Kyrgyz Republic and the IMF
News Brief: IMF Completes First Review of the Kyrgyz Republic Under the Three-Year Arrangement under the PRGF
Country's Policy Intentions Documents
Free Email Notification
of Intent, Supplementary Memorandum of Economic Policies,
and Technical Memorandum of Understanding
Mr. Horst Köhler
Dear Mr. Köhler:
1. On December 6, 2001, the IMF Executive Board endorsed the Kyrgyz Republic's three-year economic program, and approved a Poverty Reduction and Growth Facility (PRGF) arrangement in support of that program.
2. On behalf of the government of the Kyrgyz Republic, we are pleased to transmit herewith a Supplementary Memorandum of Economic Policies, which describes in detail the implementation of our program to date and our near-term policy intentions in addition to those described in our original Memorandum of Economic Policies, dated November 16, 2001. It also proposes quantitative performance criteria, as well as structural performance criteria and benchmarks, for end-September 2002.
3. We believe that the policies and measures set forth in the Supplementary Memorandum are adequate to achieve the objectives of our program, and we stand ready to take any additional measures that may become necessary for this purpose in consultation with the Fund staff. The government will provide the Fund with such information as the Fund requests in connection with the Kyrgyz Republic's policies and developments under the program.
Supplementary Memorandum of Economic Policies
1. This Supplementary Memorandum of Economic Policies (SMEP) updates our Memorandum of Economic Policies (MEP) dated November 16, 2001, which describes the economic policies supported by the International Monetary Fund with a three-year arrangement under the Poverty Reduction and Growth Facility (PRGF). The SMEP reviews performance over the six months through March 2002 and supplements the policies detailed in the MEP for the period April-September 2002. These policies are consistent with the National Strategy for Poverty Reduction (NSPR) which we intend to finalize in September 2002.
II. Performance Under the Program
2. The Kyrgyz Republic's economy has performed largely as expected over the period under review. Real GDP grew 5⅓ percent in 2001 for the second year in a row, with growth driven by mining agriculture, construction, and trade. Although preliminary data indicate negative year-on-year growth in the first three months of 2002, we believe that this reduction is temporary and expect growth in 2002 to be in line with the program projection (4.4 percent). The 12-month inflation rate fell to 3.7 percent in December 2001 from 9.6 percent in 2000 and further to 2 percent in March 2002, reflecting appropriately tight monetary and fiscal policies. Nominal and real interest rates declined over the period under review, and the nominal exchange rate remained stable, indicating increased confidence in the som. The balance-of-payment adjustment was stronger than expected, with the current account deficit narrowing to 3.3 percent of GDP in 2001. The adjustment was partly due to lower imports associated to with a decline in the Public Investment Program (PIP), but a good harvest also reduced agricultural imports.
3. In March 2002, our creditors in the Paris Club granted a flow rescheduling of our debt for 2002-2004 on somewhat better than Houston terms, thus ensuring that our program is fully financed. Creditors also expressed their goodwill to consider a concessional treatment of the stock of our debt upon successful implementation of the current three-year PRGF arrangement and approval of an appropriate follow-up medium-term arrangement.
4. Poverty has begun to decline. Our preliminary analysis indicates that poverty ratios have dropped since 1998, reflecting recent economic growth, particularly in agriculture, and the impact of the land reform of the mid-1990s.
5. We have achieved all quantitative program targets for the first review. The quantitative performance criteria for end-March and the quantitative benchmarks for end-December have been observed (Table 1). The structural performance criterion on the approval of a privatization action plan by end-December 2001 has been met. The structural benchmarks for end-December 2001 and end-March 2002 were implemented. However, for technical reasons, there was a short delay in publishing the first Financial and Economic Bulletin of the Ministry of Finance (MoF). Regarding the structural benchmark on the regularization of the financial relations between the NBKR and the MoF, we had reached a preliminary agreement between the parties in March, but waited for technical assistance from the Fund to ensure that the final agreement meets the recommendations of the Fund's safeguard assessment.
6. Further amendments are being made to the privatization action plan and legislation on collateral. As agreed with the staff, we did not include targets for tariffs and bill collection rates over the period of 2003-2004 in the privatization action plan adopted in December 2001 as we are specifying these targets in the context of the World Bank's Consolidation Structural Adjustment Credit. Although we submitted to parliament legislative amendments to facilitate the execution of pledges, with assistance from the Asian Development Bank (AsDB), we have drafted a new law on collaterals and mortgages which we will present to parliament before the summer recess. In April 2002, the NBKR revoked the license of two problem banks—Kramds and Issyk-Kul. The NBKR Board also approved new regulations on asset provisioning and operations with offshore banks, which will improve accuracy in the classification of banks' assets once they become effective on June 1, 2002. We have completed the fencing of two Free Economic Zones (FEZ). The feasibility of fencing two other FEZ, encompassing one oblast each, will be reviewed after an in-depth study to be completed in September.
III. Program revisions for the Period June 2002-September 2002
7. We will supplement the MEP in two main areas: revisions to the 2002 macroeconomic framework and program targets; and additional structural measures to strengthen governance of public finance and in the banking sector. As a prior action for the program review, we will complete the regularization of the financial relations between the NBKR and the MoF in accordance with the understandings reached with the staff, including the impact of the repaid government guaranteed loan from the Union Bank of Switzerland to JSC Zhibek Zholu. We have supplemented the MEP with two structural performance criteria and four structural benchmarks for end-September 2002 (Box 1).
8. In view of recent gains in price stabilization, we have revised the program's 2002 year-on-year inflation target from 7.5 percent to 4.1 percent. The slowdown of growth in the first quarter of 2002 does not warrant a downward revision of programmed real GDP at this stage as we believe that this slowdown is temporary. We expect the current account deficit to widen somewhat in 2002, mainly because higher PIP-related imports will be offset only in part by higher service revenue from the international military base. We expect gross reserve at end-2002 to be at broadly the same levels of previous years—equivalent to 4½ months of imports.
9. We have revised the fiscal program's revenue estimates in view of additional grants from Switzerland and higher tax and nontax revenue mainly stemming from gold production and related profits, the reduction of VAT credit on agriculture, and the imposition of a new excise on jet fuel. We propose to increase the program's deficit target by 0.2 percent of GDP to 5 percent in 2002, to ensure adequate social spending and emergency outlays for the recent natural disaster in the south of the country, and clearance of arrears on counterpart funding for the PIP and allowances for poor families. We will initiate discussions with the donors to increase the domestic counterpart funding of the PIP and reduce the foreign borrowing for the PIP correspondingly in the coming years. During 2002, the MoF will streamline procedures for the release of counterpart funds and, in the context of the 2003 budget preparation, it will identify priority projects for 2003-2005 in coordination with donors. We will also increase pensions below som 1000 per month by som 25 to som 90 with higher increases for lower pensions as of June 1, 2002. To ensure adequate funding of pension expenditures, the Republican budget will effect a transfer, currently estimated at som 840 million, to the Social Fund. To underscore our commitment to protecting vulnerable groups, we have decided to include allowances to poor families among the central government budget arrears monitored as a performance criterion under the program.
10. In the 2003 budget, we plan to adopt most measures identified by the two recent Fiscal Affairs Department's (FAD) technical assistance missions (on tax policy and on expenditure management). We believe that there is considerable potential for broadening the tax base and improving tax compliance. On two areas, however, we need more time. On value added taxation (VAT), we will carefully investigate the revenue impact of extending the VAT to sales of agricultural products by producers whose turnover is above the VAT registration threshold. This study will also assess the impact of such VAT extension on inflation and on vulnerable population groups. It will be brought for consideration of the Economic Policy Council by end-September 2002. On taxation of consumption on public utilities, we will discuss the issue in the context of the World Bank's energy sector reform program. We will revise the taxation regime for new mining projects in line with the recommendations of the FAD tax policy mission. In particular, for VAT purposes, exports from new mining projects (excluding Kumtor) will be zero-rated and the tax paid on intermediate inputs will be credited against VAT liabilities. No new tax exemptions will be granted to mining companies. To improve collection enforcement and coordination among different revenue agencies, the EPC will review the proposal to merge the State Customs Committee, the State Tax Inspectorate, the Financial Police, and the collection branch of the Social Security Fund in an independent Revenue Agency under the Ministry of Finance. We will establish a working group to prepare a detailed merger plan to ensure that such merger has no negative impact on revenue collection in its implementation phase. We will request technical assistance from the international financial institutions to make the agency effective. The government will also issue a resolution to convert the existing Large Taxpayer Unit (LTU) into a fully empowered LTU as specified by the recent FAD tax mission in Section IV.F of its report on "Further Reform of Tax Policy and Administration." The issuance of such decree will be a structural performance criterion for end-September 2002. In cooperation with the Fund staff, we will also conduct a review of the impact of Free Economic Zones on investment, tax revenue, exports, and employment by end-September 2002. In the context of the 2003 budget, we will consider amending the funding mechanism of the custom services as a pilot project, so that a progressively larger share of higher-than-budgeted collections will remain in the agency for its internal use. The pilot will be carefully designed in the context of the AsDB's Custom Modernization Project.
11. We intend to further enhance economic policymaking by restructuring the MoF in line with FAD recommendations. Such restructuring would include, for example:
The approval of the MoF restructuring plan, as prepared in close consultation with the IMF staff, will be a structural benchmark for end-September 2002. The Financial Planning Division which we intend to establish within the Treasury will prepare quarterly cash forecasts and plans. The establishment of such division and the preparation of its first cash forecast of revenue and expenditures for the remainder of 2002 will be a structural benchmark for end-September 2002.
12. As a result of the better-than-expected balance of payment outcome, we exceeded the end-March net international reserves (NIR) target by a significant amount—20 percent of reserve money. We believe that the rapid growth in reserve money associated with such foreign exchange inflows reflected the ongoing remonetization process in the economy, thus having no inflationary impact. During the remainder of the year, we intend to consolidate these gains. We thus aim at gross reserves equivalent to 4½ months of imports by end-December 2002. Consistent with such target and largely reflecting the programmed accumulation of government deposits, the NDA of the NBKR—which remained below the end-March program ceiling by 4 percent of reserve money—will decrease significantly. In view of the expected low inflation and continued growth, we plan to limit the increase of som broad money to 15.2 percent during 2002 so as to ensure that liquidity conditions remain consistent with the program's macroeconomic objectives. The NBKR will refrain from foreign exchange interventions except for smoothing temporary fluctuations in the exchange rate. If appreciation pressures arise, the NBKR intends to primarily strengthen the official foreign reserve position. The NBKR, however, stands ready to expand open market operations and let interest rates rise should inflation show signs of acceleration. Following assistance from MAE, the agreement between the NBKR and the MoF on how to regularize their financial relations is now being finalized and it follows the recommendations of the Fund's safeguards assessment. We have used this opportunity to deepen the market for government paper in view of the NBKR's need to expand its open market operations.
13. We place great importance to improving governance to enhance economic growth and promote poverty reduction. In the MEP we specified several measures aimed at improving transparency and accountability in the use of public resources. We believe that such objectives could be promoted further through the publication of the Chamber of Account's audits of state finances. On one hand, managers would use public resources more effectively knowing that their operations will be scrutinized. On the other, the Chamber of Account's itself would become more accountable to public scrutiny. We plan to publish the Chamber of Accounts' 2001 audit of state finance in October 2002.
14. Regarding governance in the financial sector, it is essential that the NBKR can enforce its regulatory and supervisory powers effectively. In order to increase the accountability of owners and banks' management, we are working with the AsDB to amend the Law on Banks and Banking Activities and the Bankruptcy Law. We will also introduce a new Law on Bankruptcy of Banks. At the same time, the NBKR will forcefully implement the Regulatory Response Policy (RRP) for any bank that does not meet prudential requirements. The NBKR will reclassify the assets of banks according to the newly approved regulations on asset provisioning and operations with offshore banks. If the asset quality of a bank deteriorates as a result, the NBKR will require the bank to properly provision its assets. If the capital is below the minimum level required, the NBKR will require owners to recapitalize the bank. If the NBKR's requests are not met, a bank's license will be revoked, or a bank will be placed under temporary administration. In addition, we will strengthen the NBKR's supervisory powers by submitting to parliament amendments to the law on Licensing. The new Law will stipulate that all licensing activities associated with financial institutions (that are regulated and licensed by the NBKR) are subject to the laws on Banks and Banking Activities, on the National Bank, on Credit Unions, and other specialized enabling legislation. The submission to parliament of such amendments will be a structural benchmark for end-September 2002. We will also propose amendments to current legislation to ensure that the courts accept, as the representation of banks' financial position, the banks' financial statements confirmed by the NBKR. The latter measure will be a structural performance criterion for end-September 2002.
15. With the financial support from the World Bank we will hire a consultant to develop a business plan for DEBRA and help us privatize the Savings and Settlements Corporation. Kairat Bank has restructured its operations and it is now generating profits. If the government decides to privatize the bank, we will ensure the conduct of due diligence and transparent privatization procedures. In any event, the status of Kairat Bank will not be significantly altered without consulting the staff. We expect the upcoming Financial Sector Assessment Program (FSAP) missions to help us identify further measures to strengthen the banking sector. On the basis of these findings, and in consultation with the IMF staff, the NBKR will draft a strategy for further banking sector reforms. To underscore the importance we associate to further improving the soundness of our banking system, the drafting of such strategy before end-September 2002 will be a structural benchmark under the program.
16. Our plan for developing the NSPR remains ambitious as it includes comprehensive consultations with stakeholders and various levels of government. We plan to deepen its assessment of poverty while linking the latter more explicitly to the measures under our strategy. We have sought external technical assistance to help us prioritize and cost policy options and establish a simple set of indicators to monitor progress under the strategy. We expect to finalize the NSPR by October 2002.
IV. Program Monitoring
17. To monitor policy implementation under the first-year program through end-September 2002, quantitative and structural performance criteria and benchmarks are set out in Table 1 and Box 1 of this SMEP. Detailed definitions of the quantitative budgets appear in the revised Technical Memorandum of Understanding.
18. The government of the Kyrgyz Republic and the NBKR believe that the policies and measures set forth in this Supplementary Memorandum are adequate to achieve the objectives of the program. However, in consultation with the Fund staff we will take any further measures that may be needed to ensure the success of the program. These consultations can be initiated by the government or whenever the Managing Director requests them.
1. The Kyrgyz Republic's performance under the PRGF-supported program will be assessed by the IMF on the basis of the observance of quantitative and structural performance criteria and benchmarks. This annex and the tables attached to the Supplementary Memorandum of Economic Policies (SMEP) define the quantitative performance criteria and indicative targets, the structural benchmarks and performance criteria (Box 1 attached to the SMEP), as well as the monitoring requirements.
2. Quantitative targets are summarized in Table 1 of the SMEP and defined below. This annex sets out the quantitative benchmarks for end-June 2002, quantitative performance criteria for end-September 2002, and indicative targets for end-December 2002. At the time of the second review, quantitative performance criteria will be set for end-March 2003.
3. The program contains a floor on the minimum amount of the stock of net official international reserves of the NBKR in convertible currencies. This floor will be calculated as the difference between total gross international reserves in convertible currencies at the NBKR and total official reserve liabilities of the NBKR in convertible currencies.
4. Total gross official international reserves of the NBKR shall be defined as the NBKR holdings of monetary gold, holdings of SDRs; any reserve position in the IMF; and any holdings of convertible currencies in cash, debt instruments (including accrued interest) or with foreign banks. Amounts pledged as collateral or in swaps or otherwise blocked, and capital subscriptions in foreign financial institutions and non-liquid assets of the NBKR are excluded. Excluded are also net forward positions, defined as the difference between the face value of foreign currency denominated NBKR off-balance sheet claims on non-residents and foreign currency obligations to both residents and non-residents. For program monitoring purposes, official international reserves shall be valued at a fixed program exchange rate of som 49 per U.S. dollar and $1.259 per SDR. Official gold holdings shall be valued at $265 per troy ounce. Program cross exchange rates are listed in Table 8.
5. Official reserve liabilities of the NBKR in convertible currencies shall be defined as outstanding liabilities to the IMF and other convertible currency liabilities of the NBKR to non-residents with an original maturity of up to and including one year. However, net claims on other BRO countries are excluded from the ceiling. The change in NIR will be calculated as the sum of program loan disbursements and cash grants net of external debt service payment due by the NBKR and the government of the Kyrgyz Republic excluding payments due on pledged loans. Thus calculated, the stock of net official international reserves in convertible currencies amounted to $53.6 million as of March 31, 2002.
6. The floors on the NIR of the NBKR in convertible currencies during the program period are reported in Table 1 below.
7. The floor on net international reserves of the NBKR will be adjusted: (i) upward/downward by 100 percent for any excess/shortfall in net foreign financing and cash grants; and (ii) upward/downward by 100 percent for any excess/shortfall in cash privatization receipts (see Table 4 of the Staff Report). The adjustment for shortfalls in adjustors (i) and (ii) is to be limited to $15 million each. In the case of a release of the NBKR's pledged foreign reserves, the NIR floor will be adjusted upward by 100 percent of the net effect of the releases and related amortization payments.1
8. Net foreign financing is defined as balance of payment support loans plus cash grants to the state budget minus amortization payments by the Ministry of Finance and NBKR (excluding repayments to the Fund). This definition applies to the adjustors to NIR and NDA. The cumulative net foreign financing for the program period is as follows:
9. Net domestic assets of the NBKR are defined as reserve money of the NBKR (defined below) minus the NBKR's net foreign assets2 minus the medium- and long-term NBKR obligations (MLT) minus the counterpart of the loan by the Eximbank of Turkey minus the counterpart of the EBRD and IDA enterprise loans (see equation 1 below).
10. Thus defined, the NBKR's net domestic assets consist of: (a) gross credit to the State government from the NBKR minus deposits of the State government with the NBKR minus the counterpart of the loan by the Eximbank of Turkey; (b) gross credit to subnational governments from the NBKR minus deposits of subnational governments with the NBKR; (c) gross outstanding credit to domestic banks by the NBKR minus the counterpart of the EBRD and IDA enterprise loans; and (d) all other net assets of the NBKR (other items net). Thus defined, the stock of the NBKR's net domestic assets amounted to som 893 million on March 31, 2002.
11. The ceilings on the net domestic assets of the NBKR during the program period are reported in Table 3 below.
12. The ceiling on net domestic assets of the NBKR will be adjusted: (i) downward/upward by 100 percent of the excess/shortfall in net foreign financing and cash grants; and (ii) downward/upward by 100 percent of the excess/shortfall of cash privatization receipts (see Table 4 of the Staff Report). The adjustment for shortfalls in adjustors (i) and (ii) is to be limited to $15 million each valued at the program exchange rate excluding the amortization payments for the release of the NBKR's pledged foreign reserves.
Ceiling on the cumulative fiscal deficit of the state government3
13. The ceiling on the state government fiscal deficit4 is defined as the negative sum of: (i) the change in the stock of net claims of the domestic banking system and nonfinancial institutions—including state-owned enterprises and public companies—and households on the state government; (ii) the change in the stock of net claims of foreign banking system and nonfinancial institutions and households on the state government; (iii) net privatization receipts; (iv) net foreign loans disbursed to the state government for budgetary support; (v) net foreign loans disbursed to the state government for project financing; and (vi) rescheduling of bilateral debt (principal and interest payments), following the Paris Club agreement. The fiscal balance will be measured excluding valuation gains and losses on all foreign currency denominated assets and liabilities arising from exchange rate fluctuations.
14. The change in the stock of net claims of the domestic and foreign banking systems on the state government are defined as the change in the stock of claims of these banking systems on the state government less the change in the stock of all deposits of the state government with these banking systems. The claims of these banking systems on the state government include: (i) bank loans to state government; (ii) securities or bills issued by the state government held by banks with the exception of those issued in relation with bank rescue operations; and (iii) overdrafts on the current accounts of the state government with banks.
15. The ceilings on the cumulative fiscal deficit of the state government during the program period are reported in Table 4 below.
16. Cumulative tax collections in cash correspond to the line "IV. Tax Receipts" in the Treasury Report and comprise the following categories: 1.0 taxes on income and profits; 4.0 taxes on property; 5.1 VAT on domestic and imported products; 126.96.36.199 retail sales tax; 5.2 excises on domestic and imported products; 5.4 specific taxes on services; 5.5 taxes on use of goods and services; 5.6 taxes on use of natural resources; 6.0 taxes on international trade; 7.0 other taxes. Thus defined, cumulative tax collections in cash since October 1, 2001 amounted to som 5,008 million as of March 31, 2002. Cumulative tax collections in cash include collections of tax arrears but exclude tax offsets.
17. The floors for the cumulative tax collection in cash during the program period are reported in Table 5 below.
18. For the purposes of the program, central government budget arrears are defined as an overdue payment obligation of the Republican budget related to: (i) wages; (ii) Social Fund payroll contributions; (iii) mandatory transfers to the Social Fund; (iv) categorical grants; (v) payments to Kyrgyz Energo; and (vi) allowances for poor families. A payment is defined to be overdue if it remains unpaid after its due date for (iii) and (iv); for 30 days after its due date for (i) and (ii); 60 days after its due date for (v); and 40 days after its due date for (vi). As of March 31, 2002, the stock of thus defined central government budgetary arrears was som 78.9 million.
19. The ceilings on the stock of central government budget arrears during the program period are reported in Table 6 below.
Ceiling on the outstanding stock of Social Fund pension arrears
20. A pension payment by the Social Fund is defined as overdue if it remains unpaid for 30 days after its due date. As of March 31, 2002, the stock of pension arrears was zero.
21. The contracting or guaranteeing of external debt by the government of the Kyrgyz Republic, the NBKR, or any other agency acting on behalf of the government, is understood to mean a current, i.e., not contingent, liability, created under a contractual arrangement through the provision of value in the form of assets (including currency) or services, and which requires the obligor to make one or more payments in the form of assets (including currency) or services, at some future point(s) in time; these payments will discharge the principal and/or interest liabilities incurred under the contract. Debts can take a number of forms, the primary ones being as follows: (i) loans, i.e., advances of money to the obligor by the lender made on the basis of an undertaking that the obligor will repay the funds in the future (including deposits, bonds, debentures, commercial loans and buyers' credits) and temporary exchanges of assets that are equivalent to fully collateralized loans under which the obligor is required to repay the funds, and usually pay interest, by repurchasing the collateral from the buyer in the future (such as repurchase agreements and official swap arrangements); (ii) suppliers' credits, i.e., contracts where the supplier permits the obligor to defer payments until some time after the date on which the goods are delivered or services are provided; and (iii) leases, i.e., arrangements under which property is provided which the lessee has the right to use for one or more specified period(s) of time that are usually shorter than the total expected service life of the property, while the lessor retains the title to the property. For the purpose of the guideline, the debt is the present value (at the inception of the lease) of all lease payments expected to be made during the period of the agreement excluding those payments that cover the operation, repair or maintenance of the property.5
22. Under the definition of debt above, arrears, penalties, and judicially awarded damages arising from the failure to make payment under a contractual obligation that constitutes debt are debt. Failure to make payment on an obligation that is not considered debt under this definition (e.g., payment on delivery) will not give rise to debt.
23. External debt limits apply to the contracting or guaranteeing of short term external debt (with an original maturity of less than one year, except normal import-related credits and NBKR reserve liabilities); and contracting or guaranteeing of nonconcessional medium- and long-term external debt (with original maturities of one year or more). Disbursements under the Fund's PRGF are excluded from the ceilings on external debt. The limit on the contracting or guaranteeing of short-term external debt is zero throughout the program period. Excluded from these external debt limits is the contracting or guaranteeing of new external debt that constitutes a rescheduling or refinancing of existing debt at terms more favorable to the debtor.
24. For program purposes, a debt is considered concessional if the grant element is at least 45 percent, calculated by using currency specific discount rates based on the Commercial Interest Reference Rates (CIRRs) published by the OECD plus margins depending on the debt maturity. A lower grant element will be considered only for new loans committed to replace old debt originally contracted at less favorable terms. The average of the CIRRs over the last 10 years will be used for debts with a maturity of at least 15 years and the average CIRR of the preceding six months will be used for shorter maturities.
25. For the purposes of the program, external arrears of the government of the Kyrgyz Republic or the NBKR will consist of all overdue debt-service obligations (i.e., payments of principal and interest) arising in respect of loans contracted or guaranteed by the state government or the NBKR since the Kyrgyz Republic's independence, unpaid penalties or interest charges associated with these arrears, and overdue payments owed by the state government or the NBKR on imports received subsequent to independence, unless these debt-service obligations in the view of the parties involved are not to be regarded as arrears for the purposes of the program. No such new arrears shall be incurred during the period of the arrangement.
26. For the purposes of the program, reserve money consists of currency issued by the NBKR and balances on commercial banks' correspondent accounts with the NBKR. The stock of reserve money amounted to som 5,626 million as of end-March, 2002. The indicative limits for the program periods are reported in Table 7 below.
II. Disbursements Under the Program
27. The three-year PRGF arrangement envisages seven loan disbursements: the first, equivalent to SDR 11.72 million (13.2 percent of quota), upon approval of the arrangement; the second, equivalent to SDR 11.72 million (13.2 percent of quota), on completion of the first review based on the end-March 2002 performance criteria; the third, equivalent to SDR 11.72 million (13.2 percent of quota), on completion of the second review based on the performance criteria at end-September 2002; the fourth, equivalent to SDR 9.56 million (10.1 percent of quota), on completion of the third review based on end-March 2003 performance criteria; the fifth, equivalent to SDR 9.56 million (10.1 of quota), upon completion of the fourth review based on end-September 2003 performance criteria; the sixth, equivalent to SDR 9.55 million (10.1 percent of quota), on completion of the fifth review based on end-March 2004 performance criteria; and the seventh, equivalent to SDR 9.55 million (10.1 percent of quota) on completion of the sixth review based on end-September 2004 performance criteria. Performance criteria beyond September 2002 will be established in successive reviews.
28. The government and the NBKR will provide the Fund with the necessary economic and financial statistical data to monitor economic developments and the quantitative targets. In particular, the government and the NBKR will provide the following specific information:6
29. The NBKR will provide to the Fund its balance sheet every Monday. The information provided will clearly identify the following items in the definitions specified above: the net foreign assets of the NBKR; the net international reserves; medium- and long-term liabilities; the net domestic assets of the NBKR; net credit from the NBKR to the general and other governments; net credit provided to commercial banks, other items net; and reserve money. The balance sheet will be provided valued at the actual exchange rate as well as according to the valuation applied under the program, as specified in Section I. The above information should be provided to the IMF Resident Representative and/or transmitted by e-mail to the Fund.
30. Monthly banking system data, in the form of a monetary survey, will be reported to the Fund by the NBKR within 14 days of the end of the month. The information provided should clearly identify the following items: net foreign assets and net domestic assets of the banking system, medium- and long-term liabilities, net credit from the banking system to the general and other governments, financing provided to the rest of the economy, other items net, and broad money. The monetary survey will be provided valued at the actual exchange rate as well as according to the valuation applied under the program, as specified in Section I.
31. The NBKR will provide monthly data to the Fund within seven days after the end of the month on the amount of holdings of treasury bills, GKOs, state obligations, state bonds, and other securities issued by the state government, differentiated by the following categories of holders: the NBKR, resident banks, resident nonbanks, and nonresidents. The information will be provided in both the book (nominal) value and the actual value, where applicable.
32. The NBKR will provide detailed monthly data within 14 days from the end of the month on the composition of both its gross and net international reserves in convertible currencies and holdings of monetary gold. These data will be provided at two alternative sets of the exchange rates and the gold price: first, at those used to derive the NFA position in the NBKR accounts; second, at those specified in the program (Section I). In addition, weekly reports should be sent to the Fund every Monday on: (a) exchange rates (including the official and interbank exchange rates), foreign exchange interbank market turnover, and the volume of NBKR foreign exchange sales and purchases in the interbank market and with other parties; and (b) treasury bill yields and the amount of treasury bill sales and redemptions. On the 25th day of the month following the reference month, the NBKR will provide data on bank deposit and lending rates by maturity.
33. The NBKR will provide detailed bank-by-bank data within 14 days of the end of the month on commercial banks' compliance with: (a) prudential requirements; and (b) reserve requirements, as well as any penalties, sanctions and other administrative actions imposed on banks.
34. The Ministry of Finance, together with the NBKR, will provide monthly information on the disbursements, principal and interest payment—both actual and falling due; on contracting and guaranteeing of medium- and long-term external loans by the state government and the NBKR; and any stock of outstanding arrears on external debt service payments within 21 days of the end of each month. In addition, the Ministry of Finance will also report the total amount of outstanding government guarantees and external arrears on a monthly basis. While NBKR will provide the debt service payment data on private debt, the Ministry of Finance will provide data on debt service on public and publicly guaranteed loans.
35. In addition to the monthly treasury report, the Ministry of Finance and the Social Fund will report monthly on all their recorded expenditure arrears, in particular on those defined above in this Annex. This information will be provided to the Fund staff within 26 days from the end of each reference month. The Ministry of Finance will also provide monthly reports on the disbursements and use under the public investment program and budgetary grants with a one-month time lag.
36. The NBKR will provide current account and capital account data, including data on foreign trade, services, official and private transfers, foreign investment, and disbursements of public and private loans, on a quarterly basis, with at most a two-month lag. The NBKR will also provide monthly foreign trade data with a two-month lag.
37. The National Statistics Committee will notify the Fund of the monthly Consumer Price Index by category by the 5th business day of the following month, and convey quarterly GDP estimates within two months of the end of each quarter.
1This does not apply to the Zhibek Zholu loan since it is already reflected in the targets.
2The NBKR's net foreign assets consist of net international reserves, as defined in this Annex, plus other foreign assets plus the net claims on other CIS countries. The value of the latter is kept constant at som -51 million for program monitoring purposes.
3State government comprises central government and local government finances. Central government and Republican government are synonymous in this memorandum.
4Minor weaknesses in the fiscal statistical base, as noted the Appendix IV, do not hamper the monitoring of the fiscal outturn in relation to the performance criteria set here.
5Executive Board's Decision No. 12274 (00/85) August 24, 2000.
6Any correction or revisions to the data previously reported should be clearly indicated and documented as to the reasons for revision.