News Brief: IMF Completes Reviews of Kyrgyz Republic under PRGF-Supported Program and Approves US$12 Million Credit
September 13, 2000
The Executive Board of the International Monetary Fund (IMF) today completed the first and second reviews under the second annual arrangement for the Kyrgyz Republic under the Poverty Reduction and Growth Facility (PRGF)1. The completion of the reviews enables the release of two disbursements of SDR 4.77 million each (about US$6 million) from the IMF, bringing total disbursements under the program to SDR 44.69 million (about US$58 million).
The three-year arrangement under the PRGF was approved in June 1998 for a total amount equivalent to SDR 64.5 million (about US$83 million). The arrangement was augmented by an equivalent of SDR 8.88 million (about US$11 million) at the time of the mid-term review in March 1999.
After the Executive Board discussion on the Kyrgyz Republic, Eduardo Aninat, Deputy Managing Director and Acting Chairman, made the following statement:
“The Kyrgyz authorities are to be commended for their renewed efforts at macroeconomic stabilization. Nevertheless, the authorities need to persevere with their structural reform agenda, which is essential to attain sustainable growth.
“The authorities are to be praised for the improved stance of monetary policy, the lower inflation, and the relative stability of the exchange rate. The authorities should continue with their present monetary and exchange rate policies. There are concerns, however, about the financial position of the government, despite the progress in eliminating arrears and the significant adjustment compared to 1999. In particular, there continue to be difficulties on the revenue side and the authorities have failed to implement revenue raising measures in 2000. The authorities need to exercise caution against additional expenditures in view of the upcoming presidential elections, and are urged to adopt relevant legislation for the steady improvement in tax collection and to continue improving tax administration. Looking ahead, an ambitious fiscal adjustment program for 2001 and beyond is considered essential for fiscal (and external) sustainability.
“There are serious concerns about the worsening external debt indicators and the very difficult debt outlook over the medium term, which would require strong adjustment. The debt component of the Public Investment Program is particularly worrisome, and the authorities need to continue working to improve control over the program and to prioritize existing projects and, in consultation with creditors, to aim at reducing the size of the program, taking into account the country’s implementation capacity and the objective of reducing poverty.
“The authorities are to be commended for the recent progress in public sector and energy sector reforms as evidence of a renewed commitment toward essential structural reforms. Further improvements in the business environment as well as transparency are considered essential. It is recommended that further efforts be made in the restructuring of the banking sector to reestablish confidence and to speed up privatization of large enterprises,” Aninat said.
1 On November 22, 1999, the IMF’s concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was renamed the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It was intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. In the Kyrgyz Republic, an interim PRSP—which will provide a guideline to the preparation of the full PRSP—is under preparation and will be presented to the World Bank and IMF Executive Boards in early 2001. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½ year grace period on principal payments.