Statement by the Staff Representative on the Kyrgyz Republic

The Kyrgyz Republic is emerging from a deep political crisis. In April 2010, a popular uprising toppled the previous regime and internal ethnic conflict in June 2010 exacerbated the already difficult political situation. The crisis has adversely affected economic activity and near-term growth prospects, straining the government’s financial position, which has been worsened further by critical reconciliation, recovery, and reconstruction needs. Continued growth in Russia and Kazakhstan, combined with high gold prices, contributed to an expansion in remittances and gold exports by 33 percent and 74 percent, respectively.

Abstract

The Kyrgyz Republic is emerging from a deep political crisis. In April 2010, a popular uprising toppled the previous regime and internal ethnic conflict in June 2010 exacerbated the already difficult political situation. The crisis has adversely affected economic activity and near-term growth prospects, straining the government’s financial position, which has been worsened further by critical reconciliation, recovery, and reconstruction needs. Continued growth in Russia and Kazakhstan, combined with high gold prices, contributed to an expansion in remittances and gold exports by 33 percent and 74 percent, respectively.

1. This statement provides an update on recent developments since the issuance of the Staff Report for the First Review under the Three-Year Arrangement under the Extended Credit Facility and Request for Modification of Performance Criteria (www.imf.org). It does not alter the thrust of the staff appraisal.

2. President Atambaev was inaugurated on December 1, 2011. In line with official procedures, the government and the speaker of the parliament remain in office in an acting capacity. By December 19 the parties are expected to form a coalition that can command a parliamentary majority and then nominate a prime minister and cabinet for approval by Parliament. Staff does not expect any disruptions in program implementation during this process as the president was instrumental in negotiating the ECF arrangement in his capacity as prime minister.

3. The council of the Eurasian Development Bank’s Anti Crisis Fund decided on November 28 that the planned US$106.7 million disbursement, which the authorities were expecting would contribute to budgetary financing in 2011, will not be forthcoming during the remainder of this year. The council plans to revisit the issue early 2012. The resulting shortfall in external program financing will trigger a program adjustor, reducing the 2011 fiscal deficit target commensurately. In light of the uncertainties surrounding this disbursement, the authorities have been implementing the 2011 budget very cautiously, and staff expects that they will be able to meet the adjusted end-December fiscal deficit target.

Kyrgyz Republic: First Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for Modification of Performance Criteria: Staff Report; Staff Statement and Supplement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Kyrgyz Republic.
Author: International Monetary Fund