Tajikistan’s central bank cut its benchmark refinancing rate by another 100 basis points as inflation continued to decline in October due to the short-term drop in the price of domestic food products.
The National Bank of Tajikistan cut its rate to 12.25 percent and has now cut it by a net 175 basis points this year following a 150-basis point cut in May when it reversed course after raising the rate by 75 points in February.
The central bank said it expects an increase in capital flows and thus the exchange rate partly due to the U.S. Federal Reserve’s policy stance which should strengthen the national currency and help stabilize inflation, which is expected to remain within the target level in the medium term.
Tajikistan’s inflation rate accelerated in the first half of this year to hit 8.8 percent in May and remained high until September until it dropped to 8.1 percent and then 7.3 percent in October.
Tajikistan’s central bank currently targets inflation of 7.0 percent, plus/minus 2 percentage points but has lowered the 2020 target to 6.0 percent, plus/minus 2 percentage points.
Tajikistan’s gross domestic product grew 7.2 percent in the first nine months of the year, down from 7.5 percent in the first six months.
Tajikistan’s currency the somoni, which replaced the Tajikistani ruble in 2000, has been steadily depreciating since 2014 and was trading at 9.69 to the U.S. dollar today, down 2.7 percent this year and down 9 percent since the start of 2018.
Dollarization of citizens deposits has been declining in recent years and has fallen to around 50 percent of deposits this year from over 70 percent in 2016.