ADB loan to fund Tajikistan cotton sector's recovery
04 Dec '06
3 min read
ADB will help restore the productivity and profitability of Tajikistan's cotton industry through a loan and grant package totaling US$12 million.
The cotton industry is the country's main source of farm income, agricultural exports, and rural employment. However, it has been underperforming, with yields and profitability on the decline, largely due to the substantial and increasing cotton farm debt.
This debt, estimated at $292 million in early 2006, was incurred by cotton farms under a complex system of production credit from intermediaries outside the formal banking system. The Government has responded by developing a comprehensive Cotton Farm Debt Resolution Strategy, and the project will complement this effort.
“An unprofitable cotton industry is inextricably linked to poverty,” says Lourdes Adriano, an ADB Senior Rural Development Economist. “Thus, there is an urgent need to support the recovery of the subsector. Its turnaround is the agriculture sector's path to equitable pro-poor growth.”
The project will first resolve cotton farm debt on a pilot scale in four selected districts in the two main cotton-producing regions - Sughd and Khatlon – where three quarters of the country's extremely poor live.
A team will analyze the debt level and operations in each farm, then work to restructure and settle the debt. Realistic business plans for each farm will also be prepared.
At the same time, the project will make policy recommendations and farm debt resolution options to the Government, and support education and awareness measures to provide suitable financing products and services to the restructured pilot cotton farms, the Government will relend $3 million of ADB's loan to participating commercial banks.
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