AKIPRESS.COM - The Executive Board of the International Monetary Fund (IMF) approved on April 8 a three-year arrangement under the Extended Credit Facility (ECF) for the Kyrgyz Republic in a sum equivalent to SDR 66.6 million (about US$92.4 million), the Fund said in a release. 

The Board’s approval enables the immediate disbursement of SDR 9.514 million (about US$13.2 million), while the remaining amount will be phased over the duration of the program, subject to semi-annual program reviews.

The new Fund-supported program will provide a macroeconomic framework that will support the authorities’ efforts to reduce macroeconomic vulnerabilities stemming from a weak regional environment and dependency on gold and remittances.

At the conclusion of the Executive Board's discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, stated:

“Despite Kyrgyz Republic’s good performance under the 2011–14 Extended Credit Facility arrangement, important challenges remain. These include a weak regional economic environment that is weighing on growth; a high public debt resulting from an ambitious investment program; the transition to the Eurasian Economic Union; and heavy reliance on gold, remittances, and foreign aid. Moreover, further progress on the reform agenda is needed, particularly in the financial sector. The authorities’ program, which will be supported by a new three-year Extended Credit Facility arrangement, aims to address these challenges by helping achieve fiscal and debt sustainability, ensure financial sector stability, and encourage structural reforms to boost the economy’s growth potential.

“The fiscal strategy will play a critical role. It will consist of a pause in fiscal consolidation in 2015 to accommodate external shocks, followed by the resumption of the adjustment in 2016–17 to maintain public debt at a sustainable level. Strong tax measures to increase revenues as well as the streamlining of current expenditures will be essential to improve the operating balance. The elaboration of a new debt management strategy and the review of the public investment program are crucial to address the high public debt level.

“The central bank will focus on containing inflation by keeping the interest rate positive in real terms. It will also limit foreign exchange interventions to smoothing excessive volatility without resisting exchange rate trends.

“Structural reforms and improving the business environment will be essential to boost growth potential. Maintaining a sound banking sector is also critical. To that effect, the enactment of the banking code will be essential to ensure a robust bank resolution mechanism, by strengthening the independence of the central bank.”