After the breakup of the Soviet Union just over a decade ago, the seven lowest-income members of the Commonwealth of Independent States (CIS)—Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Tajikistan, and Uzbekistan—were confronted with the dual challenge of building new states and market economies. Most of these countries have made significant progress toward these goals during the past decade. But the complexity of the transition challenges has caused living standards to fall sharply and, in some cases, has made it very difficult to implement market-oriented reforms effectively.
The IMF—together with the World Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, bilateral donors, and neighboring countries—recently launched the CIS-7 Initiative intended specifically to help reduce poverty and promote economic growth in these seven countries. With nearly 20 million people living in extreme poverty within their borders, these countries clearly still have some way to go in overcoming the economic and social disruptions that have occurred in tandem with the transition from centrally planned to market economies.
While each country obviously faces its own specific adjustment problems, the IMF and the other international financial institutions sponsoring the CIS-7 Initiative identified some common development challenges. In the area of political reforms, government capacity must be strengthened to resist corruption and deliver public services more effectively and accountably. All of these countries need more adequate health and education services for their people and must take action to fight the devastating human toll taken by diseases such as HIV/AIDS, tuberculosis, and malaria. Improved macroeconomic stability is key for establishing an environment for local businesses to plan, invest, and grow, and for helping attract technological know-how and capital flows from foreign direct investors to improve productivity and build a dynamic private sector. Enhanced regional cooperation—for example, in trade and energy—is indispensable in boosting the competitiveness of national economies and can be helpful in resolving regional disputes and dividing the cost of large infrastructure investments. Finally, urgent action is needed to reduce debt to sustainable levels.
The seven countries will be responsible for making headway in these areas by intensifying their development and reform efforts. But trade and development partners and creditors will complement this work by strongly supporting these countries in strengthening conditions for growth and poverty reduction. This assistance to the CIS-7 is expected to include low-cost loans, debt relief, or debt restructuring (where needed), as well as greater access to industrial countries’ markets and promotion of direct investment. Development agencies plan to better coordinate the way they administer support under the CIS-7 initiative while also ensuring that this support is anchored in country-led poverty reduction programs. International and regional institutions intend to give added support through technical assistance and policy advice.