Abstract
The staff report for the Sixth Review Under the Three-Year Arrangement Under the Poverty Reduction and Growth Facility on the Kyrgyz Republic highlights the economic developments and policies. To ensure that the external debt ratios fall, the program introduces a new indicative target for concessional public borrowing. Low inflation and strong productivity growth to contain unit labor costs are crucial to set up favorable conditions for nongold exports. The key to boost productivity is higher private investment, and the program focuses on improving the investment climate.
February 23, 2005
The following information has become available since the staff report was issued on February 9, 2005. It does not change the thrust of the staff appraisal.
Recent developments
In a letter dated February 14, 2005, the Paris Club informed the Fund that the creditors of the Kyrgyz Republic had granted financial assurances for the new PRGF-supported program. The precise terms and conditions of the debt relief will be determined in the context of Paris Club negotiations scheduled for March 9–10, 2005.
Preliminary 2004 economic data indicate that real GDP grew by 7.1 percent in 2004, compared to the projected 6.0 percent. Excluding operations of the Kumtor gold mine and the energy sector, real GDP growth reached 7.6 percent. Average consumer price inflation was 4.1 percent, as projected.
The general government fiscal deficit declined from 5.2 percent of GDP in 2003 to 4.1 percent in 2004—slightly lower than expected. Broad money growth (34 percent) was higher than projected (29 percent), with bank deposits increasing faster than anticipated.
Regarding regional trade policies, in early February 2005, the parliament of Kazakhstan ratified a new road transit agreement that streamlines cumbersome permit requirements for Kyrgyz traders. On January 21, 2005, the parliament of the Kyrgyz Republic approved an amendment to the Law on Pledges, simplifying collateral provisions and allowing out-of-court settlement of disputes related to foreclosures.