Press Release: IMF Executive Board Completes Third Review Under the Kyrgyz Republic's PRGF Arrangement and Approves US$1.9 Million Disbursement
November 3, 2006Press Release No. 06/239
The Executive Board of the International Monetary Fund (IMF) has completed the third review of the Kyrgyz Republic's performance under its economic reform program supported by a three-year Poverty Reduction and Growth Facility (PRGF) arrangement. In completing the review, the Board approved the authorities' request for a waiver for the nonobservance of the structural performance criterion on the transfer of the ownership interest of KyrgyzAltyn JSC in Centerra Gold Inc. to the State Property Fund.
The IMF's Executive Board approved the three-year arrangement on February 23, 2005 (see Press Release No. 05/40) for an amount equivalent to SDR 8.88 million (about US$13.2 million). Completion of this review will enable the Kyrgyz Republic to draw an amount equivalent of SDR1.27 million (about US$1.9 million), bringing total disbursements under the arrangement to the equivalent of SDR 5.07 million (about US$7.5 million).
Following the Executive Board discussion of the Kyrgyz Republic's economic performance, Mr. Takatoshi Kato, Deputy Managing Director and Acting Chair made the following statement:
"The authorities of the Kyrgyz Republic are to be commended for maintaining economic stability and pressing ahead with reforms, despite the challenging political environment. The economic program for 2007 seeks to preserve macroeconomic stability and deepen structural reforms.
"While fiscal prudence has become entrenched, further improvements in tax administration and public financial management are essential to underpin fiscal consolidation. The programmed payroll tax cuts, aimed at fostering job creation and legalization of the informal economy, are welcome. The authorities should now strive to forge a broad consensus on a comprehensive pension reform that would safeguard fiscal stability and promote domestic savings. Steadfast implementation of energy sector reforms will be key to reducing the sector's large quasi-fiscal deficit.
"Monetary policy will need to remain vigilant to avert a spike in inflation, in light of the easing in liquidity conditions over the past months. The current managed float exchange rate system continues to serve the country well, and the National Bank's plans to broaden monetary control instruments to keep liquidity expansion in check, deepen financial sector reforms, and improve bank supervision are welcome. Prompt passage of the bill to increase the National Bank's autonomy would bolster confidence and the credibility of monetary policy.
"Going forward, it will remain important that the authorities persevere with their efforts to tackle governance issues, enhance the business climate and social protection, and further advance debt management, so as to improve the prospects for a rapid and sustained improvement in living standards," Mr. Kato said.
The PRGF is the IMF's concessional facility for low-income countries. PRGF-supported programs are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners and articulated in each country's Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that PRGF-supported programs are consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent and are repayable over 10 years with a 5½-year grace period on principal payments.