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




Kyrgyzstan Review, 10 years ago




Scope of Poverty

About half of the 5 million Kyrgyz population live below the poverty line. Many of the inefficient Soviet-era factories have shut down and unemployment is widespread. While changes in the structure of the economy are necessary for long term economic viability, in the early transition period there was a significant increase in poverty. Nevertheless, there are some signs that the Kyrgyz Republic is turning the corner. First, the overall percentage of the population living below the poverty line declined, based on strong GDP growth, from about 55 percent in 1999 to 52 percent in 2000 and 48 percent in 2001 as measured in expenditure per capita (see Table 1). Second, the growth that has occurred in recent years appears to be relatively pro-poor, though not in all the regions. Poorer segments of the population had a higher increase in real consumption than the richer segments of the population. Poverty has declined in both the rural areas and the urban areas, and has been broad-based across all oblasts, although Naryn, the poorest oblast which is the most mountainous, has the least access to transport and markets, and is more reliant on livestock than crop production, benefited the least. In 2001, an estimated nine out of every ten Naryn residents lived below the poverty line.
 
Table 1: Poverty in the Kyrgyz Republic, 2000-2001
 

 

Measure of welfare

 

 

 

Absolute poverty line, 2001 so ms

 

 

Headcount Index of Poverty (%)

 

2000

 

2001

 

Expenditure per capita

 

7491

 

52.0

 

47.6

 

Consumption per capita

 

6975

 

62.5

 

56.4

 

Consumption per adult equivalent

 

6975

 

51.8

 

45.0

 

 
Poverty is concentrated in the rural communities: In 2001, two thirds of the Kyrgyz population and almost three quarters of the poor lived in rural areas. The incidence of poverty in rural areas was higher than average at 62 percent in 2001. Amongst regions, the more rural Naryn and Talas regions are the poorest. It is in the rural areas that the fight against poverty must start. Since 1996, the agriculture sector has been a key driver of economic growth. Agriculture yields remained strong in 2002, resulting in about a 4.8 percent growth. However, the driving forces of the gains to dateincreases in agricultural productivity from land reform and the growth of the small services sector will need to be matched by greater access to markets as well as growth in input services, marketing services, and off-farm rural employment.
 
Employment opportunity is weak: A viable long term poverty reduction strategy must establish alternative employment for those without access to land. The establishment of such activities requires the creation of a favorable investment climate to encourage local SME investments and attract FDI, through the improvement of access to information, development of an enabling legal environment, improvement of access to credit, the simplification of entry, licensing, inspections and tax-related regulations, and the promotion of a more transparent accounting system, as well as development of a qualified and independent judiciary and effective enforcement mechanisms. Many small businesses operate in the shadow economy given administrative barriers and high rates of social contributions, but this reduces the incentives for them to grow and undermines labor standards. The development of off-farm employment in rural areas and in small towns would be particularly important to limit internal migration to urban slums.
 
Provision of adequate social services is low. Access to public infrastructure services such as running water, public sewer, reliable electricity, district heating, or telephone services is very low. Overall rural and poor households have much less access to these services than others. Given that these services are subsidized, rich households, who usually consume more, receive most of the subsidies. In health and education, the quality of services is also a major concern. Many non-poor are also very vulnerable to falling back into poverty. Sickness, death of a family member, and natural calamities (flooding, loss of crop or livestock) remain ever-present threats. Ethnic minorities, pensioners, women, families with many children, and unregistered migrants to urban areas remain disadvantaged, as well as the disabled and orphans.
 
But Growth is making a difference. The recent World Bank/Kyrgyz government joint Poverty Assessment, which was generally reflected in the National Poverty Reduction Strategy (NPRS), concluded that growth has been tangibly pro-poor. If the recent pattern is maintained, a five percent annual growth rate in per capita consumption could reduce poverty levels on a consumption per capita basis to about 36 percent in 2006. But this assumes no increase in inequality and continued strong growth. With higher inequality and/or lower growth, the poverty headcount could remain at about 50 percent. It will therefore be important to strengthen growth at the grass roots, rural, and small and medium enterprise levels.
 
And progress is expected on the Millennium Development Goals for poverty reduction: The international community has established Millennium Development Goals (MDGs) to assess progress towards key poverty-based objectives. The Kyrgyz government has adopted many of the MDGs into its National Poverty Reduction Strategy (see Table 3) and IDA and other donors are supporting efforts to achieve them. The status of MDGs, intermediate goals. In addition to the primary goal of reducing overall poverty levels other highlights are:
 
Primary Education: Primary school enrollment, at over 90 percent, is already very strong in the Kyrgyz Republic, a Soviet legacy. However the challenge remains to both raise enrollment rates to near universal, focusing on rural education, and improve educational quality which has deteriorated. The government has committed to increasing funding for education, and IDA and the AsDB have agreed to work closely with the Government over the next few years to establish a strong policy framework to ensure adequate teacher training, text book and supplies, and community involvement.
 
Health Indicators: The Kyrgyz Republic is making progress in reducing infant and maternal mortality through its pilot health reform program, which, with support from IDA and other donors, is expected to be extended throughout the country over the next few years. The incidence of HIV/AIDS is still quite low but action is needed to prevent its growth. However, the incidence of TB is high and growing due to outmoded treatment techniques and prison conditions. The Global Fund for AIDS, TB and Malaria (GFATM) has just approved a large grant for the Kyrgyz Republic.
 
Gender Issues: Enrollment ratios are essentially the same for boy and girls in primary education and are higher for girls in secondary education. Nevertheless, there are a number of gender issues in the Kyrgyz Republic, including reducing violence against women and empowering women through microfinance.
 
Environmental Sustainability: The Kyrgyz Republics natural resources are a key treasure. However, growth areas such as agriculture and mining may begin to place strains on the environment, particularly in water availability, deforestation, and land slides. In addition to reducing the quality of life, these environmental concerns may themselves reduce the potential for growth. For example, land slides reduced the ability of the main gold mine to operate in 2002 with a serious impact on the economy. A particular concern is the need to strengthen the management of water resources, for both irrigation and drinking water, through more effective government policies, empowering local institutions and water user associations, and selective infrastructure rehabilitation.