Press Release: IMF Announces Staff-Level Agreement with the Kyrgyz Republic on Second Review of the Extended Credit Facility
March 14, 2012Press Release No. 12/81
March 14, 2012
An International Monetary Fund (IMF) staff mission, led by Mr. Christian Beddies, visited Bishkek February 29-March14, 2012 to hold discussions for the second review under a three-year, SDR 66.6 million (about US$106 million) Extended Credit Facility arrangement with the Kyrgyz Republic (see Press Releases No. 11/245 and Press Releases No. 11/446). The IMF mission reached a staff-level agreement with the Kyrgyz authorities on the measures needed for completion of the second review. This agreement requires approval by the IMF’s Executive Board, which is expected to consider the Kyrgyz Republic’s request for completion of the second review in late April 2012. Upon approval, SDR 9.514 million (about US$15 million) would be made available to the Kyrgyz Republic. This would bring total disbursements under the arrangement to SDR 28.542 million (about US$45 million).
At the conclusion of the visit, Mr. Beddies made the following statement:
“The Kyrgyz economy has rebounded strongly, growing by 5.7 percent in 2011. Growth was broad-based and supported by political stability, improved security and buoyant activity in major economic partners. Consumer price inflation has declined rapidly to 5.7 percent at end-2011 compared to over 22 percent at end-June 2011.
“Looking ahead, we expect real GDP to grow by about 5 percent this year, reflecting global uncertainties, and by about 5½ percent on average over the medium term. The mission welcomed the authorities’ commitment to implement continued tight monetary policy to further counter underlying inflationary pressures.
“The authorities confirmed that medium-term fiscal consolidation remains a critical element of their program but that priority social expenditures will be protected. Fiscal consolidation will be supported by tax policy and administration measures, which will help ensure strong revenue performance, and prudent expenditure policies. In light of the uncertain global economic outlook, it will be important to err on the side of caution in fiscal planning and prepare appropriate contingency measures. The mission advised the authorities to ensure uninterrupted functioning of the domestic debt market and advance the public financial management reform agenda. The mission supported the implementation of large foreign-financed energy infrastructure projects, which will help to strengthen the country’s energy security.
“While financial stability indicators have improved recently, the National Bank of the Kyrgyz Republic (NBKR) continues to closely monitor the systemically important banks. The authorities continue to work towards the resolution of the remaining problem banks. The mission welcomed the progress achieved on the legal reforms envisaged under the ECF-supported program to strengthen the bank resolution framework and supervisory independence of the NBKR. The IMF will continue to provide technical assistance in this area.
“The mission welcomed the finalization of the Medium Term Development Program (MTDP). The main goal of the reforms under the MTDP is to improve the population’s living standards and reduce poverty through economic growth, improvements in the business environment, and building an effective governance system.
“The mission and the Kyrgyz authorities have agreed to maintain close dialogue regarding the legal framework for the functioning of the planned State Development Bank (SDB). The mission stressed the need to ensure that the adopted laws and regulations governing the activities of the SDB are in line with objectives of good governance and transparency.”