Tables

Table 1. Kyrgyz Republic: Draft Policy Matrix, 1998–2000

Policy Area	Objectives and Targets	Strategies and Measures to be Adopted 1998–2000	Timing	TA
		Fiscal Policy
Overall Budget	Maintain fiscal deficit at a level which can be financed by external assistance at concessional terms and by sale of T-bills, without accumulating arrears.	1. Reduce accrual-based budget deficit to 8.1 percent of GDP in 1998, 7.1 percent in 1999, and 5.8 percent in 2000.	1998–2000
Revenues	Widen tax base to improve compliance and lower tax rates over the medium term.	2. Remove all discretionary tax exemptions described in list from Ministry of Finance of January 19, 1998 and refrain from granting new exemptions (both discretionary and in the form of amendments to the tax code).	June 1998 and throughout
		3. Ensure that the net effect of any amendments to the tax code proposed by the government be at least revenue neutral.	Throughout
		4. Complete study on criteria for land tax rates, including an assessment of rates for urban areas, and evaluate potential for land tax revenues in both rural and urban areas. Submit to parliament proposal to extend land tax to urban areas.	June 1999	WB
		5. Submit to parliament amendments of the tax code to introduce VAT for communal services in parallel with social protection measures, for implementation in 1999.	Sept. 1998
		6. Submit to parliament amendments of the tax code to include excise and custom payments into the base for the calculation of the VAT, for implementation in 1999.	Sept. 1998
		7. Conduct annual audits of enterprises that receive VAT refunds.	Throughout
		8. Submit to parliament amendments of the tax code to require payment of VAT within one month following the tax period, for implementation in 1999.	Sept. 1998
		9. Develop manuals and training courses to standardize practices of VAT treatment in all oblast.	Dec. 1998	USAID
		10. Submit to parliament amendments of the tax code to reenact provision that exempts insurance companies from paying profit taxes and instead charges 5 percent on gross premia, for implementation in 1999.	Sept. 1998
		11. Submit proposal to parliament to harmonize excise taxes for domestic and imported goods at the higher rate.	June 1998
		12. Submit to parliament legislation that allows excise rates to be determined by the government and not by Parliament.	Sept. 1998
		13. Submit proposal to parliament to include customs in excise tax base for ad valorem items.	Sept. 1998
		14. Require that all dividends and other payments received by Kyrgyz Altin (from Kumtor) be transferred to the budget.	1999 budget
Tax Administration	Create a streamlined, modern and effective tax system under which tax laws can be implemented and enforced effectively while minimizing distortions, inefficiency and governance problems. Encourage compliance by closely monitoring taxpayer returns and payments.	15. Submit to parliament amendments to the respective legislative acts to allow for the appointment of regional State Tax Inspectorate (STI) directors without the approval of local government authorities.	June 1998
		16. Establish independent Large Taxpayer division in Bishkek	Dec. 1998
		17. Introduce taxpayer service desks at local offices and move staff to compliance enforcement.	Sept. 1998
		18. Issue internal order by the Minister of Finance to eliminate multiple audits by different local, regional and central tax authorities.	Dec. 1998
		19. Gradually reduce all in-kind tax payments and netting out of arrears.	2000 budget	FAD
		20. Require the State Customs Committee (SCC) to provide to STI complete data on export and import declarations to be used for VAT reimbursement purposes.	Dec. 1998
		21. Place SCC under the authority of the Ministry of Finance.	Dec. 2000
		22. Require SCC to use the taxpayer identification number (TIN) of the STI.	Dec. 1998
		23. Move to the destination principle for VAT for all countries.	Dec. 1999
		24. Make at least 5 additional border posts operational.	March 1999
		25. Start implementation of ASYCUDA system, including development of a valuation database.	Dec. 1998	UN
Intergovern-mental and Budgetary Reforms	Continue progress on institutionalizing a prioritization framework for spending at the central and local levels.	26. Submit to parliament the 1999 budget law in a consolidated form containing the accounts of the State Property Fund	Sept. 1998
Expenditure	Continue strict expenditure control, while safeguarding expenditures for health, education and social protection.	27. Institutionalize uniform tax-sharing rates across oblasts.	1999 budget and throughout	WB
		28. Establish accepted list of enterprises with cultural or social functions to receive direct subsidies.	Sept. 1998
		29. Eliminate all indirect subsidies (e.g., low bus fares) aimed at some parts of the population. If politically necessary, replace indirect subsidies by explicit budgetary transfers.	March 2000	WB
		30. Limit loans from the budget to agricultural enterprises to a maximum of som 50 million in 1998, 25 million in 1999 and zero in 2000.	Throughout	WB
		31. Limit extensions of arrears payments on budget loans, wages and taxes, and initiate liquidation procedures for non-compliers.	Throughout	WB ADB
		32. Establish administrative procedures to ensure that no new arrears are accumulated by establishing expenditure control/warrant system for all spending units.	Sept. 1998 and throughout	WB
		33. Strengthen PIP unit in Ministry of Finance and sectoral policy and programming units in line ministries, following World Bank recommendations.	June 1998	WB
		34. Move to program focused methods of estimating financial requirements for health and education.	2000 budget	WB USAID
Civil Service Reform	Create an effective and transparent system of personnel management.	35. Finalize and implement action plan and legislation for civil service reform in line with TACIS recommendations.	Sept. 1998	EU TACIS
		36. Submit to parliament the Code of Conduct for civil servants.	Dec. 1998
Pension Fund Reform	Enact fundamental reform of the state pension fund that will provide sustainable financing and reduce the high social contribution rate (See also under Social Safety Net, below).	37. Agree on detailed action plan for pension fund reform. The plan will include a review of the retirement policy and measures to decrease the replacement rate, increase the ratio of contributors to beneficiaries, strengthen the link between contributions and benefits, and increase the number of years for full benefits.	Sept. 1998	WB, IMF
		38. Begin converting Social Fund accounts to accrual-based system, in line with World Bank recommendations.	June 1998	WB
		39. Start implementing pension reform, as agreed in the detailed action plan.	Dec. 1998
		40. Require that the Social Fund and the STI adopt a common TIN.	March 1999
		Monetary and Credit Policies and Financial Sector Deepening
	Increase efficiency of NBKR’s monetary policy instruments and promote the development of banks and nonbank financial institutions	41. Develop weekly liquidity forecasts for the quarter ahead and daily forecasts for the month ahead. Continue to improve accounting practices in line with international standards.	June 1998	MAE
		42. Enhance the flexibility, marketability, and effectiveness of reverse repos (e.g., include repos in electronic trading system and settlement system, improve secondary market trading).	June 1998	MAE
		43. Increase penalty rate for noncompliance with reserve requirements to two times the three-month T-bill rate.	June 1998
		44. Remove surcharge for repeated use of the Lombard facility.	June 1998
		45. Gradually replace foreign exchange auctions with direct dealings in interbank market.	June 1998	MAE
		46. Improve data base on banks’ interest rates.	June 1998	MAE
		47. Complete introduction of faster payment and settlement system.	Dec. 1998	WB
		48. Complete the establishment of the central registry for pledges in two more oblasts.	Sept. 1998	WB
		49. Complete remaining legal steps in the liquidation process of Agroprombank and Elbank and close DEBRA.	Dec. 1999	WB
		50. Submit draft laws to parliament on Investment Funds, Insurance Companies, and on Leasing.	Dec. 1998	WB, USAID, IFC
		51. Support the establishment of central stock depository through regulation and adoption of Law on the Securities Market, in line with TA recommendations.	Dec. 1998	USAID, IFC
		52. Prepare privatization plan for the Kyrgyz Agricultural Finance Corporation (KAFC).	Dec. 1999	WB
		External Economic Policies
Trade Regime	Continue and further liberalize the trade system	53. Submit to parliament the privatization plans for the state trading monopolies in the energy and gas sectors.	Dec. 1998
		54. Adopt action plan to phase out nonviable Free Economic Zones and strengthen control of the remaining ones.	Sept. 1998	IFC, WB, FAD
Debt Management	Improve external debt management and continue liberal trade system.	55. No recourse to nonconcessional external loans (with a grant element of less than 35 percent) contracted or guaranteed by the government, except as specified under the program.	1998–2000
		56. Establish procedures in the debt management unit of the Ministry of Finance to ensure a comprehensive feasibility analysis of all new public or publicly guaranteed external borrowing.	March 1998 (implemented)	WB, IMF
		57. The Ministry of Finance and NBKR will harmonize and consolidate their data bases on external debt.	June 1998
		Structural Policies
Privatization and Private Sector Development	Complete privatization of enterprises and distribution of land and create a business environment facilitating private activity.	58. Adopt a government resolution to begin implementing the privatization program, including a timetable.	June 1998
		59. Submit to parliament the revised Land Code and the Law on Land Registration.	Sept. 1998	WB, USAID
		60. Submit the draft Mortgage Law to parliament.	Dec. 1998
		61. Establish policies and procedures for land use rights auctions.	Dec. 1998	WB
		62. Issue full fledged land use rights to those who do not yet have them.	Dec. 1998
		63. Complete individual privatization plans for utilities and large enterprises aimed at attracting strategic investors.	Dec. 1998	WB, ADB
		64. Implement ADB supported program on enterprise accounting, reporting and disclosure.	Dec. 1998	ADB, IFC
Legal and Regulatory Framework	Strengthen application of legislation. Build a judiciary system capable to implement, disseminate and enforce legislation in a transparent and predictable manner across the country.	65. Adopt training program, in line with TA recommendations, for the judiciary to apply specific laws.	June 1998	WB, ADB, USAID
Agriculture	Promote efficient and private agriculture.	66. Create rural advisory and development services and an agricultural market information system for private farmers.	June 1999	WB
		67. Develop national plan for rural roads.	March 1999	WB
Energy	Rationalize domestic energy use and explore new sources. Improve billing and collection performance of Kyrgyzenergo. Encourage private investment in energy generation.	68. Increase tariff in line with WB recommendations, by adopting a new rate structure which reflects economic costs.	Throughout	WB, USAID, IFC
		69. Gradually replace KyrgyzEnergo subsidies to low income households with direct budget transfers and ensure payment compliance of all budgetary institutions.	1999 budget and throughout	WB
		70. Submit to parliament privatization strategy for KyrgyzEnergo.	June 1998	WB, EBRD
Environment	Prevent unsustainable use of natural resources by reversing deterioration of water infrastructure that is allowing significant water losses. Introduce sustainable forestry management to stop continued deforestation.	71. Develop a water management plan and submit to Parliament draft legislation to: (i) raise user charges to cover depreciation costs; and (ii) improve management skills at local levels.	Sept. 1998	WB
Communication	Promptly implement the regulatory and policy framework for restructuring the sector, aimed at ensuring orderly development as well as at attracting private investors.	72. Enact Telecom law.	June 1998	WB
		73. Kyrgyz Telecom (KT) to rebalance tariffs and maintain debt service ratio 1.5.	Dec. 1998
		74. KT to eliminate all direct or indirect transfers to postal service and refrain from granting new ones.	June 1998 and throughout
		75. KT to assess economic and financial viability of its investment prior to their undertaking.	Throughout
Transport	Improve the public transportation system to meet urban population demands. Change prices to achieve cost recovery over the medium term.	76. Formulate a reform strategy for transportation, including a detailed plan for removal of privileges, in line with World Bank recommendations.	Dec. 1998	WB
Statistics	Improve the quality of statistics in line with the General Data Dissemination System, GDDS.	77. Implement "Program to Reform Statistics in the Kyrgyz Republic."	1998–2000	WB, IMF, OECD, EU TACIS
		78. Export price index to be compiled.	Dec. 1998
		79. Move from universal to sample-based data collection for all sectors of economic activity, including informal sectors.	Dec. 1999	WB
		80. Reorganize the National Statistical Committee (NSC) to accommodate the role of regions in data flows.	Dec. 1998
		Social Safety
Welfare	Improve targeting of welfare benefits and reliability of provisions of essential social services, especially for the poor and children.	81. Implement plan to ensure improved targeting of benefits, so that the poorest quintile will receive 60 percent of benefits, as monitored by the household surveys.	June 1998 and throughout	WB
Health care	Continue to emphasize a cost effective focus on primary health care services, reduction of in-patient hospital care, and focus on the rural population and the most vulnerable.	82. Prepare analysis of funding levels to the health sector.	June 1998	WB
		83. Extend the medical care provider system from Issyk-kul to Bishkek and Chui.	Dec. 1998	WB
		84. Develop compulsory medical insurance, including appropriate arrangements for financial management and the definition of the basic package that would be provided.	March 2000	WHO/WB
Education	Improve sustainability of sector by improving resource mobilization and rationalize staff and public spending on education. Improve access and equity in basic education.	85. Complete education program in line with TA from ADB.	Dec. 2000	ADB
Labor market	Improve incentives to increase work effort, in order to improve labor mobility and resource allocation.	86. Submit to parliament a revised labor law according to WB recommendations.	Dec. 1998	WB
		87. Tighten eligibility to unemployment insurance to avoid participation for multiple periods.	June 1998	WB
		88. Implement new eligibility criteria for unemployment benefits and determine the level of benefits annually to avoid arrear buildup.	Dec. 1998	WB
		89. Improve employment and unemployment statistics based on household, as opposed to enterprise, surveys.	Dec. 1998	ILO
Legend of Acronyms ADB: Asian Development Bank ASYCUDA: Automated System for Customs Data CG: Consultative Group DEBRA: Debt Resolution Agency EBRD: European Bank for Reconstruction and Development ERRA: Enterprise Reform and Resolution Agency EU TACIS: Technical Assistance for Commonwealth of Independent States FAD: Fiscal Affairs Department GDDS: General Data Dissemination System GTZ: Gesellschaft Fur Technische Zusammenarbeit IFC: International Finance Corporation ILO: International Labor Organization IMF: International Monetary Fund KAFC: Kyrgyz Agricultural Finance Corporation KT: Kyrgyz Telecom LRF: Land Redistribution Fund MAE: Monetary and Exchange Affairs Department NBKR: National Bank of the Kyrgyz Republic NSC: National Statistical Committee OECD: Organization for Economic Cooperation and Development PIP : Public Investment Program SCC: State Customs Committee STI: State Tax Inspectorate TA: Technical Assistance TIN: Tax Identification Number UN: United Nations UNDP: United Nations Development Programme USAID: United States Agency for International Development VAT: Value Added Tax. WB: World Bank WTO: World Trade Organization

 
 
Table 2. Kyrgyz Republic: Selected Economic Indicators, 1997-2004

	1997	1998	1999	2000	2004
	Est.	Projections
GDP
Nominal GDP (in billions of soms)	29.3	35.1	40.0	44.5	64.6
Nominal GDP (in millions of U.S. dollars, at average exchange rate)	1,686	1,884	2,005	2,161	2,909
Real GDP (growth in percent)	6.5	6.0	4.6	4.5	4.0
Prices and wages
GDP deflator (percent change)	17.5	13.2	8.8	6.6	5.0
Consumer prices (percent change, December - December)	14.7	12.0	8.0	5.5	4.5
Consumer prices (percent change, average)	25.5	11.6	9.5	6.4	4.6
Average real wage (1992=100)	81.8	85.6	87.9	90.8	99.8
Average monthly wage (in U.S. dollars)	36.2	39.3	40.4	42.9	53.1
State government finances	(In percent of GDP)
Total revenue and grants	17.0	18.0	17.8	18.0	19.0
Of which: tax revenue	13.1	13.5	13.8	14.2	15.2
Total expenditure, of which	26.3	26.1	24.9	24.2	23.2
Public Investment Program	3.2	4.7	4.6	4.2	3.5
State government non-interest current expenditure	20.1	19.2	17.1	16.7	16.2
Of which: wages and Social Fund contributions	7.1	7.0	6.7	6.7	6.8
Overall fiscal balance (cash basis)	-9.4	-8.5	-7.1	-6.2	-4.2
Overall fiscal balance (accrual basis)	-9.4	-8.1	-7.1	-6.2	-4.2
Overall fiscal balance after measures	...	...	...	-5.8	-4.2
External financing	8.2	6.9	5.3	4.5	3.5
Domestic financing	1.2	1.7	1.8	1.3	0.6
Financing gap	0.0	0.0	0.0	0.4	0.0
Domestic balance1	-6.9	-5.2	-3.6	-2.9	-1.3
Expenditure arrears (end-period)	0.5	0.0	0.0	0.0	0.0
External sector2
Export growth (goods and services, percent change, in U.S. dollars)	17.7	5.1	6.3	8.2	7.0
Import growth (goods and services, percent change, in U.S. dollars)	-21.5	3.4	5.5	4.0	6.3
Current account balance (in millions of U.S. dollars)	-139.1	-141.5	-138.9	-108.7	-63.2
Current account balance (in percent of GDP)	-8.2	-7.5	-6.9	-5.0	-2.2
Gross international reserves (months of imports, end-period)	3.0	3.3	3.5	3.7	2.2
External debt outstanding/GDP	55.4	59.6	65.4	68.1	64.2
External debt outstanding/GDP (NPV terms)	42.9	44.4	46.8	48.1	43.4
NPV-of-debt/Exports (percent)	114.6	126.3	129.1	129.3	114.4
Debt service ratio3	8.0	11.5	10.1	13.9	8.7
Exchange rate (soms per U.S. dollar, average)	17.4	18.6	19.9	...	...
Money and credit	(Percent change, except velocity)
Base money (end-of-period)	21.1	15.5	9.0	...	...
Broad money (end-of-period)	24.7	16.5	10.5	...	...
Net domestic assets of the banking system4	8.2	12.4	7.8	...	...
Of which
Credit to the government4	9.0	5.4	4.0	...	...
Credit to the economy4	5.2	5.3	3.8	...	...
Velocity of broad money5	8.9	8.9	8.8	...	...
Savings and investment balances
Total Investment	13.1	12.9	13.5	13.7	14.9
Government	4.2	6.0	6.0	5.7	5.8
Private	8.9	6.9	7.5	7.9	9.1
Total savings	4.9	5.4	6.6	8.6	12.7
Government	-5.4	-3.3	-1.6	-0.1	1.6
Private	10.2	8.7	8.1	8.7	11.1
Current account balance	-8.2	-7.5	-6.9	-5.0	-2.2
Sources: Kyrgyz authorities; and Fund staff projections.    1Revenues (excluding grants) less current expenditures, capital investments and net lending.    2Includes the operations of the Kumtor Gold Mining Company.    3Excludes Kumtor debt service and exports.    4End-of-period as a percent of beginning period broad money.    5Annualized quarterly GDP/end-of-period broad money.

 
 
Table 3. Kyrgyz Republic: Demographic and Social Indicators

Population
Population mid-1996 (in millions)	4.6
Population density (per km2)	22.6
Population growth (in percent per year, average 1990–96)	0.6
Labor force growth (in percent per year, average 1990–96)	1.2
Urban population (in percent of total population)	39.0
Social indicators (most recent estimates)
Poverty index (in percent of households)	49.0
Access to safe water (in percent of population)	75.0
Illiteracy (in percent of population over 15 years)	3.0
Gross primary school enrollment (in percent of school-age population)	111.0
Life expectancy at birth (in years)	68.0
Infant mortality (per 1,000 live births)	30.0
Hospital beds (per 1,000 inhabitants)	9.0
Sources: Kyrgyz authorities, World Bank and Fund staff estimates.

 
 
 
 
Table 4. Kyrgyz Republic: External Financing Requirements, 1997-2000
(In millions of US dollars)

	1997	1998	1999	2000	1998-2000
	Est.	Projections
Trade balance	-15.3	-16.6	-20.3	-10.6	-47.5
Exports, fob	630.8	662.1	709.6	776.2	2,147.9
FSU countries	346.2	370.6	397.6	431.6	1,199.8
Non-FSU	284.5	291.5	312.0	344.6	948.1
Of which
Gold (Kumtor)	184.0	173.6	180.5	200.3	554.4
Imports, fob	646.1	678.7	729.9	786.8	2,195.4
FSU countries	396.0	412.5	442.3	476.1	1,330.9
Non-FSU	250.1	266.2	287.6	310.7	864.6
Of which
Gold (Kumtor)	25.0	27.0	27.0	30.0	84.0
Net noninterest services	-134.6	-127.1	-125.9	-109.8	-362.8
Net private transfers	2.2	2.4	2.4	2.4	7.3
Non-interest current account - before grants	-149.3	-143.0	-145.8	-120.0	-408.8
Debt service	-82.1	-123.2	-148.3	-157.7	-429.2
Amortization	-25.3	-55.2	-85.2	-98.9	-239.4
CIS	-6.7	-7.0	0.0	-17.8	-24.7
Non-CIS (including IMF)	-18.7	-48.3	-85.2	-81.2	-214.7
Interest	-56.8	-68.0	-63.1	-58.7	-189.8
CIS	-8.3	-11.6	-8.7	-8.6	-28.9
Non-CIS (including IMF)	-48.5	-56.4	-54.4	-50.1	-160.9
Change in NBKR official reserves (- = increase)	-67.8	-27.6	-28.2	-27.3	-83.1
Commercial banks	0.8	0.0	0.0	0.0	0.0
Gross financing requirement	-298.4	-293.9	-322.3	-305.0	-921.1
Sources of financing - including grants	298.4	293.9	322.3	305.0	921.1
Of which
Grants	67.0	69.5	70.0	70.0	209.5
Sources of financing - excluding grants	231.3	224.4	252.3	235.0	711.6
Foreign direct investments	83.0	28.6	35.0	52.9	116.5
Loans (including IMF)	211.1	194.3	190.4	162.2	546.9
CIS	12.5	21.5	25.0	0.0	46.5
Non-CIS	198.6	172.8	165.4	162.2	500.4
IDA	65.4	51.4	45.5	56.8	153.7
IMF 1/	44.0	29.0	29.1	29.2	87.3
ADB	55.8	56.8	55.5	36.8	149.1
Others	33.4	35.5	35.3	39.4	110.2
Other, including change in arrears	25.0	1.5	0.0	0.0	1.5
Financing gap	0.0	0.0	-26.9	-19.9	-46.7
Errors and omissions and short-term capital	-87.8	0.0	0.0	0.0	0.0
Sources: Kyrgyz authorities; and Fund staff estimates and projections.    1Projected Fund disbursements in 1998-2000 assume access of 100 percent of quota.