IMF Chief Visits Central Asia Amid Sharp Slowdown

• Author: International Monetary Fund

During his week-long visit to Kazakhstan, Tajikistan, the Kyrgyz Republic, and Uzbekistan, Strauss-Kahn will meet politicians, representatives of civil society, and academics to discuss the impact of the global crisis on these countries and how the IMF can help them respond.

"As the global crisis spread through the region, the hard-earned macroeconomic gains of recent years have been put at risk, with growth coming to a virtual halt and financial vulnerabilities on the rise," said Masood Ahmed, Director of the IMF's Middle East and Central Asia Department.

"Under these circumstances, it is even more important for the IMF to step up its engagement and support to the countries in the region, and the Managing Director's trip will allow for a dialogue at the highest level, " he added.

Regional slump

Growth in Central Asia is expected to drop to around only 1 percent this year, from almost double digit rates, on average, during 2005-07. Of the four countries, only Uzbekistan is forecast to escape a drastic slowdown in economic activity because of the country's limited integration with global financial markets and its considerable financial resources, which have allowed for a vigorous fiscal stimulus program.

The region-with a population of around 60 million-is tightly linked to Russia through trade, financial flows, and remittances and has been severely affected by the slowdown in that country. It has also faced the fallout from the weakness of the Russian ruble, which has depreciated by about 30 percent against the U.S. dollar since mid-2008.

The region's limited exposure to broader global financial linkages has largely insulated it from the direct impact of the global financial turmoil, with the notable exception of Kazakhstan, which has a large share of private, external financing in the banking sector and is facing difficulties meeting its external debt rollover needs.

The IMF chief's visit begins in the Kazakh capital of Astana, where he will meet Prime Minister Karim Massimov and senior members of his economic team. Kazakhstan, like other countries in the region, has been hard hit by shrinking trade flows, as growth-not just in Russia, but other key partner countries (the European Union and China)-has slowed and commodity prices have fallen. Kazakhstan, a major oil exporter, is projected to face a drop of the...