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Annual Report 2002 : East and Central Asia

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Kyrgyz Republic

Economic performance

Real GDP fell by 0.5% in 2002, compared with an initial growth target of 4.5%, due to an 11.2% decline in industry sector output. Industrial production decreased following a steep fall in production at the Kumtor gold mine and a slump in the energy sector, which together accounted for over 50.0% of industry sector output. The agriculture sector grew at 3.3%—less than the 7.3% growth in 2001 due to late sowing and harvest as a result of adverse weather conditions.

A cut in the Government’s capital expenditure reduced gross domestic investment from 20% of GDP in 2000 to 18% in 2001. Foreign trade is estimated to have grown by 14.0% in 2002, aided by a 25.4% increase in merchandise imports. Broad money expanded by 34.1% in 2002, but this did not affect the exchange rate and general price level, denoting increased demand for domestic currency spurred by low inflation, weakening US dollar, and increasing monetization of the economy.

The Government continued its fiscal adjustment; how-ever, the fiscal deficit at 5.9% of GDP was slightly higher than the revised target of 5.6%. The fiscal targets were reset to reflect the revenue setback caused by low growth. The Paris Club members agreed in March 2002 to reschedule debt repayments due between December 2001 and December 2004.

ADB operations

Operational strategy: ADB’s operational strategy for the Kyrgyz Republic, prepared in 1996, is being updated. The new strategy will reflect the Government’s long-term development vision, the Comprehensive Development Framework approved in 2001, and the medium-term activities in the National Poverty Reduction Strategy, which was finalized in December 2002.

Policy dialogue: Policy dialogue with the Government focused on public investment projects, financial sector reforms, a conducive private sector environment, public sector governance, and customs administration. Under the second phase of the Corporate Governance and Enterprise Reform Program, approved in 2001, ADB initiated policy dialogue to enhance corporate governance and accountability, improve adjudication processes to redress business disputes and enforce contracts, and accelerate public sector reforms. Discussions were also held on developing the regulatory capacity to improve operations of rural credit unions, and on improving road maintenance practices and safety.

Loans and technical assistance: One loan for $15 million was approved in 2002 to develop a regional trade facilitation and customs cooperation program between the Kyrgyz Republic and Tajikistan. Five technical assistance totaling $2.7 million were approved (see tables 1, 24, and 25 in the Statistical Annex).

Project implementation: Since joining ADB in 1994, the Kyrgyz Republic has received 20 loans totaling $517.2 million, of which 12 were active at the end of 2002. Contract awards totaled $21.0 million, bringing the cumulative figure to $348.6 million. The contract awards ratio for 2002 was 13.3%—lower than the ADB-wide average of 22.6%. Disbursements in 2002 totaled $27.2 million, bringing cumulative disbursements to $341.9 million. The disbursement ratio was 15.2%—lower than the ADB-wide average of 22.2% (see tables 14–23 in the Statistical Annex).

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