term priority directions of MTEF. Hence, in this respect, it is justified, that the MTEF is developed (and/or reviewed) before the drafting of the annual budget, thus providing guidance for working out the annual budget. Therefore, planning of the medium-term public expenditure implies: - Comprehensive assessment of available budget resources (receipts) in mediumterm perspective (bottom- up approach); - Determination of detailed inter- sectoral and intra- sectoral medium- term expenditure framework to conduct the appropriate policy (bottom- up approach); - Reconciliation of expenditure needed for implementation of policies in the sectors with the volume of available public resources in the medium- term framework. At the same time it should be noted that the macroeconomic indicators, the revenues of the State Budget of the Republic of Tajikistan and the robust budget ceilings for sectors for the period of are the indicators for perspective, and they can be changed with consideration of economic situation. 7

8 CHAPTER 1. MACROECONOMIC INDICATORS 1. The main Macroeconomic Indicators in the medium- term Fiscal and Macroeconomic Policy of the Republic of Tajikistan for the period of will be implemented on the basis of priorities indicated in the strategic documents of the Republic of Tajikistan. Tax and budget indicators during the mediumterm firstly developed within the framework of provision of the following purposes: - to keep the exchange rate of the national currency, inflation standards at certain level and sustainable development of other macroeconomic indicators; - enhance the base for taxation and avoid the cases tax arrears and completely to include all existing arrears to the state budget; - Comprehensive efforts for social sector development, including Education, Health, Social Protection of Population, increase the level of well- being of citizens, also development of energy sector, agriculture, transport and communication; - With the purpose of further economic sector development, regulating the state attraction of foreign investment, implement the investment projects on targeted and effective way. It should be noted that the World Economic and Financial Crisis in 2009 had its negative impact to the main macroeconomic indicators of the republic, and there is a possibility of its continuation during this year. In addition to that, the economy of the Republic of Tajikistan has close relation to the situation of the prices, import and export of goods in the republic, also to the internal and foreign political situation of other countries. During the period of financial crisis the Government of the Republic of Tajikistan implemented several anti- crisis activities, where it mitigated the pressure to some extent. In 2009 on tha basis of the implemented activities, the economy of country, including the macroeconomic indicators and financial situation, provision of socialeconomic policy were kept in balance. 2. The main Macroeconomic Indicators in the medium- term During this period the volume of Gross Domestic Products reached to 20.6 billion Somoni, the Real growth rate is 3.4, where this is more than million Somoni in comparison to The Gross Domestic Product is increased in 2009 (in comparison to the lat year) as the result of the agericultural products with the amount of million Somoni, commercial services to population 4.9 million Somoni, retail sale turnover million Somoni. Besides that, the volume of industrial products decreased to 6.3 and capital investment from all sources of funding is decreased to 15.5 in comparison to the year of

9 3. Inflation- Consumer Price Indexes, GDP Deflator. The value of the national currency during 2009 were kept in balance, where the rate of infaltion was 5 during this period, which is 6.8 lesser in comparisoin to But, it should be noted that, despite of taking the necessary measures on reduction of the pressure of financial and economic crisis, the impact of this crisis felt in on external economic activities. 4. Foreign Trade Turnover, Remittances, Exchange Rate of the National currency to US Dollar. During this period the Foerign Trade Turnover is decreased to 23.4 or the amount of 1.1 billion US dollars in comparison to 2008 and the total size of tunover amounted 3.6 billion US Dollars. Including, the volume of export decreased to million US Dollar or 28.1 and the volume of import decreased to million US Dollars or 21.4 in comparison to Decrease of import of goods caused by the following products: Argil with the amount of 87.6 million US Dollars, Fuel with the amount of 901 million US Dollars, means of light vehicles million US Dollars, Flour 47.5 million US Dollars and Cement with the amount of 16.0 million US Dollars. Thus, some of the macroeconomic indicators achieved for 2008 and 2009 are provided in the below table: List of indicators January- December 2008 January- December 2009 Difference 2009/2008 Gross Domestic Product (Million Somoni) 17609, ,8 3013,5 Real Development Growth of GDP, in 107,9 103,4-4,5 Consumer Price Index, in 111,8 105,0-6,8 Exchange Rate of the National Currency to US Dollar ( in Somoni) 3,42 4,37 1,0 Export Million US Dollars 1406,4 1010,0-396,4 Import Million US Dollars 3269,8 2568,7-701,1 Foreign Trade Turnover 4676,2 3578,7-1097,5 Balance (trade balance) -1863,4-1558,7 304,7 Number of unemployed (thousand persons) 45,7 46,5 0,8 Medium size of the salary of one worker (in Somoni), (November) 263,3 308,2 44,9 - official information from State Committee on Statistics. From above- mentioned table it can be seen that the microeconomic indicators related to foreign trade turnover is decreasing in Trade balance is considered negative in 2009 and in comparison to 2008 it decreased to million US Dollars, number of un-employed is increased in 9

10 comparison to 2008 and reached to 46.5 thousand persons. Based on the results achieved in 2009 and changing of macroeconomi situation in the republic, the Midium- Term Macroecomonic Indicators are prepared. During the preparation of macroeconomic indicators the volume of Nominal Gross Domestic Product in 2010 amounts of 24, million Somoni and the forecasting of its implementation is estimated to 25, million Somoni. In addition to that, the Real Growth of Gross Domestic Product in 2010 estimated to 5.1, inflation to 9.0, Gross Domestic Product Deflator 12.0 and exchange rate of the national currency to US Dollar is estimted to 4.50 Sommoni for one US Dollar. It should be noted that, with consideration of these factors and taking into account that the year of 2010 is the basis fiscal year for the period of the macroeconomic indicators during these years are forecasted with the amount of 30,180.0 million Somoni, 36,650.0 million Somoni and 44, Somoni with the real growth of 6.5, 7.0 and 7.2 accordingly. 5. Achievement to macroeconomic sustainability. During the medium term the volume of Gross Domestic Product is considered on the basis of its structure change and development of economic sectors. In 2011 production of goods and industrial products is forecasted with the amount of Million Somoni and the its growth rate with comparatory prices in comparison with the last year is estimated to 2.5. This indicator is estimated to Million Somoni with the real growth of 4.4 in 2012 and Million Somoni with the real growth rate of 7.1 in Production of agricultural goods with consideration of the forecasted prices in 2011 estimated to Million Somoni with the real growth of 2.3, in 2012 amounts 10, Million Somoni with the real growth of 2.0, in 2013 amounts 10,830.0 Million Somoni with the real growth of 1.8. During this period based on forecasting the price cotton fabric increases in the world market and the volume of its prodcution is estimted to raise. Transportation of goods by all types of transport means is estimated to 64.6 thousand tons in 2011, and the volume of tansportation of goods estimated to increase to 3.2 and in 2013 to 3.1 and reaches to 68,6 thousand tons. At the same time during this period the automobile road of Dushanbe- Chanak is planned to be competed,where provides the ground for development of transportation services. Retail goods tunrover with forecasted prices estimates the volume of million Somoni in 2011 and based on the comparison prices and comparing to the last year reaches 11.0, in 2012 amounts to Million Somoni and based on the comparison prices and comparing to the last year reaches 12.5, in 2013 amounts to 10,450.0 Million Somoni and and based on the comparison prices and comparing to the last year reaches to Commercial service provision to the population with forecasted prices estimated in 2011 and reaches to Million Somoni with the growth rate of 11.0 based on the comparison prices, in 2012 it amounts to Million Somoni with the growth 10

11 rate of 11.5, in ,435.0 Million Somoni wit the growth rate of 12.0 in comparison to the last years. During this period it is estimated that the investment activities from all sources of funding reaches to Million Somoni, including Million Somoni from the State Budget in 2011, Million Somoni, inlcuding Million Somoni from the State Budget in 2012, and Million Somoni, including Million Somoni from the State Budget in GDP in Estimation Real In addition to that the GDP Inflator in with condsideration of changing economic situation estimeted to 12.0, 13.5 and 14.0 accordingly. During the preparation of the macroeconomic indicator perspective and the State Budget for the period of based on the proposition of the National Bank of Tajikistan the annual medium value of the national currency against one US Dollar is estimated 4.80 Somoni, 5.10 Somoni and 5.60 Somoni accordingly. In 2011 the level of inflation is estimated to 9.0, during the years of is estimated to 7.5 and 6.5 accordingly. 11

12 The dynamics of GDP development and Inflations during the years GDP Inflation There are several important state constructions have been finished during the Medium Term in the economy of the republic, where this supports to development and improvement of the economy of the Republic of Tajikistan, - Capital infrastructure projects (including the construction of HPS Sangtuda 1 with participation of Russian Federation); - Construction of automobile road of Dushanbe- Chanak, which enables the increase the service provision in transportation sector; - Construction of electricity transmission line of 500 kv project South North and the Project of Lolazor Khatlon of 200 kv; - increase the volume of production and exporting the aluminum due to its increase of demand in the world and keeping its high value; - Recovery of cotton production resulting from the continuous institutional reform in this sector; - Increase the volume of remittances to the country (with accordance to World Bank data in 2006 the amount reached 900 million US Dollars or it made 36 of GDP 2 ). The effect of these factors will be continued during the period of and in case of sufficient conservative probabilities on continuation and progress on existing social and economic development trends, it would be possible that the annual economic development to be at 7 on average. 2 See The World Bank. Country Partnership Strategy Progress Report for the Republic of Tajikistan for the period FY06-FY09. June 22, 2007, Page 1 12

13 With consideration of these factors the new job vacancies are envisaged, where majority of unemployed people will be provided with new jobs and the living standard will increase. Also, during the period the special attention is given to the increase of the salaries of budgetary sectors employees. The total volume of the salary fund for 2011 is estimated to million Somoni, which is equals to 5.1 of the Gross Domestic Product, and it increases to 34.0 in comparison to This indicator for 2012 is estimated million Somoni or 5.3 of the Gross Domestic Product, in 2013 the amount reaches to million Somoni or 5.5 Gross Domestic Product and the annual average increase is 28. During the period of based on the National Bank of Tajikistan the amount of funds received in the republic are as follows: Transfer of funds to the Republic of Tajikistan (million US Dollars) Incoming 433,5 664, , , , ,9 Outgoing 169,8 360,4 561,2 901,6 967,6 599,8 Net monetary incomings 263,7 303,6 566,5 872, , , , , , , ,0 500,0 Transfer of funds to the Republic of Tajikistan (Million US Dollars) 0, Incoming Outgoing Net incomings In addition to that, based on the data and information and estimations the International Monetary Fund foresee the volume of the remittances which will be sent by citizens of Tajikistan labor migrants who are working abroad: Million US Dollars Years Labor Migrant Remittances 1,797 1,935 2,105 2,327 2,621 2,839 On the basis of above- mentioned data, in the medium term, it is estimated 13

14 that the degree of the population s income increases, which put the ground for better level of living standards and poverty reduction. In the post- period of the world economic and financial crisis the main purpose of MTEF consisted of provision of macroeconomic sustainability, support to real economy sector, creation of the new vacancies and support to the labor market, improve the investment environment to attract the investments, etc. Major obstacles for achieving the macroeconomic sustainability consist of the following factors: - Insufficient relationships between the activities of the economy sector entities on issues connected to development of macroeconomic perspectives, monetary and creditory and budgetary matters, where they become the obstacles to take most relevant economic decisions on time; - Insufficient means for monetary and credit policy and inadequate development of security market; - Insufficient of economy diversification and exporting capacity of the republic, where the level of external factors are high, including the negative factors of the world crisis; - Inconsistencies between rapidly growing labor resources and creation of the job vacancies, where it resulted to increase of the labor migration to abroad. With consideration of implementation of the main directions and priorities of NDS, PRSP and the Strategy on management of state finances in macroeconomic sector these factors will be reviewed: - Advancement of tax and budget policy; - Advancement of further monetary and credit policy; - Continuing the institutional reform. Advancement of tax and budget policy will be implemented through further improvement of budgeting process, planned implementation of the Strategy on management of state finances in the short term, sustainable and reliable strengthening, completeness and transparency of budget, advancement of taxation system, improvement of administrating of tax, establishment of country- wide registration and census of taxpayers system through implementing the principle of the Single window, simplicity of customs documentations and appropriation of customs tariffs in the modern way. Further advancement of monetary and credit policy, provides the measures for sustainable development of banking system, improvement of legal support for banking activities, advancement of the order of insurance of deposit, catch the attention of the international financial institutions for provision of loans to organizations and increase of accessibility of loans, enhancement of service structures provided by banks, the use of effective keys to stop the level of inflation. The process of structural reform and increase the effectiveness of the work of the government structure has the likelihood with consideration of the changing of economic situation. Continuation of the process of advancement of macroeconomic 14

15 perspective methods and statistics, increase the effectiveness and transparency of management of state finances will be foreseen. To reach to these goals the activities should be continued with relation to capacity building of government structure staff that is responsible for implementation of macroeconomic policy, also the works directed to advancement of legal standard principles which are regulating the macroeconomic sustainability. CHAPTER 2. GOVERNMENT REVENUES 1. Total volume of revenues for the medium- term period and the sources of their formations. Tax collection policy to State Budget in the medium term is implemented on the basis of the Tax Code of the Republic of Tajikistan, Customs Code of the Republic of Tajikistan and other legal normative acts. In 2009 due to the world financial crisis and its negative impact to the economy of the Republic of Tajikistan there are several necessary measures have been taken to ensure the quality collection of funds to the State Budget. With the aim to keep the macroeconomic indicators in balance and on this basis to ensure the State Budget revenues, state financial support and encouragement of small and medium entrepreneurship and not to admit to decrease of financial situation industrial organizations and other economic sectors there are several drafts of legal normative acts were developed and adopted. Including, the Law of the Republic of Tajikistan on Including of amendments to the Tax Code of the Republic of Tajikistan was adopted on May 15, 2009, where based on this law the level of income tax decreased from 25 to 15 and the level of value added tax decreased from 20 to 15 for all economy sectors. The maximum level of income increased from 600 thousand to 800 thousand Somoni for taxpayers functioning in accordance to simplified system of taxation. Hence, the preliminary execution of State Budget in 2009 reached to 99.7 or it amounted to million Somoni, where this amount in comparison to 2008 is more than million Somoni, but it is less than 16.9 million Somoni against the planned amount. The implementation of Republican Budget Revenue during this period accomplished to 94.2, where the amount of 152 million Somoni did not come into to the Budget. The local government budgets during this period reached to 110 and the amount of 1236 million Somoni received by the State Budget, where it exceeds the amount of 43 million Somoni in comparison to planned budget. With consideration of these factors the total volume of State Budget Revenues during the medium term is estimated with the following indicators: 15

16 Total volume of State Budget Revenues Public Program Appr. Budget Actual Appr. Budget Estimate Estimate Estimate Estimate 5 549, , , ,2 7724, , ,0 11 to GDP 25,9 27,1 26,7 26,6 25,6 25,5 23,2 Investment 784,1 516, , , ,3-4,1 1299, ,2-40 Government Debt 378,6 576,7 301,3 301,3 274, , ,0-84 Special Funds of Budget Organizations Current revenues by grants 182,9 311,8 283,8 283,6 370, , , , , , , , , ,7 22 to GDP 19,6 20,2 19,6 19,8 19,8 19,9 19,9 The total volume of approved State Budget Revenues for 2010 is determined with nominal growth of 17.0 in comparison of 2009 with the amount of million Somoni, where this indicator is equivalent to 26.7 of GDP volume. The total volume of State Budget Revenues with annually average growth of 16.6 during the period of is estimated to million Somoni, million Somoni and million Somoni accordingly, where this indicator equals to 25.6 of GDP volume in 2011, 25.5 of GDP volume in 2012, 23.2 of GDP volume in 203 accordingly. 2. Analysis of revenues based on the various types of taxes The State Budget Revenues in 2010 in account of Public Investment Programmes is estimated with the volume of million Somoni with nominal growth of 45.5 in comparison to 2009 and this amount equals to 4.9 of GDP volume. This indicator during the period of equals to million Somoni, million Somoni and million Somoni accordingly. It should be noted that the State Budget revenue through the Public Investment Programmes during the period of is an approximate indicator, and with consideration of carrying on the negotiations with International financial institutions and change in the economic situation in the country they can be changed as well. State Budget Revenues in account of State Debt estimated in 2010 with the amount of million Somoni or 1.2 of total GDP, in 2011 with the amount of million Somoni or 0.9 of GDP, in 2012 and 2013 with temporary indicators with the amount of million Somoni and 38.0 million Somoni accordingly. State Budget Revenues in account of the Special funds of budgetary organizations in 2010 is estimated with the amount of million Somoni, where it equals to 4.3 of total volume of State Budget Revenues. This indicator increases in the further years, in 2011 it is estimated with the amount of million Somoni, in 2012 to million Somoni and in 2013 it amounts million Somoni or 29.0 increases in comparison to 2012, where it equals to 6.2 of the total amount of State Budget 16 revenues.

17 Preliminary fulfillment of State Budget current revenues for 2010 amounts million Somoni without consideration of grant amounts, or it is estimated as achievement of the planned budget to and this equals to 18.9 of GDP volume and with comparison to accomplished current revenues in 2009 this amount is more than The volume of State Budget current revenues without involvement of grants estimated for 2011 with the amount of million Somoni, in million Somoni and in million Somoni, where in comparison of 2010 it increases to 26.8 or the amount of million Somoni, in comparison to or million Somoni, and in comparison or the amount of 1661 million Somoni. The total amount of grants for the period of is not considered, as it is not clear how much exactly will be invested during these years. For period of 2011 and 2012 the amount of million Somoni (30 million US Dollars) and 51.0 million Somoni accordingly the grant funds are considered to the State Budget revenues. These indicators are not the maximum barrier and the grant funds for mentioned years can be changed based on the negotiations with International Financial Institutions. At present the negotiation are on the way with International Financial Institutions and other donor governments to get access to the grant funds. At present circumstances there is probability that with change of the economic situation there will be the change in tax policy in the Republic of Tajikistan. During this period the advancement of the Tax Code of the Republic of Tajikistan and amendments to this Code with the purpose of encouragement of small and medium entrepreneurship, increase of the exporting power of the republic, improvement of collection of tax funds, remove the current tax privileges, finding the new sources, etc. are taken into account. The structure of State Budget current revenues for the period of by the receiving organizations are as follows: Indicators estimate impl Appr. budget Prel. impl с 2012 с 2013 с difference 2011/2010 " +,- " in difference 2012/2011 " +,- " in difference 2013/2011 " +,- " in Gross Domestic Product Total Revenues without grants ( million Somoni) Share to GDP including Customs Service (million Somoni) ,0 3859,9 4606,0 4774,5 5841,1 7256,6 8917,6 1235,1 126,8 1415,5 124,2 1661,0 122,9 18,7 18,8 18,9 19,4 19,8 19,9 0,6 102,9 0, ,1,6 1498,0 1850,0 1850,0 2305,1 2839,5 3476,9 455,1 124,6 534,4 123,2 637,4 122,4 17

18 Share to GDP 7,3 7,6 7,3 7,6 7,7 7,8 0,1 101,1 0, ,0,2 Comparison weight in the current revenue Tax Committee ( million Somoni) Share to GDP Comparison weight in the current revenue Other structures (Million Somoni). Share to GDP Comparison weight in incomes 38,8 40,2 38,7 39,5 39,1 39,0-0,7 98,25-0,3 99,2-0,1 99,6 2283,1 2643,0 2811,5 3414,5 4279,6 5266,4 771,5 129,2 865,1 125,3 986,8 123,1 11,1 10,8 11,1 11,3 11,7 11,8 0,5 104,9 0, ,1,7 59,1 57,4 58,9 58,5 59,0 59,1 1,1 101,9 0, ,1 78,8 113,0 113,0 121,5 137,5 174,3 8,5 107,5 16,0 113,2 36,8 126,8 0,4 0,5 0,4 0,4 0,4 0,4-0,1 87,3 0,0 93,2 0, ,0 2,5 2,4 2,1 1,9 2,0-0,4 84,8-0,2 91,1 0,1 103 The share of revenues collected by Tax Committee under the Government of the Republic of Tajikistan in the State Budget current revenues equals to 58.5 in 2011, 59.0 in 2012, 59.1 in 2013, accordingly it is the equivalent to 11.3 of GDP in 2011, 11.7 of GDP in 2012 and 11.8 of GDP in 2013, based on the revenues the growth in comparison to approved budget of 2010 is estimated to increase to million Somoni in 2011, accordingly of 2011 to million Somoni in 2012 and of 2012 to million Somoni in 2013 accordingly. The share of revenues collected by Customs Service under the Government of the Republic of Tajikistan in the State Budget current revenues equals to 39.5 in 2011, 39.1 in 2012, 39.0 in 2013, accordingly it is the equivalent to 7.6 of GDP in 2011, 7.7 of GDP in 2012 and 7.8 of GDP in 2013, based on the revenues the growth of 2011 in comparison to approved budget of 2010 is estimated to increase to million Somoni, accordingly for 2012 in comparison to approved budget of 2011 to million Somoni and in 2013 in comparison of 2012 to million Somoni. 3. The estimations of tax and non- tax revenues for the medium- term period Hence, the estimations of tax and non- tax revenues based on each source of income in the medium term will be estimated with the following indicators: 2009 actual 2009/ GDP () 2010 с. estimate 2010 с prel impl incr. 2011\ incr. 2012\ incr. 2013\ 2012 Gross Domestic Product 20623, , , , , ,0 Current revenues without grants 3859,9 18,7 4606,4 4774,5 5841,0 1234,6 7256,6 1415,6 8917,7 1661,0 II. Tax Revenues 3646,0 12,2 4355,0 4514,0 5538,3 1183,3 6899,6 1361,3 8491,3 1591,6 18

19 1. Income Tax from physical persons and Income Tax 609,4 3,0 692,5 713,0 832,3 139,8 1132,4 300,1 1387,2 254,8 Income Tax from Physical persons 366,9 1,8 426,4 436,8 530,4 104,0 682,9 152,5 885,9 203,0 Income Tax from judicial person 118,4 0,6 122,2 128,7 142,4 20,2 229,6 87,2 252,3 22,7 Least Tax from incomes of organizations 124,1 0,6 143,9 147,5 159,5 15,6 219,9 60,4 249,0 29,1 2. Social Tax 481,4 2,3 540,0 545,8 657,2 117,2 832,0 174,8 1011,8 179,8 3. Property Tax and Land Tax 142,7 0,7 158,1 164,6 218,1 60,0 237,3 19,2 306,6 69,3 Tax from immovable properties 57,5 0,3 67,4 71,0 87,6 20,2 91,7 4,1 118,3 26,6 Land Tax from the judicial person 8,2 0,0 7,8 8,2 10,7 2,9 14,2 3,5 18,2 4,0 Land Tax from the physical person 15,1 0,1 17,2 19,4 34,8 17,6 39,3 4,5 49,0 9,7 Unique Tax for all agriculture product producers 61,9 0,3 65,7 66,0 85,0 19,3 92,1 7,1 121,1 29,0 4. Sale Tax, Value Added and Turnover 1916,3 3,8 2345,0 2417,7 2992,3 647,3 3643,5 651,2 4520,4 876,9 4.1.Sale Tax 141,5 0,7 148,9 180,9 203,7 54,8 249,0 45,3 322,7 73,7 Tax on sale of cotton fabric 53,4 0,3 55,5 56,2 62,5 7,0 69,9 7,4 72,7 2,8 Tax on sale of primary aluminum 2,5 0,0 3,3 4,2 5,2 1,9 7,5 2,3 10,3 2,8 Retail Sale Tax 85,6 0,4 90,1 120,5 136,0 45,9 171,6 35,6 239,7 68, Value Added Tax 1722,8 2,9 2138,4 2174,3 2682,6 544,2 3258,5 575,9 4033,4 774,9 Value Added Tax (Internal) 407,0 2,0 529,7 560,5 669,2 139,5 829,7 160,5 1049,5 219,8 Value Added Tax (External) 1128,4 1397,8 1397,8 1721,4 323,6 2113,0 391,6 2602,0 489,0 Tax on the use of automobile roads 187,4 0,9 210,9 216,0 292,0 81,1 315,8 23,8 381,9 66, Tax on the basis of simplified system 52,0 0,3 57,7 62,5 106,0 48,3 136,0 30,0 164,3 28,3 5. Excise Tax 165,6 0,8 224,5 235,8 298,3 73,8 357,9 59,6 456,0 98,1 Internal Excise Tax 12,4 0,1 18,1 29,4 38,9 20,8 45,5 6,6 66,8 21,3 External Excise Tax 153,2 0,7 206,4 206,4 259,4 53,0 312,4 53,0 389,2 76,8 6. Customs Tax 197,0 1,0 220,1 220,1 287,3 67,2 362,6 75,3 426,0 63,4 7. Other Taxes on goods and services 133,6 0,6 174,8 217,0 252,8 78,0 333,9 81,2 383,3 49,4 Tax from vehicle owners 45,0 0,2 51,1 60,5 74,2 23,1 97,0 22,8 113,0 16,0 Tax on the use of the land depth 18,8 0,1 22,8 29,4 44,8 22,0 85,8 41,0 91,8 6,0 Royalty for water 0,0 33,4 39,2 44,1 10,7 52,5 8,4 68,9 16,4 State Tax 43,0 0,2 43,2 51,2 64,2 21,0 72,5 8,3 82,8 10,3 Tax on special processing of goods 26,8 0,1 24,3 36,7 25,5 1,2 26,1 0,6 26,8 0,7 V. Non- Tax Revenues 213,9 1,0 251,4 260,5 302,7 51,3 357,0 54,3 426,4 69,4 Hence, the increase of revenues during the period of basically through value added tax ranges from 544,2 million Somoni to million Somoni, through Social Tax ranges from to million Somoni, Income tax from the physical persons from million Somoni to million Somoni, Least Income Tax from 15.6 million Somoni to 60.4 million 19 Somoni, Excise Duties from 73.8 million

20 Somoni to 98.1 million Somoni and the Customs Tax ranges from 67.3 million Somoni to 75.3 million Somoni. The comparative weight of Value Added Tax in the State Budget current revenues for the period of ranges from 41.0 to 41.1, Income Tax from physical persons from 14.2 to 15.6, Social Tax from 11.3 to 11.5, Excise Duties ranges from 5.0 to 5.1. The estimations of State Budget current revenues for the period f on the basis of incoming sources and taxation resources are formed as follows. 4. Inflow of Grants for the support of the State Budget and Public Investment Programmes for the medium- term period. Tax revenues from the incomes of physical persons based on the statistical data on the salaries and their estimations for the period is estimated to 530 million Somoni, 683 million Somoni and million Somoni accordingly. Social Tax from non- budgetary tax-payers based on the source of taxation is estimated million Somoni in 2011, 832 million Somoni in 2012 and million Somoni in 2013 accordingly. Based on the data of Land Works, Geodesy and Topography Agency under the Government of the Republic of Tajikistan on the size of fields and average standards of current taxes, also with consideration of financial situation of agricultural farms the revenue from land tax and the unified tax for producers of agricultural products for the period of the amount of tax revenues are estimated 131 million Somoni, 145 million Somoni and 188 million Somoni accordingly. The incomes from the sale tax of cotton fabric based on its production during the current year with the volume of thousand tons and in 2011 with the volume of 390 thousand tons, thousand tons and the sale of cotton fabric with the amount of thousand tons, in thousand tons with the sale of cotton fabric of the volume of thousand tons with average of US Dollar for each ton with 10 standard rate is estimated to 62.5 million Somoni for 20111, 70.0 million Somoni in 2012 and 72.6 million Somoni in During the period of based on requirements of the current legalnormative acts and preliminary calculations the amount of privileges for import of goods is 2.0 billion Somoni, including 1.3 billion Somoni from Value Added Tax and 0.7 billion Somoni from Customs Tax. The Excise Tax for the goods produced in the territory of the country and subexcise goods imported to the republic during the period of is estimated million Somoni, 358 million Somoni and 456 million Somoni accordingly. The Customs Tax during the year of amounting million Somoni, million Somoni and 426 million Somoni accordingly depends on the increase of the volume of imported goods and customs value of imported goods. During the period of the incomes from Internal Value Added Tax with consideration of real growth of GDP, changing the value of national currency against the foreign currency and existing tax privileges is determined with the amount 20

21 of million Somoni, million Somoni and million Somoni accordingly. CHAPTER 3. PUBLIC EXPENDITURES FOR MEDIUM TERM PERIOD 1. The Policy on the Implementation of the State Budget funds in the mediumterm period. State Budget Expenditure Policy during the medium- term will be implemented based on identified strategic documents, including National Development Strategy of the Republic of Tajikistan for the period of up to 2015, Poverty Reduction Strategy of the Republic of Tajikistan for the period of , Strategy on management of public finances for the period of , the Annual Message of the President of the Republic of Tajikistan to the Majlisi Oli of the Republic of Tajikistan and other strategic documents. State Budget Expenditures is planned with the purpose of satisfying the priority needs of budgetary sectors with consideration of their medium term priorities and the excess of expenditures against the incomes. State Budget Expenditure Indicators for the medium term period is given in the following table: Appr. budget Actual Appr. budget Estimation Estimation Estimation Estimation Total State Budget Expenditures , , , ,3 8025, , total in to GDP 26,4 27,4 27,7 26,8 26,6 26,0 23,7 Budget , , , , ,8 22 In to GDP 20, ,6 20,0 20,8 20,4 20,5 Salary Fund , , , in togdp 4,8 0,0 4,7 4,5 5,1 5,3 5,5 Major Expenditure 1 008,4 0, , , , , ,2 14 In to GDP 4,7 0,0 5,1 5,0 4,9 4,8 4,5 Public Investment 784,1 516, , ,3 1094, , ,2-40 Programmes In to GDP 3,7 2,5 4,7 4,5 3,6 4 2 Public Debt 378,6 576,7 301,3 301,3 274, , ,0 In to GDP 1,8 2,8 1,2 1,2 0,9 0,7 0,1 Special Funds 182,9 311,8 283,8 283,6 370, , ,2 29 In to GDP 0,9 1,5 1,2 1,1 1,2 1,0 1,0 In 2010 the total volume of State Budget Expenditures is estimated to million Somoni, where it is more 21 than 20 in comparison to approved

22 budget of 2009 and it equals to 27.7 of total GDP. During the period of total amount of State Budget Expenditures increases and the annual average of expenditures reaches to 16. State Budget total expenditures in 2011 are estimated to million Somoni with nominal growth of 18.0 in comparison to 2010, which equals to 26.6 of total GDP. This indicator estimated in 2012 to million Somoni and in 2013 to million Somoni, where this number increases to 11.0 in comparison to State Budget Expenditures through Public Investment Programme in 2010 is estimated to the amount of million Somoni with the nominal growth of 45.5 in comparison to 2009, where it makes up to 4.9 of the total GDP. This indicator during the period of estimated to million Somoni, million Somoni and million Somoni consequently. In addition to that, based on expenditure indicators the joint investment programmes with international finance institutions is developed on the basis of the projects integrated in the Public Investment Programmes with the purpose of providing the share of the Government of the Republic of Tajikistan. During the period of based on the instant data there are 81 joint investment programmes is estimated, which includes implementation of 48 joint investment programmes during The share of the Government of the Republic of Tajikistan in joint investment programmes is estimated to 85.6 million Somoni in 2011, where in comparison to approved budget of 2010 this figure is more than 10.2 million Somoni or 13.5 increase. Basically, the share of the Government of the Republic of Tajikistan in joint investment programmes is foreseen to the reform and restoration of the national economy. 2. The sources of funding and their directions for utilization. Government share funding through State Budget funds in joint investment programmes during 2011 is distributed to the following based on sectors: - Agriculture - 16,9 million Somoni (19,7 ); - Transportation - 44,3 million Somoni (51,9 ); - Education - 4,9 million Somoni (5,7 ); - Health - 1,5 million Somoni (1,8 ); - State Governance and management sector - 0,5 million Somoni (0,6 ); - Housing and communal services - 1,8 million Somoni (2,1 ); - Social Sector - 0,7 million Somoni (0,8 ); - Reserve for implementation of programme which are in the process of negotiations - 15,0 million Somoni (17,5 ); 22

23 Total: - 85,6 million Somoni ( ) Funding of joint investment programmes in 2011 on the basis of all sources is estimated with the amount of 1094 million Somoni, Debt 804,7 million Somoni or 58,8 per cent; Grants 446,6 million Somoni or 32,6 per cent; Share of the Government of the Republic of Tajikistan: through budget funds 85,6 million Somoni or 6,3 per cent; Other internal sources 2,2 million Somoni or 2,3 per cent. 3. State Budget Expenditures for government debt services, etc. State Budget Expenditures for settlement of debt in 2010 is foreseen with the amount of million Somoni or 1.2 of total GDP, in 2011 this figures estimated million Somoni or 0.9 of GDP share, in 2012 and 2013 based on the temporary indicators the estimated figures are million Somoni and 38.0 million Somoni accordingly. Taking into the consideration of full debt repayment for People s Republic of China, the State budget expenditures from State Budget comparatively decreases. State budget expenditures through special funds of budgetary organizations is estimated to million Somoni in 2010, where it is the equivalent of 4.1 of the total amount of State budget expenditures. This indicator grows in further years, and it amounts million Somoni in 2011, million Somoni in 2012 and in 2013 it is estimated to million Somoni or 29.0 more than the period of 2012 and this number equals to 6.0 of the total State budget expenditures. The approved amount of State budget current expenditures for 2010 is million Somoni or 20.6 of GDP and this indicator increases in further years and the estimation for 2011 amounts to million Somoni, in 2012 amounts to million Somoni, in 2013 amounts to million Somoni, where the annual average growth for the last three years estimated to The comparative weight of State budget current expenditures is estimated to 20.6 of GDP in 2010, 20.8 of GDP in 2011, 20.4 of GDP in 2012, and 20.5 of GDP in Planned Wage Fund for 2010 is million Somoni and it makes 22.6 of the total State budget current expenditures or it is the equivalent of 4.7 of GDP. This indicator increases in further years, and estimated to amount of million Somoni or 5.1 of GDP in 2011, million Somoni or 5.3 of GDP in 2012, and million Somoni or 5.5 of GDP in Increase in salaries basically foreseen in all sectors and it is directed with the purpose of keeping the volume of salary within the border of inflation rate and devaluation of Somoni worth. Within the framework of determined Wage Fund the priorities of all budget organizations will be taken into account and the reform of salary will be continued in the republic. With the aim of implementation of the reform of salaries of Government Servicemen the Unified Tariff Table- 23 tariffs coefficients, payment of salaries of