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    Middle East and Central Asia Department

    © 2014 International Monetary Fund

    Cataloging-in-Publication Data

    Joint Bank-Fund Library

    The Caucasus and Central Asia [electronic resource] : transitioning to emerging markets/prepared by staff of the Middle East and Central Asia Department. – Washington, D.C. : International Monetary Fund, 2014.

    • 1 online resource.

    • At head of title: Middle East and Central Asia Department.

    • Includes bibliographical references.

    ISBN: 978-1-48430-514-0

    1. Economic development—Caucasus. 2. Economic development—Asia, Central. 3. Monetary policy—Caucasus. 4. Monetary policy—Asia, Central. 5. Finance—Caucasus. 6. Finance—Asia, Central. 7. Fiscal policy—Caucasus. 8. Fiscal policy—Asia, Central. I. International Monetary Fund. Middle East and Central Asia Department.

    HC244.C38 2014

    Disclaimer: The views expressed herein are those of the authors and should not be reported as or attributed to the International Monetary Fund, its Executive Board, or the governments of any of its member countries.


    This paper was prepared by staff of the IMF’s Middle East and Central Asia Department under the overall guidance of Juha Kähkönen. The staff team was led by Jonathan Dunn, Mark Horton, and Hossein Samiei. Individual chapters in the paper were prepared by Maria Albino-War, Veronica Bacalu, Ritu Basu, Christian Beddies, Svetlana Cerovic, Marianna Colacelli, Jonathan Dunn, Natan Epstein, Mark Griffiths, Jamal Haidar (summer intern), Maxym Kryshko, Eduard Martin, Gohar Minasyan, Dragana Ostojic, Pedro Rodriguez, Bahrom Shukurov, Bryce Quillin, and SeokHyun Yoon.

    The paper reflects recent country work by staff members who cover the Caucasus and Central Asia. It grew out of the high-level conference “The Caucasus and Central Asia: The Transition Journey and the Road Ahead,” held in Bishkek, Kyrgyz Republic, in May 2013, for which Deputy Managing Director Min Zhu provided important support. Staff are grateful for the valuable feedback provided on the paper by many colleagues, including especially Etibar Jafarov (MCM).

    Outstanding research and administrative assistance was provided by Mehmet Cangul, Soledad Feal-Zubimendi, Mark Fischer, Yi Liu, Danica Owczar, Rafik Selim, and Fagana Stone.


    The countries of the Caucasus and Central Asia (CCA) have made significant strides in transitioning to market economies and laying the foundation for sustained growth since their independence in 1991. Almost all CCA countries now have functioning key macroeconomic institutions (central banks and ministries of finance) and have completed many reforms—such as the privatization of small and medium firms, price liberalization, and exchange rate unification—to enable the establishment of market economies. They have achieved stronger growth than countries in other regions, though this growth has been relatively volatile and gains in output have been driven mostly by commodity and labor exports, reflecting the highly undiversified economies of most CCA countries.

    As they look forward, CCA countries can capitalize on the macroeconomic space afforded by current high commodity prices and still-comfortable remittance flows to pursue bold policy and structural reforms. These reforms—which are needed in both the public and private sectors—will help build macroeconomic institutions and policy frameworks that will allow these countries to manage volatility better and to sustain high growth, diversify their economies and strengthen job opportunities, and support market institutions through better governance. With the successful implementation of such reforms, many CCA countries will be well positioned to become dynamic emerging markets in the next decade. This emerging market vision will be bolstered if CCA countries strengthen their ties to each other and to the rest of the world.

    This publication presents our analysis of the progress CCA countries have made in establishing macroeconomic policy frameworks and practices, and the priority actions they can pursue to strengthen those frameworks and practices in support of sustained, less volatile, and more inclusive growth. I hope that this publication will be of use for policymakers and others in CCA countries, and for the international community that supports them, to enable the completion of reforms to deepen and sustain markets and to allow these countries to achieve the vision of becoming dynamic emerging markets.

    Masood Ahmed

    Director, Middle East and Central Asia Department

    International Monetary Fund

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