This DSA has been produced jointly by Fund and Bank staffs, in consultation with Asian Development Bank and the Kyrgyz authorities. The fiscal year for the Kyrgyz Republic is January 1-December 31. The risk rating would not change with the inclusion of remittances (Figure 2).
These energy infrastructure projects will expand the potential for exporting electricity, improve reliability of the transmission system and ensure smooth supply of electricity to remote parts of the country. Neighboring Uzbekistan has been threatening repeatedly to withdraw from the regional power grid that would leave the southern part of the Kyrgyz Republic without electricity, given that the only way to supply electricity to the south is through the Uzbek electricity grid.
The contribution to economic growth will come from increased domestic spending, which is not likely to be significant, as only around 10 percent of the disbursed financing from China will be spent domestically (the rest will be used to purchase imported equipment and labor).
Kambarata-II (hydropower) was put in operation in 2010, but does not generate substantial volumes of electricity. Its contributions to exports and growth are therefore limited. Kambarata-I is a much larger project, but remains highly uncertain and is therefore excluded from this DSA, as from previous DSAs.
The Kyrgyz Republic is rated as a medium performer based on the World Bank’s Country Performance and Institutional Assessment Index for low income countries. The relevant policy-dependent thresholds for countries in this category are 40 percent for the PV of the debt-to-GDP ratio, 150 percent for the PV of debt-to-exports ratio, 250 percent for the PV of debt-to-revenue ratio, 20 percent of the debt service-to-exports ratio, and 30 percent of the debt service-to-revenue ratio.
Under the debt-for-equity swap agreement signed between the previous Kyrgyz administration and the Russian authorities in 2009, the Russian side agreed to relinquish claims on the Kyrgyz Republic in the amount of US$193.5 million in exchange for a 100 percent stake in two state-owned companies in the Kyrgyz Republic. However, in early 2010, despite the Kyrgyz Republic appearing to have fulfilled all its obligations, the Russian side called in question the implementation of the agreement and declared the outstanding debt disputed. Since then the parties have been in close consultations to resolve this issue and a settlement is expected in 2011, as also assumed in the previous DSA.