Regions and Countries

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p. 3 of 4 BACK | NEXT I. Development Situation II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Lending Levels

Country Strategy and Program Update 2003-2005: Kyrgyz Republic

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III. Portfolio Management Issues

A. Portfolio Performance

17. ADB operations in the Kyrgyz Republic commenced in 1994. As of the end of December 2001, ADB had approved 20 loans for 16 projects totaling $527.2 million, all from the Asian Development Fund (ADF). In addition, 46 TA grants have been approved, amounting to $28.2 million. Five loans have been closed and 19 advisory TAs and six project/program preparatory TAs have been completed. Despite economic difficulties, fiscal constraints, and institutional weaknesses, ADB's portfolio in the Kyrgyz Republic has performed well until now, and the implementation of approved loans and TAs has proceeded generally on schedule (appendixes 2-3). Portfolio indicators and implementation status can be seen at Appendix 1, Tables A1.6-A1.9.

18. Budget constraints have traditionally affected the implementation of ongoing projects in the country. However, the fiscal situation has become even more severe in recent years and resulted in new limits to the PIP, which will have a significant impact on the implementation of ongoing projects. ADB initiated a dialogue with the Government over two years ago to prioritize the projects in the PIP and to allocate more of the scarce resources to better performing and priority projects. ADB extended TA³ to assist the Government in this regard and to improve the management of the PIP. Factors that came to light as a result of the TA indicate that the fiscal constraints and implementation problems will seriously affect ongoing and future projects over the next few years and will call for a selective approach to lending by ADB and other aid agencies.

19. The PIP study has found that scope exists for rationalization by stopping the implementation or reducing the size of many of the poor performing and slow-moving projects and reducing their funding allocations. This would make room both for new, higher priority projects, and for the better performing projects. Government estimates indicate that, in 2002, the ongoing projects require around $140 million against the $90 million envisaged under the PRGF. A mismatch between the actual funding requirements of ongoing projects and the annual PRGF limits, although on a somewhat declining scale, also exists for the rest of the PRGF period. Given the annual PIP limits and slow implementation of many projects, adding new lending is not possible. Even extending reduced levels of lending without pruning some of the poorly performing projects and limiting funding to them would affect the implementation of all projects. This underscores the need for the Government and the funding agencies to work closely together to prioritize and make adjustments to ongoing projects. During the 2002 country programming mission, this was a major area of dialogue and the Government is appreciative of ADB's continued support in this area.

B. Performance Monitoring and Evaluation

20. The country portfolio review mission planned for later this year will discuss a portfolio rationalization exercise and whether any adjustments are necessary to individual projects because of implementation performance, budget constraints, and the PIP limits. The Government's capacity to monitor and evaluate the implementation of externally assisted projects is of particular importance now that more of the scarce resources are needed for the better performing and priority projects. A planned advisory TA in 2002 for strengthening aid coordination and management will focus on improving the Ministry of Finance's capacity to monitor and evaluate foreign-assisted projects.

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