Kyrgyz Republic: Sixth Review Under the Three-Year Arrangement Under the Extended Credit Facility—Informational Annex
Author: International Monetary Fund. Middle East and Central Asia Dept.
Publication Date:
11 Jul 2014
eISBN:
9781498392532
Language:
English
Keywords:
ISCR; CR; government; ECF arrangement; Kyrgyz authorities; SDR; price index; broad money; public finance; debt service; bank Supervision; Anti-money laundering and combating the financing of terrorism (AML/CFT); Tax administration core functions
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This paper discusses Kyrgyz Republic’s Sixth Review Under the Three-Year Arrangement Under the Extended Credit Facility. Following exceptionally strong performance in 2013, growth is moderating to a more sustainable pace. The program is broadly on track, with all end-December 2013 quantitative performance criteria and all but one indicative targets (IT) met for end-December 2013. Although three March 2014 ITs were missed, since then there has been progress in rebuilding reserves and enhancing tax collections. The two structural benchmarks for end-December were met. The IMF staff supports the completion of the sixth and final review.

Abstract

This paper discusses Kyrgyz Republic’s Sixth Review Under the Three-Year Arrangement Under the Extended Credit Facility. Following exceptionally strong performance in 2013, growth is moderating to a more sustainable pace. The program is broadly on track, with all end-December 2013 quantitative performance criteria and all but one indicative targets (IT) met for end-December 2013. Although three March 2014 ITs were missed, since then there has been progress in rebuilding reserves and enhancing tax collections. The two structural benchmarks for end-December were met. The IMF staff supports the completion of the sixth and final review.

Relations with the Fund

(As of April 30, 2014)

Membership status: Joined: May 08, 1992 Article VIII

General resources account:

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SDR department:

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Outstanding purchases and loans:

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Latest financial arrangements:

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Formerly PRGF.

Projected payments to Fund 2/

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

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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 U.N. 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 2013 Article IV consultation discussions were held in March-April 2013 and were completed by the Executive Board in June 2013 (see Country Report No. 13/75).

FSAP participation and ROSC assessment

An FSAP update mission in July 2013 reviewed progress since the 2007 assessment, and the Board will consider the Financial System Stability Assessment (FSSA) along with the fifth ECF review in December 2013. 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 ninth resident representative of the Fund in the Kyrgyz Republic, Mr. Sobolev, took up his post in Bishkek in November 2013.

Relations with the World Bank Group

(As of June 2, 2014)

World Bank Group strategy: The CPS for FY14–17: The joint WB/IFC CPS was reviewed by the Board on July 25, 2013. Its strategic goal is to help reduce extreme poverty and promote shared rosperity through support for improved governance. This governance-oriented approach focuses on three dimensions of the relationship between the state and the citizen, which correspond to three broad areas of engagement—public administration and public service delivery, business environment and investment climate, and the management of natural resources and physical infrastructure. IFC’s primary focus would be the second and potentially the third areas of engagement, contributing to the CPS agenda by promoting private sector development through investment and advisory services that encourage diversification and competitiveness.

Since the Kyrgyz Republic joined the World Bank in 1992, the Bank has approved US$1.2 billion for International Development Association (IDA)-funded projects and Recipient Executed Trust Funds (RETFs), out of which US$1 billion has been disbursed. To date, 41 operations for US$885 million have been completed and closed, and The Kyrgyz Active Portfolio includes 11 IDA projects and 17 RETFs, which include two IDF and one GEF for US$314 million are ongoing. From 1992 until 2000, the Kyrgyz portfolio had a significant focus on budget support; since 2001, however, there has been a gradual shift toward investment projects till 2010. To achieve macroeconomic stability in the country after political turmoil in April 2010, the Kyrgyz Government requested the Bank to provide budget support. There have been two budget support operations since the July 2010 Donors Conference and the multiyear programmatic budget support program is envisioned till FY17.

IDA financed operations: Under the CPS, the following were delivered in FY14: DPO-1 (US$25 million equivalent), Central Asia Roads Link Project (US$45 million equivalent) and the Central Asia South Asia Electricity Transmission and Trade Project (US$45 million equivalent). The first Development Policy Operation of the multiyear programmatic budget support program became effective on December 6, 2013 and the second Development Policy Operation is under preparation with the Board meeting scheduled on June 10, 2014.

Electricity Supply Accountability and Reliability Improvement Project, Pasture and Livestock Management Improvement Project are scheduled for Board discussion in early FY15.

Trust funds: In addition to the IDA portfolio, the Kyrgyz program includes a significant number of cofinancing and stand-alone trust funds (TFs). Currently, the RETFs Portfolio has a total value of US$27 million, out of which US$13 million has been disbursed. Two sectors—Agriculture and Rural Development and Public Sector Management—receive most of the TFs. The largest TFs are the Agricultural Productivity Assistance Project (US$6.85 million), and Capacity Building in Public Financial Management (US$7.49 million), Kyrgyz Global Partnership for Education (US$12.7 million) and Kyrgyz Health Results Based Financing (US$11 million). TFs are mainly provided to co-finance IDA operations and to support capacity-building activities. The main contributors to the TFs have been the European Union (EU), Switzerland, Russia, and the United Kingdom.

Analytical advisory activities include continuation of programmatic PER and technical assistance (TA) in number of sectors, including mining sector business environment; railways trade link; analytical poverty work; Chamber of Accounts to enhance the public procurement audit methodology; public sector reform roadmap; PSD policy dialogue; agribusiness study; and conflict filter.

IFC program: Since becoming a member of IFC in 1993, the Kyrgyz Republic has received commitments totaling more than US$113 million from IFC’s own funds to finance 33 projects in the financial sector, including banking and microfinance, mining sector, agribusiness, as well as in the pulp and paper sectors. In FY12–14, IFC committed about US$22 million in 12 projects representing banking, microfinance, and infrastructure sectors. As of December 31, 2013, IFC’s committed portfolio stood at US$30 million, which includes investments in financial markets and manufacturing sectors.

IFC’s strategy: IFC’s role in the WBG Country partnership Strategy for the Kyrgyz Republic is to support the development and diversification of the private sector, contributing to country’s greater competitiveness, and improving employment opportunities. IFC prioritizes activities aimed at improving the investment climate, increasing access to finance and promoting corporate disclosure standards, while at the same time exploring a greater role in energy efficiency and renewable energy and looking for opportunities in the area of PPP jointly with IDA. In the banking sector, IFC aims to increase access to finance for MSMEs by improving regulatory framework, strengthening local financial institutions, expanding microfinance organizations, and providing credit lines for MSME financing to local banks. In the real sector, IFC aims to improve corporate business practices, while looking for emerging opportunities to invest across variety of sectors, particularly in agribusiness, mining, and infrastructure.

IFC advisory programs implemented in the Kyrgyz Republic focus on: i) improving financial markets infrastructure, specifically credit information sharing systems and risk management education; (ii) institutional and capacity building of financial intermediaries; (iii) microfinance and housing microfinance development; (iv) investment climate and tax administration, (v) improving corporate governance in local companies and (vi) designing public-private partnership projects, currently in health and power sectors.

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.

Relations with the Asian Development Bank (ADB)

(As of May 15, 2014)

The Kyrgyz Republic joined ADB in 1994. ADB approved the new Country Partnership Strategy (CPS) 2013–17 for the Kyrgyz Republic in August 2013. The CPS is aligned with the National Sustainable Development Strategy, 2013–17 approved by the President of the Kyrgyz Republic in January 2013 (NSDP). The overarching goal of the CPS is poverty reduction through inclusive economic growth. The CPS supports the government in addressing key constraints to growth and equitable access to economic opportunities. It focuses on (i) public sector management for private sector development; (ii) transport and logistics; (iii) energy; (iv) education and training; and (v) water supply and sanitation (WSS). ADB has been active in these areas and within each sector will focus more strongly on addressing regional disparities. The Country Operations Business Plan 2014–16 was endorsed by the Board in December 2013.

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. ADB’s annual approvals 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, the country received an ADF allocation of US$121.44 million for 2013–14, comprising US$53.97 million in grants and US$67.47 million in loans. For 2013, a US$65 million (US$32.50 million in loans and US$32.50 million in grants) regional ADF allocation and cofinancing of US$60 million from the Eurasian Development Bank are confirmed to finance the Central Asia Regional Economic Cooperation Corridor 3 (Bishkek-Osh Road) Improvement Project, Phase 4. Cofinancing for other projects, especially in energy and transport projects, is actively sought. As of 15 May 2014, the country has received 36 loans worth US$885.4 million, 19 ADF and one GEF grants worth US$358.3 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 13 projects (total net size of US$526.6million) contained ten ADF loans (total size of US$285.2 million) and eleven ADF grants (total size of US$239.9 million) and one JFPR grant for US$1.5 million.

ADB has also provided 85 technical assistance (TA) projects amounting to US$48.28 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 presently satisfactory with all projects on track. As of 15 May, contract awards and disbursements reached US$2.90 million and US$7.21 million (3 percent and 16.3 percent of year’s projections), respectively.

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. The reconstructed roads ensure safer and faster year-round travel to Kazakh, Tajik, and Chinese borders. Investments in energy will expand energy production and distribution. CAREC transport and trade facilitation projects are expected to support the government’s goal of developing external trade activities. 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 15 May 2014, cumulative direct value-added official cofinancing for the Kyrgyz Republic since 1997 amounted to US$116.2 million for ten investment projects and US$3.1 million for eight technical assistance projects. In November 2013, ADB approved the CAREC Corridor 3 (Bishkek-Osh Road) Improvement Project Phase 4, which is cofinanced by the Eurasian Development Bank (US$60 million). Cofinancing of energy sector projects with the Eurasian Development Bank and European Bank for Reconstruction and Development in 2014 and 2016 is being discussed.

ADB private sector operations in the Kyrgyz Republic began in 2012 with the signing of a US$10 million SME loan to the Kyrgyz Investment and Credit Bank. ADB’s Trade Finance Program (TFP) fills market gaps in trade finance by providing guarantees and loans through over 200 partner banks in support of trade. TFP has supported US$13 billion in trade involving over 2,500 small- and medium-sized enterprises. In December 2012, three banks in the Kyrgyz Republic signed TFP agreements including Demir Kyrgyz International Bank, Kyrgyz Investment and Credit CJSC, and RSK Bank OJSC. ADB anticipates transactions to start flowing in 2013.

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.

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, 2014)

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 2014, the Bank signed 111 projects accounting for a net cumulative business volume of €455 million. The Bank’s portfolio amounted to €221 million in 50 active projects. The current private sector portfolio ratio (as a percentage of the total portfolio) is 78 percent which is well above the Bank’s 60 percent mandated ratio. The latest country strategy for the Kyrgyz Republic which sets the key priorities for the Bank’s operations was approved 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 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 challenging economic and political situation in the country the Bank signed four corporate sector projects in 2013 and two more in the first four months of 2014.

  • Under the Direct Lending Facility (DLF), in 2013 the Bank financed a local producer of bottled water and soft drinks to support expansion of existing beverage business including diversification into beer production.

  • Under the Medium-Sized Co-Financing Facility (MCFF), the Bank supported one of the leading distribution companies of packaged food products and cosmetic goods in the country to support business expansions and servicing new distribution contracts; a local operator of customs warehouse to improve the quality of services offered to its clients; a local diary that has been modernizing its cheese and butter production to improve quality and increase output of its products that are mainly exported; a local construction material company to modernize its equipment and increase export potential; and a local retail chain to expand its network of shops in Bishkek.

  • Small Business Support connects small and medium-sized enterprises to the expertise that can help transform their businesses. Depending on the nature of the company’s needs, Small Business Support works either through Business Advisory Services, supporting short-term specific projects with local consultants, or through the Enterprise Growth Programme, using

longer-term projects that help senior managers develop new business skills and make the structural changes their companies need to thrive.

  • The Enterprise Growth Programme (EGP) works with international advisers with more than 15 years’ experience in a particular industry or field. In visits over the course of 12–18 months, the advisers strive to transfer their know-how to receptive managers. The teaching of international best practices is tailored to the needs of the client, and can cover anything from restructuring, to marketing and design or financial management. EGP has undertaken 50 projects in the Kyrgyz Republic with companies in manufacturing, ICT, tourism, and agriculture. The majority of projects focused on improving marketing and sales, organization, operations, and financial management. The total donor commitment for these projects was approximately €3 million.

  • Business Advisory Services helps companies work with qualified local consultants on a range of projects, covering concerns from market research to strategic planning, quality management and certification or energy efficiency and environmental management. These projects are undertaken on a cost-sharing basis. BAS also work with the local consultancy sector, supporting professional capacity building to develop the skills of local consultants to enable them to serve the SME sector on a sustainable basis, and to introduce more sophisticated advisory services in areas such as quality management and energy efficiency. As of 1 May 2014, BAS Kyrgyz Republic has undertaken 774 projects, engaging 278 consultants. More than 70 percent of the enterprises assisted are located 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 45 beneficiaries secured external investments, for a total investment of €25 million. BAS Kyrgyz Republic is funded by the Swiss and the U.S. Governments which have contributed €4.5 million and €230,000 consequently.

Strengthening financial institutions: In 2013, the EBRD continued supporting the country’s financial institutions. The Bank signed eight new loan agreements with local banks and MFIs in local currency 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). These also included the first ever energy efficiency credit lines provided under the new US$20 million Kyrgyz Sustainable Energy Efficiency Facility (KyrSEEF) which is an example of an integrated approach combining policy dialogue, financing and TC-supported capacity building at local intermediaries, benefiting from donor-funded investment incentives. KyrSEFF offers to provide financing for small-size energy efficiency improvements in the residential, service, agribusiness, SME, and industry sectors.

The Bank also engaged in policy dialogue on stabilizing the banking sector, strengthening deposit insurance, enhancing the regulation of the microfinance sector, addressing concerns about rapidly rising borrowers’ over-indebtedness, supporting development of mobile banking, and improving financial inclusion. 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 for the equivalent of US$2 million by a leading commercial bank, KICB. Technical cooperation projects with the Central Bank and the securities market regulator aimed at improving corporate bond market issuance and disclosure standards and strengthening the regulatory framework for bond issuance and trading. In addition the EBRD acted as an anchor investor having invested about US$400,000 equivalent for this first issue by KICB. A successful placement of the bond is expected to allow others to replicate this financial instrument and access local currency funds.

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

  • Under this framework, the Bank continued implementation of the water rehabilitation projects in Bishkek, Osh, Djalal-abad and Kara-Balta and in 2013 signed new water/wastewater project for Kant. The new loan of €1.5 million is co-financed by €3.6 million capital grant from the Swiss Secretariat for Economic Affairs (SECO) and will be used to finance water network rehabilitation, a metering programme covering the entire city, limited wastewater improvements and operations and maintenance equipment. 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 2013 the EBRD provided the first loan of €11 million to finance critical solid waste investments in Bishkek. The loan is co-financed by €3 million capital grant from the Bank’s Shareholder Special Fund (SSF) and €8 million from the EU’s Investment Facility for Central Asia (IFCA). The project will improve the city’s solid waste management, including collection across the city, investment in an urgently needed sanitary landfill, and the closure of the existing dumpsite, which is at the end of its economic life. The project will help optimize solid waste collection including via acquisition of new trucks and containers and is expected to result in an improved level of public service, the introduction of waste recycling and environmental improvements. In addition substantial TC has been mobilized to assist the Bishkek municipality with development and implementation of resettlement and livehood restoration in connection with the existing landfill.

  • The Bank continued implementation of the Bishkek Public Transport project with a tender for purchase about 80 new high- and low-floor trolleybuses completed late in 2012. The first trolleybuses have been already delivered and operate in the city. For all municipal projects gender was taken into consideration with respect to improving equality of access to the new services.

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 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 engaged with the government on public procurement improvement 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 initiated a TC project to assist the NBKR with the review and development of legal and normative framework as well provide training to the key stakeholders in mobile payments area.

Technical Assistance Provided by the Fund

(February 2003–May 2014)

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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 (http://www.stat.kg). 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 www.imf.org/external/np/rosc) 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.

Kyrgyz Republic: Table of Common Indicators Required for Surveillance

(As of June 2, 2014)

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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.

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

Other IMF Content

Other Publishers

Cover IMF Staff Country Reports
Kyrgyz Republic: Kyrgyz Republic—Sixth Review Under the Three-Year Arrangement Under the Extended Credit Facility
Author: International Monetary Fund. Middle East and Central Asia Dept.
Volume/Issue:
Volume 2014: Issue 200
Publisher:
International Monetary Fund
ISBN:
9781498392532
ISSN:
1934-7685
Pages:
83
DOI:
https://doi.org/10.5089/9781498392532.002