IMF declares the Kyrgyz Republic eligible for debt relief

• Pages: 312

Page 312

The Kyrgyz Republic has been declared eligible for assistance under the joint IMF-World Bank enhanced Heavily Indebted Poor Countries (HIPC) Initiative, the IMF announced. In February 2005, the IMF approved a loan of about $13 million under its Poverty Reduction and Growth Facility (PRGF) to support the Central Asian country's economic program. The Kyrgyz Republic, with a population of 5.3 million, is eligible for 100 percent grant funding under the World Bank's International Development Association (IDA) for FY06/07.

Making the announcement on October 13, Agustín Carstens, then Deputy Managing Director of the IMF, 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." Its external debt, as of end-2004, exceeded the sustainability thresholds established under the HIPC Initiative.

The prospective debt relief is expected to create fiscal space to allow the Kyrgyz Republic to further reduce poverty over the coming years and to achieve the Millennium Development Goals, especially by boosting social spending and high-quality public investment. The IMF has already approved debt reduction packages for 29 countries, 25 of them in Africa.

Despite a difficult political environment, the Kyrgyz authorities are preserving macroeconomic stability and pressing ahead with reforms, which the IMF sees as essential for creating a stronger foundation for improving living standards and significantly reducing poverty in a low-inflation environment. Growth in the Kyrgyz Republic is projected at 4-5 percent in 2006, recovering from a small output contraction last year.

Central Asia's outlook

In the Central Asian region (Kazakhstan, Kyrgyz Republic, Tajikistan, and Uzbekistan), growth this year is expected to average about 8 percent, said David Owen of the IMF's Middle East and Central Asia Department, presenting the findings of the IMF's latest regional economic outlook on October 16 in Almaty, Kazakhstan. Macroeconomic performance for the region remains very good, although the report highlights the need for policies to guard against rising inflation and excessive borrowing. "This will be the seventh year in a row of growth at this pace or higher-a sustained strong performance that has nearly doubled...