Since the issuance of the staff report, the following information has become available on macroeconomic developments, program performance, and privatization of state enterprises. This information does not alter the thrust of the staff appraisal.
1. Real GDP is estimated to have increased by 2.3 percent in the first half of 2003 (year-on-year). Gold production remained below last year’s level—excluding Kumtor, real output increased by 4.3 percent. The 12-month rate of inflation was 1.6 percent at end-June 2003, somewhat less than targeted under the program and significantly lower than in neighboring countries. These developments are consistent with the program projections. During the last 12 months, the som has appreciated by about 8 percent against a basket of the U.S. dollar, the euro, the Russian ruble, and the Kazak tenge.
2. The authorities report that the end-June benchmarks of the monetary program were observed. The central bank’s net international reserves (NIR) exceeded the adjusted program floor by 6½ percent of reserve money. Its net domestic assets (NDA) have reportedly remained below the adjusted ceiling by one percent of reserve money.
3. Performance under the fiscal program was uneven. According to preliminary data, the benchmark on the central government fiscal deficit was exceeded by 0.5 percent of GDP. This breach appears temporary as it took place mainly because of a delay in the disbursement of a grant from the European Union—now expected in July. The central government tax collection fell slightly short of the target but the Social Fund payroll taxes exceeded the benchmark, keeping the general government tax collection on track. There were no budgetary or pension arrears.
4. On June 15, the Swedish company ‘Swedtel’ won the privatization tender for KyrgyzTelekom. The bid was $15.6 million for a controlling share of 51 percent of equity. The authorities are now negotiating with the company the details of the sale agreement.