Press Release No. 11/446

Press Release: IMF Executive Board Completes First Review Under the Extended Credit Facility for the Kyrgyz Republic, Approves US$14.8 Million Disbursement

December 7, 2011

The Executive Board of the International Monetary Fund (IMF) today completed the first review of the Kyrgyz Republic’s economic performance under the program supported by a three-year, SDR 66.6 million (about US$103.53 million) Extended Credit Facility arrangement (see Press Release No. 11/245). Approval of the review makes SDR 9.514 million (about US$14.79 million) available to the Kyrgyz Republic. This would bring total disbursements under the arrangement to SDR 19.03 million (about US$29.58 million).

In completing the review, the Board approved the authorities’ request for an upward modification of the quantitative performance criteria (QPC) on the net international reserves held by the National Bank of the Kyrgyz Republic (NBKR) for end-December 2011, reflecting higher-than-expected foreign-exchange inflows. with the subsequent modifications in the QPC on the NBKR’s net domestic assets. The Board approved also the authorities’ request for an upward modification of the QPC on the general government overall deficit target for end-December 2011 to reflect the advancement of the foreign-financed energy infrastructure project. Moreover, in light of the successful renegotiation of the borrowing terms on the first phase of this project, the Board approved a downward modification of the ceiling on contracting or guaranteeing of nonconcessional external debt by the public sector.

Following the Executive Board's discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, stated:

“Implementation of sound policies under the Fund-supported program has helped the Kyrgyz Republic recover from the sharp slowdown last year. Growth has been strong and inflation has fallen considerably. However, the country faces a number of challenges going forward, including from a deterioration in the global economic environment.

“Fiscal performance has been strong and the authorities have agreed to accelerate fiscal consolidation in the medium term to reduce vulnerabilities, rebuild policy buffers, and ensure debt sustainability. The government intends to restrain current spending while preserving priority capital outlays to increase the economy’s long-term growth potential. Reforms in tax policy and administration are expected to boost revenues, while public financial management reforms will strengthen governance and transparency.

“The authorities’ response to the pickup in inflation has been effective. The central bank plans to maintain a tight monetary stance to mitigate underlying price pressures. While key banking indicators have been improving, ongoing efforts to enhance the resilience of the financial sector are critical. The authorities intend to press ahead with legal reforms to strengthen the bank resolution framework and to keep monitoring closely systemically important institutions.

“Good governance and sound institutions remain key to creating a level-playing field for strong private sector-led growth. The authorities remain committed to ensuring that all of their development plans are consistent with the principles of good governance and transparency.”