Kyrgyz Republic: Staff Report for the 2013 Article IV Consultation and Fourth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waiver Of Nonobservance of A Performance Criterion, and Request for Modification of Performance Criteria—Informational Annex

The shift to a parliamentary democracy in 2010 provided an impetus for the Kyrgyz Republic to reform the economy. Despite the recent progress, the Kyrgyz Republic faces significant economic challenges, which will require actions on many fronts. Improving the business climate, governance, and institutions remains a key pillar of sustainable and inclusive growth. Restoring fiscal sustainability will be essential, as the budget has become more dependent on external assistance since the 2009 global and 2010 domestic crises. Tight monetary policy continues to be warranted to keep inflation at bay.


The shift to a parliamentary democracy in 2010 provided an impetus for the Kyrgyz Republic to reform the economy. Despite the recent progress, the Kyrgyz Republic faces significant economic challenges, which will require actions on many fronts. Improving the business climate, governance, and institutions remains a key pillar of sustainable and inclusive growth. Restoring fiscal sustainability will be essential, as the budget has become more dependent on external assistance since the 2009 global and 2010 domestic crises. Tight monetary policy continues to be warranted to keep inflation at bay.

Relations with the Fund

(As of March 31, 2013)

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

General Resources Account:

article image

SDR Department:

article image

Outstanding Purchases and Loans:

article image

Latest Financial Arrangements:

article image

Formerly PRGF.

Projected Payments to Fund 2/

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

article image

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.

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.

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. The new trading software that is currently being tested will enable automatic matching and settlement of transactions and will eliminate the existing segmentation of the foreign exchange market. The software is expected to be rolled out to banks over the next few months and to remove the MCP. 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.

Article IV Consultations

The Kyrgyz Republic is on the 24-month consultation cycle. The 2011 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).

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.

Resident Representative

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

Relations with the World Bank Group

(As of May 8, 2013)

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. Since then, the country has made important progress towards restoring stability and a joint IDA/IFC Country Partnership Strategy (CPS) covering FY14–17 is expected to be presented to the Board in July 2013. Closely aligned to the new National Sustainable Development Strategy, the CPS will retain its focus on improved governance with three broad areas of engagement: i) public administration and public service delivery; ii) business environment and investment climate; and iii) natural resources and physical infrastructure.

Budget support and investment lending

FY13 IDA Program: The FY13 IDA lending envelope envisaged an allocation of US$67.2 million for four operations, out of which three have been approved by the Board. The Additional Financing for Village Investment Project 2 (US$4.2 million) was approved in December 2012, the Education Sector Support Program (US$16.5 million) was approved in March 2013, and the Second Health and Social Protection Project (US$16.5 million) in May 2013. The Board presentation of the First (in a series of two) Programmatic DPO (US$30 million) is currently expected in early FY14. Also in 2013, the World Bank restructured the Financial Sector Development Project (originally approved in March 2012) and its Board approval is expected in May 2013.

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).

Analytical advisory activities

FY12–13 Analytical Advisory Activities (AAA) program included: programmatic Public Expenditure Review, Kyrgyzstan Conflict Analysis Filter, Gender Assessment, programmatic Poverty Studies, Preparation of a New Statistical Master Plan (SMP–2) and Information Matters–Transparency and Accountability GPF grant. In addition, the World Bank has been providing technical assistance to the mining sector and in developing a Public Sector Reform Roadmap and recently launched a Private Sector Strategy Development activity.

Trust funds

In addition to IDA funds, the Bank manages a significant number of cofinancing 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 cofinancing 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 World Bank 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 March 31, 2013, IFC’s committed portfolio was US$28 million, which includes investments in eight 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 will help improve regulatory framework for credit bureaus, collateral registries and consumer protection, enhance the system of credit reporting and build capacity of financial intermediaries in the area of risk-management, credit underwriting and secured lending. IFC’s new Investment Climate Project is designed to help reduce the gap between enactment of reforms and their implementation, simplify business inspections and improve the investment climate for agribusiness. The agribusiness component of this project is designed to support development of Food Safety Framework and harmonization of agribusiness regulation with WTO standards, which is aimed at enhancing export potential of agriculture produce and improving income opportunities for the Kyrgyz farmers. Implementation of this component will be supported by IFC’s regional Food Safety Program. IFC’s recently launched Central Asia Tax Project, focuses on tax administration reform, and seeks to further improve risk-based approaches to tax inspections, simplify tax reporting, and VAT administration. Under the second phase of Central Asia Corporate Governance Project (CACGP II) IFC will continue efforts to help build sustainable local businesses through improving the corporate governance of enterprises and banks and, at the policy level, strengthening the regulatory framework. IFC Transformation for Microfinance Institutions (MFIs) Project will continue to support the strengthening of MFIs’ institutional capacity, help them transform into deposit-taking institutions or banks and extend their outreach, especially to rural populations. The recently launched Housing Microfinance Advisory Project seeks to improve the housing conditions of low-income groups by introducing new home improvement loan products to local MFIs. Regarding investment activities, IFC will continue working with existing clients, predominantly MFIs, focusing on: their lending to MSMEs through credit lines; their risk management practices through advisory services and specific lending products; and their provision of short-term trade finance. Aiming to advance energy efficiency and renewable energy agenda, IFC will establish Regional Renewable Energy Advisory Program, which can be utilized in the Kyrgyz Republic. The program will be designed to help the governments improve regulatory framework for renewables, and support IFC and non-IFC projects through provision of sectoral expertise, market assessments, product design and financial structuring.

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 and FY13.

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. In April 2013, a Canadian company initiated arbitration proceedings related to a mining concession.

Relations with the Asian Development Bank (ADB)

(As of March 31, 2013)

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.

A new country partnership strategy (CPS) 2013–17 is being prepared. The government and ADB have agreed to the overall CPS 2013–17 framework, which supports the National Sustainable Development Strategy (NSDS) 2013–17. The CPS is expected to be finalized in August 2013. ADB’s Strategy 2020 and NSDS share a common goal of inclusive growth.

The overarching goal of the CPS 2013–17 will be inclusive economic growth. The CPS will support the government in addressing key constraints to economic growth, and overcome uneven access to economic opportunities to ensure that this growth includes the poor and disadvantaged groups. The CPS will focus on the following priority sectors: (i) public sector management for better investment climate, including access to finance; (ii) transport and logistics; (iii) energy; (iv) education and training; and (v) water supply and sanitation (WSS). ADB has been active in these areas for some time but will focus more strongly, within each sector, on addressing regional disparities.

ADB’s Country Operations Business Plan (COBP) for 2012–13 was approved in December 2012. The country operations business plan, 2012–13 has been developed during the transition of both the government strategies and the CPS. COBP 2014–16 are being discussed with the government, and will support the priority sectors of the CPS 2013–17.

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 ADF grant and loan since 2009. ADB’s annual lending began with US$40 million in 1994 and reached the peak level of US$167.8 million in 2010. Based on the results of the 2012 country performance assessment (CPA), the Kyrgyz Republic received an ADF allocation of US$121.4 million for 2013–14, comprising US$53.9 million in grants and US$67.5 million in loans. The indicative ADF resource allocation for 2015–16 is tentatively equal to the allocations of 2013–14, which will be confirmed by the CPAs 2013 and 2014. The country may receive additional ADF resources for the projects of regional importance.

As of 31 March 2013, the country has received 35 loans worth US$820.4 million, 18 ADF and one GEF grants worth US$323.3 million. The Kyrgyz Republic has also received eight grants from Japan Fund for Poverty Reduction (JFPR grants) amounting to US$8.5 million. ADB is the largest funding agency in the transport and education sectors.

The active ADB portfolio of 11 projects (total size of US$451.8 million) contained nine ADF loans (total size of US$216.9 million) and 11 ADF grants (total size of US$254.9 million).

ADB has also provided 81 technical assistance (TA) projects amounting to US$45.8 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 31 March 2013 reached US$0.4 million and US$4.9 million (0.6 percent and 10.2 percent of year’s projections), respectively. The Kyrgyz portfolio has one project with actual problems and two projects with potential problems. The two projects are potential problem projects due to delays in implementation and disbursements, and one project is an actual problem due to delays in the project start-up. The Community-Based Infrastructure Services Sector Project was suspended on June 11, 2012 due to poor project management and integrity issues.

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.

Relations with the European Bank for Reconstruction and Development (EBRD)

(As of May 1, 2013)

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 April 2013, the Bank signed 95 projects accounting for a net cumulative business volume of €419 million. Investment portfolio stood at €190 million represented by 44 active operations. The current private sector portfolio ratio (as a percentage of the total portfolio) is 75 percent which is well above the Bank’s 60 percent mandated ratio. The last country strategy for the Kyrgyz Republic was approved by EBRD’s Board in September 2011, and was 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 last country strategy remain valid and include 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.

  • In 2012 EBRD signed six corporate sector projects. These include an MCFF loan to a local producer and exporter of dried fruits and soft drinks to purchase new production equipment and build storage facility; a loan to finance complementary facilities in one of the best office buildings in the capital; a DLF to complete construction and fit-out of a new mid-market hotel and an MCFF to support expansion of an existing hotel in Bishkek to improve supply of good quality accommodation; an MCFF loan to the largest distributor and processor of seafood in the country which is expected to improve operational efficiency and quality of the products through utilization of higher energy efficient equipment and modernization of storage facilities.

  • The mining sector remains a major contributor to economic growth, export receipts and fiscal revenues. In 2012 the Bank supported the activities of Kumtor mine by disbursing US$76 million to finance further investments in its mining operations.

  • 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 2012 BAS Kyrgyz Republic had undertaken more than 500 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. BAS also supports 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 funded by the Swiss government.

Strengthening financial institutions: In 2012, the EBRD continued supporting the country’s financial institutions. The Bank signed four new loan agreements with local banks and MFIs in local currency. These included a loan to Bai Tushum and Partners, a long-standing partner—the first micro-finance company in the region—which successfully transformed itself into a bank, with a positive impact on competitive environment in the banking sector.

In 2012 the Bank approved the new US$20 million Kyrgyz Sustainable Energy Efficiency Facility (KyrSEEF) which will provide financing for small-size energy efficiency improvements in the residential, service, agribusiness, SME, and industry sectors and will be an example of an integrated approach combining policy dialogue, financing and TC-supported capacity building at local intermediaries, and benefiting from donor-funded investment incentives. The Bank has been actively engaged in policy dialogue on stabilizing the banking sector, strengthening deposit insurance, enhancing the regulation of the microfinance sector and continued providing Technical Consultation (TC) to its partner financial institutions under the Kyrgyz Financial Sector Framework.

Building on the Memorandum of Understanding signed in the context of the local currency financing program, the Bank commenced work on developing the corporate bond market using a combination of TC and investments supporting the issuance of local currency corporate bonds by a leading bank. Technical cooperation projects with the Central Bank and the securities market regulator aim at improving corporate bond market issuance and disclosure standards and strengthening the regulatory framework for bond issuance and trading.

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 cofinancing 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 cofinanced 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 cofinanced 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 cofinanced 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 Business Development and 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.

  • 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 is 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 been working on developing TC to provide institutional capacity building support to the State Agency for Geology to support mining sector reform.

  • 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 continues its support for renewable energy development including through TC to the Ministry of Energy and Industry to support the renewable energy framework, and a possible financing of a pilot mini-hydro project(s).

  • 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.

Technical Assistance Provided by the Fund

(February 2003–April 2013)

article image
article image
article image
article image
article image
article image
article image
article image

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.

Table of Common Indicators Required for Surveillance

(As of April 25, 2013)

article image
article image

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: 2013 Article IV Consultation and Fourth Review Under the Three-Year Arrangement Under the Extended Credit Facility, Request for Waiver of Nonobservance of a Performance Criterion, and Request for Modification of Performance Criteria—Staff Report; Public Information Notice and Press Release on the Executive Board Discussion; and Statement by the Executive Director for the Kyrgyz Republic
Author: International Monetary Fund. Middle East and Central Asia Dept.