IMF Executive Board Deems Kyrgyz Republic Eligible for Assistance Under the HIPC InitiativePress Release No. 06/221
October 18, 2006
On October 13, the Executive Board of the International Monetary Fund (IMF) deemed the Kyrgyz Republic eligible for assistance under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative based on a preliminary assessment conducted jointly by IMF and World Bank staff.
In February 2005, the Executive Board approved a new three-year arrangement under the Poverty Reduction and Growth Facility (PRGF) in an amount equivalent to SDR 8.88 million (about US$13 million) to support the Kyrgyz Republic's economic program. The Board completed the second review under the arrangement in May 2006. The Kyrgyz Republic is an IDA-only country, which makes it eligible for 100 percent grant funding under the World Bank's International Development Assistance (IDA) 14 for FY06/07.
Following the Executive Board discussion on October 13, Agustín Carstens, who was Deputy Managing Director and acting Chairman, said: "Executive Directors agreed that the Kyrgyz Republic is eligible for debt relief under the enhanced HIPC Initiative, based on its heavy external debt burden—even after application of traditional debt relief mechanisms—and its status as a PRGF-eligible and IDA-only country. They noted that the debt sustainability analysis, conducted jointly by the Fund and World Bank staffs in close collaboration with the authorities, showed that the Kyrgyz Republic's external debt as of end-2004 exceeded the sustainability thresholds established under the Initiative.
"Directors commended the authorities for preserving macroeconomic stability and pressing ahead with important reforms, despite the difficult political environment. They saw these efforts as essential for creating a stronger foundation for improving living standards and significantly reducing poverty in a low-inflation environment. The prospective debt relief would create significant fiscal space in the coming years for further reducing poverty and helping secure achievement of the Millennium Development Goals—especially by scaling up priority social spending and high-quality public investment.
"Directors encouraged the authorities to agree expeditiously on the Completion Point triggers with Fund and World Bank staffs, to continue satisfactory performance under the PRGF-supported program, and to finalize the Country Development Strategy, so that the Decision Point document could be considered by the Boards of both institutions as soon as practicable.
"Directors encouraged the authorities to preserve the fiscal discipline and continue improving public financial management. They pointed, in particular, to the need to enhance expenditure prioritization and medium-term budget planning, and to introduce an effective tracking of pro-poor spending, so as to monitor effectively the use of resources made available under the HIPC Initiative.
"Directors underscored the need to continue strengthening the external debt management framework to forestall a new cycle of debt accumulation. They stressed that any new external public borrowing should only take place on highly concessional terms, and that any external private borrowing should be carefully scrutinized to avoid the accumulation of contingent public sector liabilities," Mr. Carstens said.