Regions and Countries

	Table of Contents
p. 7 of 7 BACK | NEXT Executive Summary I. Current Development Trends and Issues II. The Government's Development Strategy III. ADB's Development Experience IV. ADB's Strategy V. ADB's Assistance Program VI. Risks and Performance Monitoring and Evaluation

Country Strategy and Program 2004-2006: Kyrgyz Republic

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VI. Risks and Performance Monitoring and Evaluation

A. Risks

x59. The Kyrgyz Republic’s economy is highly indebted, landlocked, and vulnerable to external and internal shocks. Agriculture, hydropower, and mining are key sectors in the economy and all of them are vulnerable to weather-related developments and natural disasters. The country’s export promotion potential depends significantly on the easing of trade barriers in the region, particularly by its neighbors, over whom it has little leverage. Exogenous risks cannot be fully eliminated. Nonetheless, the CSP attempts to address those risks by putting a primary emphasis on the promotion of private sector-led economic growth as a means toward economic diversification and to further poverty reduction. Furthermore, the proposed strategy focuses heavily on regional cooperation by targeting strategic investments in regional road links and trade facilitation to eliminate physical and other trade barriers.

60. The political environment in the country has become more complex in recent years. An increasingly more vocal opposition and the upcoming presidential and parliamentary elections in 2005 may affect the Government’s ability and willingness to pursue the difficult reforms needed to improve the investment climate and to rehabilitate strategic sectors in the economy. Should the pace of reforms slow significantly, this would weaken prospects for sustained economic growth and poverty reduction. While the prospects for program loans are limited over the CSP period as the Government has indicated its reluctance to borrow for such loans prior to the next Paris Club rescheduling exercise, ADB will emphasize policy dialogue within each sector of intervention.

61. Weak capacity is also a risk to the successful implementation of the CSP. ADB will emphasize knowledge and capacity building of the Government by providing adequate funding, technical support, and technology transfer. The lending program is supported by a nonlending program, which includes assistance to prepare investment projects as well as advisory and capacity-building TA. The TA program is focused on sectors/areas where lending will take place. Careful monitoring of the program will also be needed.

62. Owing to the constraints on public investment, the proposed operational strategy is sharply focused and envisages support to only a few selected sectors. A flexible approach to the strategy would need to be taken if favorable developments occur regarding the present assumptions on growth, debt, and budget constraints. The country looks to ADB as a major source of external financing. As such, ADB may need to respond to unanticipated internal and external shocks.²⁰ Sector absorptive capacities limit the investments an external agency can support over a 3-year period. Any slippage of projects will result in reduced levels of ADB lending to the country and, therefore, to the levels of overall public investment in that particular year.

B. Monitoring Process and Plan

63. At the macro level, ADB will judge the success of the CSP through its ability to help the Government achieve selected development targets, as reflected in the NPRS and the MDGs. ADB will work closely with other development partners in this respect, particularly the UNDP, which has primary responsibility for assessing progress toward meeting the MDGs through the publication of periodic reports. The core set of indicators under the MDGs and NPRS focus mainly on the social sphere. Economic indicators will be monitored under the PBA exercise.

64. At the sector level, the performance of the CSP will be measured by the delivery of the proposed program of lending and nonlending assistance. It will also be measured by the meeting of goals and objectives set out in the attached roadmaps. The annual country portfolio reviews, which are expected to be conducted jointly with the World Bank from this year onward, will also be a gauge of portfolio performance.

Back V. ADB's Assistance Program	Country Strategy and Program 2004-2006: Kyrgyz Republic