Kyrgyz Republic: Third Review Under the Three-Year Arrangement Under the Extended Credit Facility and Request for Modification of Performance Criteria—Informational Annex

The Kyrgyz Republic has stabilized with the formation of a new coalition, but political uncertainty remains. Despite a slump in gold production and delays in donor financing, monetary and fiscal policies remained prudent. Improving the business climate, good governance, and strong institutions remain key to sustaining strong growth over the medium term. Fiscal consolidation with strong revenue measures and prudent expenditure policies are instrumental in safeguarding macroeconomic stability. More forceful reform efforts are needed to ensure long-term viability of the banking sector.


The Kyrgyz Republic has stabilized with the formation of a new coalition, but political uncertainty remains. Despite a slump in gold production and delays in donor financing, monetary and fiscal policies remained prudent. Improving the business climate, good governance, and strong institutions remain key to sustaining strong growth over the medium term. Fiscal consolidation with strong revenue measures and prudent expenditure policies are instrumental in safeguarding macroeconomic stability. More forceful reform efforts are needed to ensure long-term viability of the banking sector.

Annex I. Kyrgyz Republic—Relations With The Fund

(As of September 30, 2012)

I. Membership Status: Joined: May 08, 1992; Article VIII

II. General Resources Account:

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III. SDR Department:

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IV. Outstanding Purchases and Loans:

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V. Latest Financial Arrangements:

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Formerly PRGF.

VI. Projected Payments to Fund 2/

(SDR Million; based on existing use of resources and present holdings of SDRs):

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VII. Status of HIPC and MDRI Assistance

On November 30, 2011, the Executive Board considered the addition of income and indebtedness criteria for end-2010 to the HIPC Initiative framework, which resulted in the removal of the Kyrgyz Republic from the ring-fenced list of eligible countries.

VIII. Safeguards Assessments

An update assessment with respect to the new ECF approved by the IMF Board on June 20, 2011 was completed on October 28, 2011. The assessment concluded that the National Bank of the Kyrgyz Republic (NBKR) has established important safeguards in financial reporting, external, and internal audits. While the chairperson is accountable to parliament, governance arrangements need to be strengthened by establishing independent board oversight and more effective reporting by the Audit Committee that became operational following the 2009 assessment. The proposed new Banking Code also presents an opportunity to strengthen institutional autonomy and giving the NBKR sole responsibility for the governance of official foreign exchange reserves. Previous assessments were completed in April 2009, October 2005, and January 2002.

IX. Exchange Rate Arrangements

The currency of the Kyrgyz Republic has been the som (100 tyiyn = 1 som) since May 15, 1993. The de jure exchange rate arrangement is floating arrangement. The NBKR participates and intervenes in the interbank foreign exchange market to limit exchange rate volatility as necessary. The de facto exchange rate arrangement is classified as other managed arrangement. The NBKR publishes daily the exchange rate of the som in terms of the U.S. dollar, which is determined in the interbank foreign exchange market. The official exchange rate of the som against the dollar is calculated as the daily weighted average of the exchange rates used in the purchase and sale transactions of dollars conducted in the foreign exchange market through the Trade Information Electronic System (TIES) of the NBKR for the reporting period from 3:00 pm of the previous trading day to 3:00 pm of the current trading day. The government uses the official exchange rate for budget and tax accounting purposes as well as for all payments between the government and enterprises and other legal entities. The Kyrgyz Republic maintains a multiple currency practice (MCP), which predates the arrangement, arising from the use of the official exchange rate for government transactions. The official rate may differ by more than 2 percent from market rates because it is based on the average transaction weighted rate of the preceding day. In practice, the official and market rates have never differed by more than 2 percent. Staff does not recommend approval of this MCP.

The Kyrgyz Republic maintains an exchange system that is free of restrictions on the making of payments and transfers for current international transactions, except for the MCP discussed above and exchange restrictions maintained for security reasons relating to the restriction of financial transactions and the freeze of accounts of certain individuals or organizations associated with terrorism pursuant to (i) relevant UN Security Council resolutions, and (ii) the list of current terrorist organizations designated by the U.S. Secretary of State. The authorities have notified these measures to the Fund in May 2007.

X. Article IV Consultations

The Kyrgyz Republic is on the 24-month consultation cycle. The last Article IV consultation discussions were held in April–May 2011 and were completed by the Executive Board in June 2011 (see CR No. 11/155).

XI. FSAP Participation and ROSC Assessment

An FSAP update mission in October 2006 reviewed progress since the 2002 assessment, and the Board considered the Financial System Stability Assessment (FSSA) along with the fourth PRGF review in May 2007. A fiscal ROSC mission was held in March 2001 and the ROSC Fiscal Transparency Module was published on March 13, 2002. A data ROSC mission was held in November 2002 and the ROSC Data Module was published in November 2003. A fiscal ROSC reassessment was held in September 2007.

XII. Resident Representative

The eighth resident representative of the Fund in the Kyrgyz Republic, Mr. Gvenetadze, took up his post in Bishkek in October 2009.

Annex II. Kyrgyz Republic—Relations With The World Bank Group

(As of November 6, 2012)

World Bank Group Strategy: The Kyrgyz Republic Interim Strategy Note (ISN) for FY12–13 was discussed by the Board in August 2011. The ISN focuses on the country’s recovery and stabilization needs, while paving the way for support for long-term development. The need for an interim strategy approach was underscored by the fragile political, social and economic situation in the country and the absence of a medium-term development framework upon which a full IDA strategy could be based. The ISN is built around the ongoing program of the elected government, and focuses on governance and the restoration of economic and social stability. Currently the Bank jointly with the IFC are working on preparation of the next Country Assistance Strategy (CAS) covering FY14–17 expecting to be presented to the Board in July 2013.

Budget Support and Investment Lending

FY12 Program: The entire IDA allocation for FY12 in the amount of US$58.8 million was approved. The Economic Recovery Support Operation, a single tranche budget support operation (US$30 million) was approved and fully disbursed. Additional Financing (AF) for Bishkek and Osh Urban Infrastructure Project (US$15.8 million) was approved and has become effective. Financial Sector Development Project (US$13 million) was approved in March 2012 and is expected to become effective in February 2013. The delay is caused by the review of the project’s Financial Agreement by Parliamentary committees.

FY13 Planned IDA Program: In FY13, a total of up to US$67.2 million is planned for: the Education Sector Support Program (US$16.5 million), Second Health and Social Protection Project (US$16.5 million), Programmatic DPO (US$30 million), AF2 for Village Investment Project2 (US$4.2 million).

FY13 Planned Trust Funds (TF) Program: Up to US$40.2 million for: GAFSP for irrigation (US$16.5 million), Global Fund for Education (US$12.7 million), Health Results-Based Financing (US$11 million).

In FY13 AF–2 for Health and Social Protection (SWAp) (US$24 million) was ratified by the Kyrgyz Parliament after extended deliberations, with the condition that the design will be adjusted.

Analytical Advisory Activities

FY12 Analytical Advisory Activities (AAA) program included: Public Expenditure Review, Kyrgyzstan Conflict Analysis Filter, Gender Assessment, Preparation of a New Statistical Master Plan (SMP–2) and Information fMatters–Transparency and Accountability GPF grant.

FY13 AAA program: continuation of the public expenditure review, analytical poverty work, climate change, PSD reform, governance reform, and preparation of CAS.

Trust Funds

In addition to IDA funds, the Bank manages a significant number of co-financing and stand alone Trust Funds (TF). The current TF portfolio amounts to a total of US$100 million including 31 Bank and 14 Recipient Executed TFs. The largest are co-financing for Agribusiness and Marketing (US$4.7 million), Water Management Improvement (US$4.4 million), Second Village Investment (US$13.7 million), Public Financial Management (US$7.5 million) and stand-alone TFs, which include Fast Track Initiative-2 (US$6 million), EU Food Crisis Rapid Response (US$9.75 million), EITI Implementation (US$8 million), EITI (US$6.9 million), Agricultural Productivity (US$6.8 million).

IFC Program and Portfolio

The International Finance Corporation (IFC) continues to contribute to sustainable private sector development with long-term financing and advisory services to local financial institutions, and direct financing to small enterprises for the expansion and modernization of their operations. The engagement of IFC has accelerated in the period of 2009–12, and these efforts have been complimentary to WB efforts in private sector development and development of the financial sector. IFC will continue focusing on private sector development and aiming to increase its investments with a particular focus on the banking, manufacturing, mining, and agribusiness sectors. In addition, IFC is planning to participate in financing investment programs of privatized entities if privatization is undertaken in an open and transparent manner and in line with international best practice. In infrastructure, IFC is exploring opportunities, primarily on a sub national basis, in power transmission, hydropower plants, and municipal utilities. In addition, an IFC PPP Advisory program is being implemented in the Central Asia region and IFC is seeking to engage with the Kyrgyz government to assist with privatizations and concessions. IFC PPP team provided assistance in managing privatization of Zalkar Bank and will be assisting the Government in implementing CASA 1000 energy project.

IFC Strategy and Program:

  • Increase access to finance for MSMEs by strengthening local financial institutions and providing credit lines for MSME financing to local banks and expanding microfinance institutions.

  • Develop institutional capacity and support capacity building of financial institutions (including leasing and insurance, if there are opportunities) and microfinance companies and improve corporate governance in local enterprises.

  • Increase private sector participation in infrastructure through selective advisory and investment climate engagement.

  • Assist the agribusiness sector directly and through MSMEs finance to banks and microfinance companies.

  • Support the improvement of business environment and investment climate.

Since becoming a member of IFC in 1993, the Kyrgyz Republic has received commitments totaling more than US$120 million from IFC’s own funds to finance more than 35 projects in the financial, banking and microfinance, oil, gas and mining sector, agribusiness, pulp, and paper sectors. New commitments in 2012 amounted to US$10.7 million for investments in three projects representing banking, microfinance, and infrastructure sectors. As of July 1, 2012, IFC’s committed portfolio was US$40 million, which includes investments in nine companies, representing banking, microfinance, real and infrastructure sectors.

IFC will continue its advisory services work in the financial sector, developing corporate governance and improving the business environment. The Azerbaijan-Central Asia Financial Infrastructure Project is planning to continue its work on the Code of Conduct, strengthen the institutional capacity of a private credit bureau, and possibly work on the special law on credit bureaus. The Investment Climate project continues working with the government on ensuring higher transparency standards by helping to develop the amendments to the new Law on Inspections which were approved in 2012 and worked with inspectorates on introducing risk-based criteria for inspections and using checklists during inspections. In order to address the revenue transparency and financial disclosure challenge in the Kyrgyz Republic, a new Project on Regulatory Reform and Tax Transparency has been launched in 2011 to identify the main policy constraints, root causes of low formalization, poor tax compliance by real sector companies, and define a set of actionable policy options to increase compliance and formalization. The project will complement the efforts of IFC’s Investment Climate work and facilitate an increase in IFC investments in the real sectors of the economy.

MIGA has supported private sector development in the Kyrgyz Republic by extending guarantees to foreign direct investments in four projects in the manufacturing, services, and mining sectors. The total amount of foreign direct investment facilitated by MIGA guarantees is over US$360 million.

MIGA’s current portfolio in the Kyrgyz Republic consists of guarantees for two projects in the transport sector: an airline (Kyrgyz Airlines) and an airport services company (Manas Management Company). The projects are owned by Austrian and Italian investors. The combined gross exposure from these projects is US$14.8 million. Both of these projects were the subject of disputes between the investors and the Government during the last four years. The settlement between the Kyrgyz Government and investors, which was worked out in May of 2008 with MIGA’s mediating role, has now been fully implemented by both sides. This finally resolves this matter that had been pending for more than four years. In August 2009 MIGA’s guarantee holders withdrew their claim against MIGA and released MIGA from any liability. In addition, they have dismissed their claims against the government, which had been pending in the London Court of International Arbitration. There were no new MIGA projects in the Kyrgyz Republic in FY12.

MIGA Program: MIGA’s current portfolio in the Kyrgyz Republic consists of one project, financed by Austrian and Italian investors, in support of the country’s manufacturing and services sector. The outstanding gross exposure from this investment is US$10.8 million.

ICSID: The Kyrgyz Government lost an ICSID supported lawsuit relating to an expropriated hotel and defaulted on the required payment. In October the Canadian court approved the confiscation of Kyrgyz holdings on the Toronto Stock Exchange. The Kyrgyz Government has contested this decision.

Annex III. Kyrgyz Republic—Relations With The Asian Development Bank (ADB)

(As of September 30, 2012)

The Kyrgyz Republic joined ADB in 1994. ADB’s country partnership strategy for the Kyrgyz Republic is presented in the joint country support strategy (JCSS) for 2007–10. The JCSS was prepared in cooperation with four development partners—the Swiss Cooperation, the United Kingdom’s Department for International Development, the United Nations Agencies, and the World Bank Group. Four other development partners—the European Commission, the German Government (presented by GTZ and KfW), International Monetary Fund, and United States Agency for International Development joined the JCSS at the later years. In line with the country development strategy, the JCSS identifies four priority areas: (i) promoting economic management consistent with strong and sustained pro-poor growth; (ii) improving governance, promoting effective public administration, and reducing corruption; (iii) building sustainable human and social capital; and (iv) ensuring environmental sustainability and natural resources management. ADB’s new Country Partnership Strategy for 2013–17 is currently being prepared and is expected to be approved in 2013.

ADB’s Country Operations Business Plan (COBP) for 2012–13 is under preparation and expected to be approved by the end of 2012. The strategic thrust will remain the same as in the previous COBP 2011–12—creating a favorable environment for sustainable inclusive growth with broader private sector participation. ADB will continue to support: (i) transport; (ii) water supply and sanitation; (iii) energy; (iv) public sector management to improve investment climate; and (v) education (vocational education and skills development, and higher education).

ADB is one of the major development partners in the country. All assistance provided to the Kyrgyz Republic is from concessional ADB’s special fund resources—Asian Development Fund (ADF). The Kyrgyz Republic has been eligible for 50 percent grant and 50 percent ADF loan since 2009. The indicative allocation for 2012 is US$134.4 million. ADB’s annual lending began with US$40 million in 1994 and reached the peak level of US$167.8 million in 2010.

As of 30 September 2012, the country has received 34 loans worth US$816.2 million, 15 ADF and one GEF grants worth US$299.1 million. The Kyrgyz Republic has also received seven grants from Japan Fund for Poverty Reduction (JFPR grants) amounting to US$7 million. ADB is the largest funding agency in the transport and education sectors.

The active ADB portfolio of 13 projects (total size of US$480.9 million) contained nine ADF loans (total size of US$220.2 million) and eleven ADF grants (total size of US$260.7 million).

ADB has also provided 79 technical assistance (TA) projects amounting to US$44.15 million as of today. ADB also provides TA through the regional technical assistance facility. Among the most recent assistance is technical assistance for developing an e-procurement strategy for the Kyrgyz Republic.

The performance of ADB’s portfolio is partially satisfactory. Contract awards and disbursements as of September 30, 2012 reached US$55.14 million and US$34.95 million (63.6 percent and 57.6 percent of year’s projections), respectively. The Kyrgyz portfolio has one project with actual problems and three projects with potential problems. The Community-Based Infrastructure Services Sector Project remains an “actual problem” project due to poor project management and integrity issues, and was suspended on June 11, 2012. The three projects are potential problem projects due to delays in implementation and disbursements.

The Kyrgyz Republic is a strong advocate for regional economic cooperation, and is an active participant in the Central Asia Regional Economic Cooperation (CAREC) Program. The Kyrgyz Republic has benefited significantly from regional road development. Following CAREC initiatives in key areas approved at sector meetings, the Kyrgyz Republic is taking measures in trade policy and trade facilitation sectors to increase trade and transport flow. ADB is also helping to develop procedures and technical tools to enhance land acquisition and resettlement practices to foster more effective infrastructure development in the region.

As of the end of 2011, cumulative direct value-added official cofinancing for the Kyrgyz Republic since 1997 amounted to US$54.7 million for eight investment projects and US$3 million for seven technical assistance projects. Currently, there is no active project with cofinancing arrangements.

The Kyrgyz Republic was selected as one of the pilot countries during the February 2003 Rome Conference on Harmonization. Since then key development partners have learned to better coordinate and harmonize procurement procedures, oversee financial management and monitoring, share project implementation units, and conduct joint country portfolio reviews. Recently, the World Bank and ADB have been jointly assessing the public procurement system in the Kyrgyz Republic.

ADB cooperates extensively with civil society organizations in the Kyrgyz Republic to strengthen the effectiveness, quality, and sustainability of the services it provides.

Annex IV. Kyrgyz Republic—Relations With The European Bank For Reconstruction And Development (EBRD)

(As of November 1, 2012)

Overview of EBRD Activities to Date

The Bank has been actively supporting the transition in Kyrgyz Republic since 1995. From 1995 to the end of October 2012, the Bank signed 88 projects accounting for a net cumulative business volume of 415 million. During 2008-10 the Bank was signing on average 9-10 projects per year, while in 2011 it did a record of 17 transactions. The annual business volume has been steadily increasing over the last four years from €12 million in 2008 to €86 million in 2010. In 2011 despite the high number of transactions these were smaller in size resulting in the annual business volume of €66 million. The current private sector portfolio ratio (as a percentage of the total portfolio) is 77 percent which is well above the Bank’s 60 percent mandated ratio. In September 2011, EBRD’s Board has approved a new country strategy for the Kyrgyz Republic, which is designed to ensure continued EBRD support for the recovery of the country’s economy and sustainable growth after a period of social and political unrest in the recent past. The EBRD’s key priorities under the new country strategy are supporting local private enterprises, in particular through support for micro, small, and medium sized enterprises (MSMEs), alongside support to strengthen the financial sector and develop critical infrastructure.

Fostering the Private Sector: The Bank’s operations in support of local private enterprises took advantage of the ETC Initiative, which was instrumental in enabling the Bank to deliver a number of small projects with significant transition impact, particularly in the areas of corporate governance and business conduct. Despite difficult economic and political situation in the country the Bank signed four corporate sector projects in 2011.

  • Under the Direct Lending Facility (DLF), in 2011 the Bank supported two manufacturing sector operations (a local furniture producer and expansion of gas stations to the regions).

  • In July 2011 the Bank has approved a new €8 million additional loan to Interglass LLC, the largest industrial glass producer in Central Asia, to complete the upgrade and modernization the plant’s facilities, located at Tokmok, northern Kyrgyzstan.

  • Under the Medium-Sized Co-Financing Facility (MCFF), the Bank supported one of the leading distribution companies of packaged food products and cosmetic goods. This was a modest achievement, with fewer deals under MCFF than expected coming to fruition. Following the 2010 crisis, it was particularly difficult to identify larger size investment projects that could be well supported by MCFF.

  • Under operations of its Small Business Support team, the Bank facilitates the skills transfers to the local consultancy industry and improves the know-how and management of the MSME sector through its two twin programs: Enterprise Growth Programme (EGP) and Business Advisory Services (BAS). The objective of the EGP is to assist MSMEs to operate successfully and help to develop new business skills at the senior management level in order to be able to compete in a market economy. The EGP introduces industry-specific management expertise by providing the advisory services of experienced senior executives from economically developed countries. These advisers transfer management and technical know-how to enterprises, sharing their commercial experience directly with the CEOs and senior managers of local companies.

  • On the other hand EBRD BAS Kyrgyz Republic enables MSMEs to access a diverse range of consulting services by facilitating projects with local consultants on a cost sharing basis. Direct assistance to enhance enterprise performance is combined with systemic market development activities to create sustainable and commercially viable infrastructures of MSME support in the Bank’s countries of operations. As of the end of 2011 BAS Kyrgyz Republic had undertaken 474 projects engaging 205 consultants. Sixty percent of the enterprises assisted are located in rural areas outside the main cities. Despite the difficult business climate, turnover increased in nearly 66 percent of BAS beneficiary companies in the year following project completion, while 14 percent of beneficiaries secured external investments with an average size of €530,000. After events in 2010, BAS has undertaken a crisis response initiative to provide 90 percent subsidy to MSMEs located in Osh, Djalal-Abad and Batken oblasts. BAS also supported professional capacity building of local advisory services to serve the MSME sector on a sustainable basis and introduced more sophisticated advisory services in areas such as quality management and energy efficiency. BAS Kyrgyz Republic is co-funded by the Swiss Government.

Strengthening Financial Institutions: In 2011, the EBRD continued supporting the country’s financial institutions. The Bank signed nine new loan agreements with local banks and MFIs in local currency, including the first ever syndicated A/B Loan with FMO participation in Kyrgyz Republic, as part of the Bank’s Local Currency and Local Capital Market Initiative, a risk-sharing program supported by donor grants to catalyze local currency lending in the early transition countries (ETC). The Bank has also supported the development of Kyrgyz Investment and Credit Bank via participation in equity increase. The Bank has been actively engaged in policy dialogue on stabilizing the banking sector and strengthening deposit insurance and provided Technical Consultation (TC) to its partner financial institutions under the Kyrgyz Financial Sector Framework.

The Bank has continued moving its partners forward in area of corporate governance, through strengthening external and internal audit, improving shareholder transparency, and implementing better internal policies and procedures.

To reduce dollarization and develop local currency capital markets, the Bank conducted a local capital markets assessment mission in December 2011. It has also offered TC to the NBKR to improve the forecasting and control of inflation while improving its internal and external communication on monetary and exchange rate policy.

Support for Critical Infrastructure: To build the institutional framework for sustainable operations of municipal services, the Bank strengthened its activities in municipal infrastructure projects in 2011 and 2012. The Bank approved a €20 million framework to improve water supply and wastewater treatment supported by co-financing grants from bilateral and multilateral donors.

  • Under this framework in May 2011, the Bank signed new water/wastewater projects for Osh and Jalalabad municipalities. The EBRD’s €6 million loan to the projects is co-financed by a capital expenditure grant from SECO (Switzerland). In August 2012 the Bank signed water project for Kara-Balta having provided a sovereign loan of €2 million co-financed by a capital grant of €3 million from the EBRD Shareholder Special Fund. The capital expenditure grant is required to meet IMF conditions for nonconcessional lending and mitigate affordability constraints. Projects in the water sector enabled the Bank to make progress with water tariff reforms, meeting IFRS accounting standards, and promoting efficiency in the Bishkek water company.

  • In order to support the transport infrastructure of Bishkek city the Bank provided a sovereign loan of up to €7.7 million co-financed by a capital grant from the EBRD Shareholders’ Special Fund of €4.2 million to finance the purchase of new trolleybuses and partial rehabilitation of related infrastructure. In addition, this investment will provide support for the introduction of electronic ticketing in the municipally operated public transport sector in Bishkek.

Policy Dialogue: EBRD is continuing support to the Investment Council, which has been providing local and international business representatives (representing the mining, industry, agro-processing and tourism sectors) with a platform to discuss the main barriers to doing business with top officials of the government. Following the political events and subsequent changes in 2010, the new government acknowledged its commitment to improve the investment climate in the country and renamed the council as the Council for Business Development and Investment. The donor community expressed its readiness to continue its full support to the Council under the new government.

  • The Bank continued to actively engage in policy dialogue with the government and local authorities to promote the further reform agenda in corporate and infrastructure sectors.

  • The Bank strengthened its collaboration with the Kyrgyz Supreme Court with a view to increasing capacity in the judiciary dealing with commercial disputes. Since 2007, the Bank provided technical advice to the Judicial Training Centre, trained judicial trainers, delivered commercial law training seminars for up to 240 existing judges, created a law library at the Supreme Court, organized internships in the courts of Kazakhstan and Russia, and published a bench book on commercial law. The Bank expanded its assistance in 2010 to help establish a training system for candidate judges, and implement a fair and transparent judicial selection process. In 2011 under Juridical Capacity Building Project of EBRD 36 Judges have received Certificates for Successful Completion of Training for Judges who successfully passed Training Program for Applicants to the Position of Local Courts Judges of the Kyrgyz Republic.

  • The Bank has offered TC to support the government’s efforts to improve public procurement under the joint EBRD-UNCITRAL technical cooperation project designed to upgrade public procurement regulation in the CIS to the new UNCITRAL Model Law on Procurement of Goods, Construction, and Services.

  • The Bank in providing support to the development of local capital markets through policy dialogue, TC and possible projects deepening the market and reducing bank funding mismatches.

  • The Bank has supported Financial Inclusion TC project which provided support to five selected banks most active players on international money transfer market to improve financial literacy among banks’ clients so that they could start saving and use bank services. The project focused on recipients of remittances, prepared 20 professional trainers for the banks who have provided training and advice to over 25,800 individual clients. Based on conservative assessment over 2,190 new bank accounts were opened.

  • The Bank has prepared Terms of Reference and is advancing with TC aimed to support reforms in the mining sector initiated by the government through a three-pronged approach, providing: (a) capacity building, training, and practical implementation support to State Agency for Geology and Mineral Resources; (b) policy development, legislative drafting and training to the Ministry for Economy and Antitrust Policy (sector policymaker); and (c) institutional, communications/outreach and training support for the Kyrgyzstan Extractive Industries Transparency Initiative Secretariat.

  • The Bank has been providing TC to the Deposit Insurance Agency and intends to continue assisting the Agency to improve IT, increase operating procedures effectiveness, strengthening monitoring and risk management.

Annex V. Kyrgyz Republic—Technical Assistance Provided By The Fund

February 2003–March 2012

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Annex VI. Kyrgyz Republic—Statistical Issues

1. Data provision is adequate for surveillance. The four institutions responsible for collecting, compiling and disseminating macroeconomic statistics—the National Statistics Committee (NSC), the Ministry of Economic Regulation (MER), the Ministry of Finance (MOF), and the National Bank of the Kyrgyz Republic (NBKR)—have legal and institutional environments that support statistical quality, and their respective staff are well-versed in current methodologies.

2. The NSC maintains a comprehensive and regularly updated website with data that largely incorporate international methodological recommendations with adequate coverage and timeliness ( In February 2004, the Kyrgyz Republic subscribed to the SDDS.

3. A data ROSC mission in November 2002 concluded that the quality of the macroeconomic statistics had improved significantly in the last few years. The authorities’ response to the data ROSC (posted on the IMF website ( includes an update on the status of implementation of the ROSC recommendations.

National accounts

4. In general, dissemination of national accounts statistics is timely. Technical assistance has been received from the IMF, EUROSTAT, OECD, the World Bank, and bilateral donors. While significant progress has been made in improving the national accounts estimation process, problems persist regarding the quality of the source data, due mainly to excessively tight collection deadlines associated with the release schedule. Efforts are needed to improve the quality of the source data for quarterly GDP estimates. Moreover, while the quarterly GDP estimates are disseminated on a discrete basis for SDDS purposes, these estimates are still derived from cumulative data. Difficulties also remain in properly estimating the degree of underreporting, especially in the private sector. To improve the coverage and reliability of primary data, work has been undertaken to introduce sampling procedures. Improved sampling procedures have been adopted for household surveys and new report forms have been introduced for the enterprise survey. The NSC has established a division of sample surveys, which would assist in improving the sampling techniques.

5. The November 2008 STA mission on national accounts assisted the staff of the National Accounts Division in NCS to produce discrete quarterly GDP estimates at current and constant prices, using both the production and expenditure approaches. The mission made a number of recommendations, including: (a) need to introduce the new establishment surveys; (b) disseminate the industrial production index (IPI) as a chain-linked indices, in line with international standards; (c) investigate the inconsistency between the IPI and the producer price index (PPI); (d) fully computerize the calculation of volume estimates for agriculture in line with international practice; and (e) obtain time series data for loans and deposits of financial institutions.

Price and labor market statistics

6. The concepts and definitions used in the CPI, which has been published since January 1995, are broadly consistent with international standards. The price index covers all urban resident households of all sizes and income levels, but needs to cover rural households, which comprise the majority of the population.

7. The PPI, which has been published since October 1996, is compiled broadly in accordance with international standards, although its coverage needs to be improved. The coverage of the PPI was broadened in May 1997 and is expected to be further expanded in the coming years.

8. Progress has been made in computing unit value indices for imports and exports. Work continues with regard to computation of these indices using a standard index presentation and the development of an export price index. However, problems in customs administration have led to incomplete coverage of trade and the lack of an appropriate valuation system. Moreover, the data processed by customs have suffered due to the use of an outdated computer software system.

9. Problems exist in the compilation of the average wage, especially with respect to the valuation of payments in kind and the coverage of the private sector. Monthly and annual data are not comparable because of different coverage and classifications. These problems extend to employment data as well. The coverage of unemployment includes an estimate of unregistered unemployed.

Government finance statistics

10. The scope of central government statistics falls short of international standards because it excludes data for the Social Fund (these data are published separately). Other limitations involve the discrepancies between the deficit and financing data. While revenue and expenditure data generally accord with the GFSM 1986, there are misclassifications in both categories (for example, some nontax revenues are classified as taxes, and certain expenditure items are misclassified in the budget and treasury accounts). Monthly GFS data are reported to STA for publication in the IFS; the latest data reported for publication in the GFS Yearbook were for 2006, and covered general government and its subsectors; and the data were compiled using the GFSM 2001 analytical framework.

11. The provision of data on public external debt service has improved. Data on actual debt service, guaranteed debt service, outstanding debt and revised debt projections, are provided on a monthly basis. The quality (including timeliness) of external debt data is adequate. The External Debt Division of the ministry of finance is now solely responsible for monitoring external debt, and has benefited from on-site training provided by a Swiss-financed long-term consultant and the computerization of its database.

Monetary and financial statistics (MFS)

12. The 2002 data ROSC mission found that: (a) the residency criterion was not uniformly applied, as the currency denomination was used to classify some transactions with foreign and domestic units; (b) deposits with banks in liquidation were included in broad money; and (c) source data did not provide sufficient information for a more detailed sectoral breakdown (e.g., subsectorization of nonbank institutions as recommended in the MFSM).

13. The April/May 2004 STA mission on MFS found that the NBKR had made substantial progress in implementing ROSC recommendations pertaining to monetary statistics. To address the outstanding issues, the mission further recommended that the NBKR (a) improve the basic source data to allow for proper classification of the transactions with foreign and domestic units; (b) fully implement the MFSM’s methodology concerning accrual accounting; (c) exclude deposits with banks in liquidation from monetary aggregates and classify them as restricted deposits; and (d) set up a working group to follow up on consistency between monetary and balance of payments statistics. The mission also recommended expanding the current broad money survey to include the accounts of credit unions and microfinance companies.

14. The new accounting framework for banks implemented in January 2009 revealed some problems in classification of a part of the Social Fund deposits. Efforts are under way to address the consequences of the introduction of the new accounting rules.

15. Monetary data have been reported electronically to STA using Standardized Report Forms (SRFs). STA identified classification issues in the reported SRF data, which were communicated to the authorities. The data will be published in IFS and IFS Monetary and Financial Statistics Supplement as soon as these issues are resolved.

External sector statistics

16. Data on the balance of payments and international investment position are compiled and disseminated on a quarterly basis. The 2002 data ROSC mission noted that the compilation of balance of payments statistics broadly follows the methodology recommended in the BPM5. However, deficiencies remain with respect to data on remittances, trade, services, and foreign direct investment. There is also a need to improve compilation procedures for achieving temporal consistency of data, and investigating and reconciling discrepancies. The March 2004 STA mission on balance of payments statistics noted that while progress had been made in several areas, further improvements were needed in the international transactions reporting system; data sampling methods; and data validation and coverage, particularly on trade, services, private sector external debt, and foreign direct investment.

A. Kyrgyz Republic: Table of Common Indicators Required for Surveillance

(As of November 2, 2012)

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Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes, and bonds.

Foreign and domestic financing only.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D), Weekly (W), Monthly (M), Quarterly (Q), Annually (A), Irregular (I), Not Available (NA).

Reflects the assessment provided in the data ROSC (published in November 2003, and based on the findings of the mission that took place during November 2002) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O), largely observed (LO), largely not observed (LNO), or not observed (NO).

Same as footnote 7, except referring to international standards concerning source data, statistical techniques, assessment and validation of source data, assessment and validation of intermediate data and statistical outputs, and revision studies.


When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

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