Tajikistan is a landlocked low-income country in Central Asia with a population of 7.3 million, and per capita income of US$550 (Atlas method, 2008). Tajikistan faces difficult challenges arising from geography, history, institutional weaknesses, and the global economic crisis. The country experienced strong economic growth between 2000 and 2007, averaging about 9 percent per year. But for the last two years Tajikistan’s economic development was complicated by deficiencies in macroeconomic management, and severe winter energy shortages.  The economy depends heavily on exports of cotton and aluminum, and on remittances of migrants to Russia (remittances were estimated at USD 2.2 billion (43 percent of GDP) in 2008)). Due to the global economic crisis, Tajikistan’s growth is expected to fall to 3 percent in 2009, one-third the rate of expansion of 9 percent enjoyed during 2000–2007, mainly due to the expected 30 percent drop in remittances from Tajik migrants working in Russia and to a decline in exports of cotton and other commodities. Many Tajiks working in Russia are employed in the construction industry, which has enjoyed a boom during the years of high oil prices. A slowdown in construction is likely to result in lower earnings or unemployment of Tajiks working abroad, lower remittances, and the return to the country of migrant workers, putting pressure on public services. The fall in commodity prices is expected to affect the value of Tajik exports, such as cotton and aluminum. The foreign direct investment is likely to decline, affecting plans for large infrastructure projects. Access to concessional financial resources from emerging economies, such as Kazakhstan and China, may fall, increasing the cost of capital for business. A projected reduction in external finance from all sources will likely put pressure on the balance of payments, reserves, the exchange rate, and the current account. Although the steady decline of poverty rate was registered during the past years, it still remains very high. In 2007, about 53 percent of the population was living below the poverty line of US$41 per month, and 17 percent were below the extreme poverty line of US$26 per month. This is a significant improvement over the 64 percent of people that were living below the poverty line in 2003 and the 83 percent there were doing so in 1999. About 71 percent of the poor and 76 percent of the extremely poor live in rural areas. The high poverty rate of people living in rural areas makes them exceptionally susceptible to weather and price shocks. Food comprises about 64 percent of total consumption for Tajiks. The worldwide food crisis has also taken its toll on the country, which saw a 25.9 percent food price inflation rate in 2007 which slowed down up to 12.9 percent in 2008 due to weak demand. Thus, Tajikistan remains the poorest and among the most fragile of the CIS countries. Social indicators, although improved for the past few years, still remain on the law level, reflecting poor public service delivery, weak governance, persistent energy shortages and low per capita incomes. Tajikistan is the only country in the Europe and Central Asia region unlikely to achieve most of its Millennium Development Goals (MDGs). Tajikistan’s agriculture output is dominated by a cotton sector that absorbs vast of agricultural inputs but produces only 9 percent of agricultural output (2008). It suffers from substantial domestic inefficiencies and inequities. Today, the Tajik cotton sector is facing significant challenges. The large debt of the cotton sector (estimated at up to USD 553 million at the end of  2008), the absence of competition in input and output marketing, and slow land reforms have led to a decline in the sector and left cotton farming barely viable for many farmers. The Doing Business 2009 report released in September 2008 ranked Tajikistan 159th out of the 181 economies measured by the Doing Business indicators. The report looks at the cost for a domestic business to meet government requirements in starting and operating a business, trading across borders, paying taxes, closing a business, and other activities. The report recognized one positive reform in Tajikistan over the last year: the Joint Stock Companies Act adopted by Parliament in May 2007. The report also points out one negative change in Tajikistan’s business environment: administrative backlogs in obtaining location permits added 160 days to the overall time for dealing with construction permits. Since market transition in 1991, Tajikistan has experienced high levels of migration. Early emigration was motivated by war and the conflicts following independence, while more recent migration has been motivated by economic factors. Labor migrants’ remittances have played an important role as one of the drivers of Tajikistan’s robust economic growth during the past several years. Remittances have become the most important source of external financing for the balance of payments, have increased incomes, and as a result helped reduce poverty.  With 67.5 % of its population under the age of 29, Tajikistan’s youth will be a main force in determining the country’s economic future and stability. The country’s challenge in serving its youth is underscored by the fact that the country is, as of now, unlikely to meet most of the  Millennium Development Goals (MDGs). The country is rich in natural resources, most importantly water and hydropower potential, and also some minerals— high quality coal, gold, silver, precious stones, and uranium. Tajikistan suffered a brutal civil war immediately after independence during 1992 to 1997, which inflicted widespread physical damage and heavy human losses of up to 50,000 lives. Peace and stability were achieved twelve years ago in 1997 through a peace deal between the Government and the United Tajik Opposition. Tajikistan's 1,200-km border with Afghanistan makes the country an important route for the drug trade, which complicates the challenge of tackling corruption and makes the spread of HIV/AIDS through injecting drug users a growing concern. | 
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