VZCZCXRO0894
RR RUEHLN RUEHVK RUEHYG
DE RUEHDBU #0215/01 0381218
ZNR UUUUU ZZH
R 071218Z FEB 08
FM AMEMBASSY DUSHANBE
TO RUEHC/SECSTATE WASHDC 0189
INFO RUCNCIS/CIS COLLECTIVE
RUEHNE/AMEMBASSY NEW DELHI 0026
RUEHIL/AMEMBASSY ISLAMABAD 0045
RUEHBJ/AMEMBASSY BEIJING 0022
RUEHBUL/AMEMBASSY KABUL 0059
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHDC 0026

UNCLAS SECTION 01 OF 02 DUSHANBE 000215 
 
SIPDIS 
 
SIPDIS 
SENSITIVE 
 
DEPT FOR SCA/CEN 
 
E.O. 12958:  N/A 
TAGS: PGOV EFIN ECON TI
 
SUBJECT: Tajikistan's National Budget - The Best Parts are Hidden 
 
 
DUSHANBE 00000215  001.2 OF 002 
 
 
¶1. (SBU) Summary: The Government's 2008 budget is much larger than 
last year's, and assumes much greater revenues.  Developed in a 
totally non-transparent manner, the document hides the true extent 
of presidential spending.  End Summary. 
 
¶2. (U) In November 2007 media conveyed a brief statement from the 
Government noting that Parliament had "endorsed" the 2008 budget, 
and giving a few snippets of information showing that it would be 
considerably larger than the 2007 budget, and would include big 
increases in spending on health and education.  The Government did 
not release the actual budgetary legislation, but the embassy 
recently got a look at this document, all fourteen pages of it 
(gulp).  What was most telling was its vagueness.  Tajikistan's 2008 
budget is 38 percent larger than the 2007 budget, reaching $1.3 
billion.  It is 3.7 times higher than the budget of 2002.  It 
includes a budget deficit of $21 million, to be covered by 
privatization and treasury securities and deposits of the government 
at the National Bank of Tajikistan.  The 2008 budget to GDP ratio is 
30.7 percent.  Budget revenue per capita is 622 Somoni, or $177. 
 
¶3. (SBU) The Government projects Tajikistan's GDP for 2008 to be 
14.8 billion Somoni, or approximately $3.5 billion.  However, this 
does not include the untaxed "grey" economy.  The grey economy 
includes all unreported company operations and trade. Almost all 
companies in Tajikistan practice double bookkeeping to avoid taxes 
and customs.  Another major element of the grey economy is 
remittances by labor migrants in Russia and Kazakhstan; migrants 
transferred officially about $1.3 billion in 2007 through the Tajik 
Banking system, accounting for nearly 40 percent of that year's GDP. 
 The true size of remittances is probably larger.  The government of 
course does not capture money made from the transit of illegal 
narcotics from Afghanistan - which may account for as much as 20 
percent of actual GDP. 
 
¶4. (SBU) Taxes and non-tax collections are the main source of 
government revenue, accounting for 63 percent of the budget.  Tax 
collection will have to increase 66 percent on last year's 
collection to meet the targets of 2008 budget.  This will increase 
pressure on small and medium businesses, and on anything which is 
profitable and traceable, notably the mobile telephone sector. 
Investment project aid from international financial institutions 
such as the World Bank accounts for 12.7 percent of the budget, or 
$163 million (this includes a portion of Chinese $1 billion 
Government loan given to Tajikistan in 2006). 
 
¶5. (SBU) Some Key Items - The government is going to spend 211 
million Somoni ($61 million) for defense.  This is 4.6 percent of 
the 2008 budget, and 46 percent more than in 2007.  On education the 
government of Tajikistan allocated 691 million Somoni ($198 million) 
or 15 percent of the budget.  This is a 37 percent increase since 
last year.  On health the budget allots 255 million Somoni ($73 
million) or 5.6 percent of budget.  It is a 43 percent increase 
since 2007.  This is the government's "socially oriented" budget, 
which does increase spending on health and education, but not nearly 
enough to meet Tajikistan's educational and health needs.  For 
example, at present there are 1.7 million students in Tajikistan's 
schools; the budget allots less than 50 cents per day per student; 
Qschools; the budget allots less than 50 cents per day per student; 
this includes salaries for teachers, building maintenance, buying 
new books and development of new education materials.  The health 
sector is also in deep crisis; since independence it has become 
common practice for those in need of treatment, including surgery, 
to pay for it themselves; officially it's free.  Many government 
officials and businessmen prefer medical treatment outside 
Tajikistan, in Moscow, Germany or Israel.  Back in Tajikistan in the 
current winter power crisis, despite government claims that most 
hospitals have generators, we receive reports that it is common for 
babies to be born by candlelight, in unheated maternity clinics. 
 
¶6. (SBU) The most interesting sections of the Tajik budget are those 
containing "other" or "administration expenses".  They include the 
following: for "state authorities and management" - $101 million 
[which may partly cover salaries and expenses for ministries, but 
every ministry's portion of the budget already includes salaries]; 
"other economic sectors and service" - $3.7 million; "other 
expenditures" - $82 million; "other law enforcement" - $20.7 
million; "unexpected expenditures of Government" - $5.7 million; 
"other expenses not classified as economic sectors" - $125 million, 
and finally the "President's Reserve Fund" - $17.2 million.  In 
total, the budget for generic "other" expenses and administration is 
around $355 million, or 28 percent of the total budget. 
 
¶7.  (SBU) In a February 7 meeting to elicit donor contributions for 
 
DUSHANBE 00000215  002.2 OF 002 
 
 
the ongoing energy sector shortfall, Ambassador asked Foreign 
Minister Zarifi if the government planned to re-prioritize funding 
away from expensive palaces, dachas and other show projects to cover 
the energy needs of the population.  Zarifi explained that we should 
not worry about such projects since they are not part of the 
government's budget, but instead are funded by "sponsors."  Zarifi 
couldn't or wouldn't answer the follow-on question: Why don't these 
"sponsors" pay to import fuel oil or improve hydropower?  Zarifi 
argued that the palaces were "necessary" for Tajikistan to play a 
role in regional cooperation, to enhance political prestige, and to 
"show the people of Tajikistan that the country is respected 
internationally."  "Paris has its Eiffel Tower, after all," he 
added.  Zarifi's comments let slip a widely known secret - that much 
government spending is completely off-budget where the international 
financial institutions cannot scrutinize it. 
 
¶8. (SBU) Comment - Darkness: As in the past, the details of the 
budget remain closely held by the Presidential administration.  The 
document is developed by the presidency, and passed by Parliament 
without debate.  The large undefined "other expenses" suggest that 
the document is designed as much to hide as to inform.  There are no 
public hearings on the budget, and Tajik civil society does not 
participate in or otherwise contribute to budget discussions.  We 
called Parliament Deputy Gulchehra Tursunovna Bozorova, who chairs 
the Budget, Tax and Economy Committee, to ask her to discuss the 
budget, but she declined to speak with us without first obtaining 
written permission from the Speaker of Parliament.  (Bozorova is an 
alumna of the recent Open World exchange for Tajik 
parliamentarians.) 
 
¶9. (SBU) Comment Continued: Helping to keep the wider public from 
knowing how its money is spent, Tajik mass media avoid any deep 
analysis of the state budget, and barely mention it at all.  This is 
in part self-censorship, but also reflects the media's lack of 
financial specialists.  End Comment. 
 
JACOBSON