ADB $100 Million Emergency Funds to Help Kyrgyz Republic Recover from Conflict

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending emergency assistance of $100 million equivalent to help the Kyrgyz Republic get back on its feet in the wake of community violence earlier this year.

“This assistance will help keep vital services going and help avert further hardship for families who have lost homes and livelihoods as a result of the disturbances. This will also help restore the dignity of affected families,” said Juan Miranda, Director General in ADB’s Central and West Asia Department.

A loan and grant from ADB’s concessional Asian Development Fund will be used to help the government maintain key social services and rebuild homes damaged during the violence in June. The emergency support will also be used to rehabilitate community infrastructure, water supply and treatment systems in the worst-affected cities of Osh and Jalal-Abad.

The conflict damaged around 1,900 homes, 30 public buildings and 700 businesses, and displaced around 375,000 people. The economy was dampened, with a sharp drop in tourist avenues, impaired business activity, and impeded international trade. A joint economic assessment carried out by development agencies, including ADB, estimated the country’s gross domestic product will contract by 3.5% in 2010, against an earlier forecast of 5.5% growth.

With revenues now expected to fall well short of targeted spending needs for this year, the government’s ability to fund health, education, and social assistance payments is at risk, which threatens to push more households below the poverty line. In addition, there is growing urgency to repair damaged homes before the onset of winter. The joint economic assessment estimated that aggregate conflict-related financing needs are likely to reach $1 billion through to 2012.

ADB’s assistance will help address the financing needs. It will provide about $40 million in fiscal support to help the government provide uninterrupted delivery of essential social services and critical infrastructure maintenance spending. It will also extend $30 million to build permanent homes for families, whose properties were damaged, complementing the work of other development partners. A further $30 million will finance critical community infrastructure rehabilitation and immediate improvements to ageing water systems in Osh and Jalal-Abad, as well as developing plans for longer term water and sanitation improvements to be funded through regular lending operations.

“The assistance will help mitigate the immediate poverty and social effects of the conflict, and at the same time contribute to reconciliation and the restoration of normalcy in the country,” said Jose Tan, Economist (Public Finance) in ADB’s Central and West Asia Department.

The loan of $48.5 million has a 40-year term, with a 10-year grace period carrying an annual interest charge of 1%. The grant has been set at a maximum of $51.5 million. Additional counterpart finance of $10 million will be provided by the government, for a total project cost of $110 million.

The Ministry of Finance is the executing agency for the emergency assistance, which is expected to be completed by September 2013.