Countries and Regions

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p. 4 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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IV. Country Performance and Assistance Levels

A. Lending Level Proposed

21. The Kyrgyz Republic is an ADF only borrower and the status is expected to remain for the foreseeable future. An assessment of the country's performance to determine the resource allocation for 2002 showed overall progress. However, in keeping with absorptive capacity considerations due to the high level of external debt and borrowing constraints, actual lending in 2002 is expected to be $20 million. This compares to an average lending level of $73.4 million during 1997-2001. In 2003, the triggers will focus on macroeconomic performance, structural reforms, social development, good governance, and portfolio performance (Appendix 1, Table A1.10). As the new CSP will be prepared during 2003, the lending scenarios with triggers will be further refined for 2004-2005.

22. The base case for 2003 assumes steady progress on key reform issues, and the prioritization by Government of PIP projects without which both ongoing as well as future projects will be jeopardized. Under a base case scenario, maximum ADF assistance would be about $30 million based on the present assessment of the debt and budget parameters.

23. A decisive slowdown in reforms and a deteriorating macroeconomic performance are identified in the low case scenario for 2003. The prioritization of the PIP, continued adherence to the debt strategy, and the finalization of the NPRS are some of the main criteria. Lending under the low case scenario would be $15 million or less. No high case has been identified, given that developments beyond 2002 are still uncertain. This will be further examined during the preparation of the new CSP.

B. Nonlending Program

24. The TA program for 2003-2005 includes 12 projects totaling $6.6 million. These are project preparatory and advisory TAs related to specific planned loans. The reduction of the TA indicative planning figure for the Kyrgyz Republic to around $2.2 million per annum from levels of $3 million to $4 million in previous years limits the scope for capacity building and institutional strengthening. Efforts will be made to identify sources of cofinancing. The following items of economic, thematic, and sector work have been identified. Work on a poverty partnership agreement will be initiated later this year and completed in 2003. A study on budgetary procedures and another on the impact of economic reforms on growth and poverty will also be completed during this period.

C. Summary of Changes ⁴

25. The proposed assistance pipeline for 2003-2005 for lending and nonlending products and services as agreed with the Government is shown in Appendix 1, Tables A1.11 and A1.12; the corresponding concept papers for these are in Appendixes 2 and 3. The strategic emphasis of this program is on growth, regional cooperation, human development, governance, and poverty. There have been significant changes to the operational program planned in the CSP update for 2002-2004, which envisaged annual lending levels of $55 million to $62 million. Such levels of lending are not sustainable.⁵ Current estimates indicate that total external borrowing of about $70 million to $90 million per annum will be needed from 2003 onwards. The Government would prefer future projects to be smaller in size. The changes to the lending program are summarized in the table below. Corresponding changes have been made in the ADB-financed TA program for this period.

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