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: / Strategies / Kyrgyz Republic Country Assistance Strategy (2003)




Kyrgyzstan Review, 10 years ago




Risks

The CAS program contains a number of risk areas noted below, which in combination are significant. The CAS also lays out a program to address these risks as follows:
 
Reform Fatigue and Politics: Perhaps the highest risk is that there may be pressures to delay key reforms, particularly in light of the upcoming Parliamentary and Presidential elections scheduled for 2005. A key cornerstone of the IDA will be its Governance Structural Adjustment Credit which will help make the civil service more professional. IDA will also increase its outreach activities so that a larger amount of the population is aware of the necessity of reform activities. IDA will also continue to work within the NPRS process, and assist in making the NPRS process an inclusive one.
 
External Debt: The level of external debt is currently unsustainable. The Kyrgyz Republic has worked closely with the international community and the Paris Club to successfully reduce the debt service burden to more affordable levels in the medium-term. Paris Club creditors agreed to consider a concessional treatment of the debt stock, subject to successful implementation of the macroeconomic framework under the ongoing IMF PRGF. IDA and the IMF will monitor debt sustainability indicators closely and support Kyrgyz Republics efforts to improve their debt sustainability outlook by facilitating a strong reform performance. IDA will also begin extending a significant portion of its own support as grants rather than loans.
 
Unexpected Economic Events: The Kyrgyz economy is land-locked and relatively undiversified, which makes the country very vulnerable to unexpected external or internal shocks. Poverty reduction rests critically on achieving significant economic growth. During the CAS period, IDA will work closely with the Government to diversify the economy, including facilitating growth at the local level. The IDA program also includes a mix of adjustment and investment lending to respond to both macro and sectoral needs. It will also extend a Learning and Innovation operation to help the Government address potential natural disaster risks. Finally, IDA will increase its attention to regional cooperation in critical areas such as water, trade, and energy.
 
Capacity Constraints. The capacity of the Government (central and local) remains weak. IDA has put key analytic pieces into place in FY02-03 which provide an important building block Poverty Assessment, Financial Sector Assessment, CFAA and CPAR. These will continue to be developed through operations and IDF/PRSP grants. In addition IDA will extend two technical assistance projects in FY04, the GTAC and FINBUS, in the critical sectors of governance and finance. At the local level IDA plans to support capacity development through its two CDD operations. And IDA will continue to provide assistance on the development of the MTEF, critical to the next stage of the NPRS.