Regions and Countries

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p. 8 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture and Rural Development B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Private Sector Operations IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Kyrgyz Republic

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III. Sector Strategies

24. The effects of the Russian crisis are continuing to have an impact on the Kyrgyz economy. The Kyrgyz Republic has a good record of absorbing planned levels of ADB assistance and of providing budget counterpart funds in a timely manner. As stated earlier, the Government is facing severe budget constraints which are expected to prevail over the medium-term. Nevertheless, the Government has recently assured ADB that the counterpart fund requirements of ongoing and planned ADB-financed projects would be met adequately. To ensure its counterpart funds, the Government has indicated that budget cuts would be made first for projects which suffer from poor implementation. ADB-funded technical assistance will support the Government’s plans to prioritize the projects included in the public investment program; the Government also intends to limit future borrowings from non-concessional sources. ADB will closely track the actual provision of counterpart funds. If there are serious shortcomings in this regard or if the budget situation worsens for any unforeseen reason, then the future lending program may be scaled back.

25. In August 2000, armed combatants infiltrated into Batken province in the south of the Kyrgyz Republic from Tajikistan. Due to the resultant uncertain security in the southern provinces of the country, an area where ADB is active, mission travel was temporarily suspended. The United Nations has since provided clearance for travel in most areas. Until the security situation is fully settled, there is the risk that the Government’s resources will be diverted, causing further difficulties to an already tight fiscal situation.

26. Another issue facing ADB operations in the Kyrgyz Republic is the risk that ADB-financed ADTAs could be affected adversely by the ongoing program of civil service reforms. The related government restructuring, organization of ministries, and downsizing of personnel was carried out in the past in an unstructured manner. Some of the major institutional and capacity building efforts supported by ADB-financed ADTAs have met with mixed success since significant numbers of concerned staff were shifted to other agencies, left for the private sector or do not continue in their present posts for other reasons. The responsibility for civil service reforms has been shifted in 1999 to the President's Office (PO). ADB has been able to reach understanding with PO to institute safeguards, which will minimize the risk of the impact and objectives of future ADTAs being affected by the process of civil service reforms.

27. The economic, legal, and regulatory framework inherited at independence in the Kyrgyz Republic emphasized administrative rather than market-determined and contractual relationships. These suppressed economic initiatives by individuals and enterprises and imposed constraints on private sector development. Across all sectors, policy and institutional reform and capacity building remain the highest priority and the critical element in spurring new productive investment and economic growth. Through advisory technical assistance and program and project lending, ADB proposes to support policy changes in the agriculture, education, road, power, and social sectors and for improving corporate governance.

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