Heavily Indebted Poor Countries Initiative
The Kyrgyz Republic became eligible for debt relief under the Heavily Indebted Poor Countries Initiative (HIPC) in 2006 but withdrew its decision to join in 2007. The government’s consideration of the initiative was met with opposition. While the program offers the potential for 70% of the country’s $2 billion debt to be canceled, opponents argue that it will increase dependence on IFIs. They also question the success of IFI involvement if, after years of receiving loans, the Kyrgyz Republic is one of the world’s poorest countries.
Food Crisis
High food and fuel prices, coupled with inflation and dependence on Kazakhstan’s economy, constitute significant challenges to Kyrgyz growth. As a result, the Kyrgyz Republic has received extra aid and attention from the IFIs in light of rising food and commodity costs. The IMF, for example, doubled its aid to the Kyrgyz Republic under the current Poverty Reduction and Growth Facility (PRGF) from $14.4 million to $28.8 million. Similarly, the World Bank has approved an additional $10 million grant to the Kyrgyz Republic under its Global Food Crisis Response Facility. The grant will go toward the Agricultural Investments and Services Project ($4 million), which targets infrastructure for farmers and herders, and the Health and Social Protection Project ($6 million) for nutritional supplements and education.
IMF Arrangement to Mitigate Impact of High Food and Fuel Prices, May 22, 2008 (IMF website)
World Bank Approves $10 Million Grant, June 16, 2008 (WB website)
Extractive Industries (EI)
BIC works with local civil society organizations to monitor projects financed by the IFIs. IFI financing of extractive industries in the Kyrgyz Republic raises many concerns for civil society groups, particularly as the Kumtor mine has been riddled with problems. The need for more rigorous environmental protections was highlighted by a May 1998 mining-related cyanide spill.
EI Transparency Issues
BIC has concentrated on extractive industries and transparency with respect to projects undertaken in the Kyrgyz Republic. Disclosure of revenue paid to the Kyrgyz government by mining companies and government disclosure of those earnings are crucial to establishing accountability in mining sector management. The Kyrgyz Republic is a candidate for the Extractive Industries Transparency (EITI) and must complete validation by 2010.
The government formally announced the launch of EITI at a conference in Bishkek in June 2004 with the support of the World Bank and the United Kingdom’s Department for International Development. Its first EITI report was released in October of the same year. IFI involvement has largely taken the form of technical assistance. In May 2003, the World Bank approved a governance project focusing on transparency in the public sector. In 2008, EBRD is providing $100,000 in technical assistance to the Kyrgyz Republic for EITI implementation.
Governance Technical Assistance Project (WB website)
Centerra Gold Financing (EBRD website)
The Kyrgyz Republic formed an EITI Implementation Committee and Advisory Council, composed of representatives from government, industry, civil society, and international organizations, including the World Bank and IMF. Civil society organizations in the Kyrgyz Republic have actively supported EITI. The Bureau on Human Rights and Rule of Law, Civil Society Against Corruption, “Tree of Life” Human Development Centre, and the Kyrgyz Committee for Human Rights have joined the international campaign, Publish What You Pay.
Besides these positive developments, the IMF’s report on the Fiscal Transparency Module in the Kyrgyz Republic noted delays in EITI implementation from the government’s side. The National Statistics Committee (NSC) collects data from the government and six of the largest companies and has published reports from 2004-2007 on the National Statistics Committee website. However, as a government agency, NSC does not meet the independent audit requirements of EITI, nor has it reconciled differences between government and company figures.
According to the IMF, although Centerra, the operator of the Kumtor mine, appears to be in compliance with international standards, Kyrgyzaltyn, the state-owned company, has been less transparent. Extrabudgetary funds, such as the Issykul Development Fund, which receives 2% of Kumtor’s profits and is administered by local government officials, and a poverty reduction fund from the sale of Centerra shares in 2004, remain problematic in terms of transparency.
For more information, see the links below:
Kyrgyz Republic: Fiscal Transparency, IMF Country Report No. 08/151, May 2008 (IMF website, Acrobat pdf)
Revenue Watch Institute website
EITI website
Publish What You Pay website
EI and Project Developments
BIC identifies projects posing significant risks and eliciting local concern as “problem projects.” Updates on these projects, not only in the extractive industries, can be found in BIC's Problem Projects section for the Kyrgyz Republic. One of these projects is summarized below.
Problem Projects
Kumtor Gold Mine
Bank: IFC, EBRD
Project Description: This project first consisted of the construction of the Kumtor mine and then continued with the most recent financing of Centerra Gold, operator of the mine, by the EBRD in 2008.
Civil Society Concerns: A 1998 cyanide spill confirmed civil society fears of environmental risks. Further disputes with the government over taxes and ownership in 2008 have led to suspensions of exploration activity, and the EBRD’s support of Centerra Gold raises questions of IFI priorities, given the profitability of the Kumtor mine.
Projects Under Watch
Besides problem projects, BIC also follows IFI activities or possible activities, which concern civil society actors but either have not been officially endorsed by an IFI or whose risks have not been adequately explored. These projects are listed below.
Hydropower
Though the Kyrgyz Republic lacks its neighbors’ rich oil and gas deposits, the country possesses great potential for hydropower developments. Construction of hydropower projects at Kambarata began during Soviet times, and the Russian company, Inter RAO UES, has commissioned an investment study in Kambarata-1 and Kambarata-2 hydropower plants. More recently, regional news agencies have reported negotiations between the World Bank and Kyrgyz government for funding of these plants.
Hydropower plants involve substantial investments and potential risks. In December 2007, a roundtable at the Kyrgyz-Russian Slavic University expressed concerns over the methodology and problems associated with the hydropower plants, alleging poor planning and a lack of expertise from the company’s side and risks from blasting and reservoir filling during construction. Although no official agreements with the IFIs have been signed, BIC is monitoring hydropower developments in the Kyrgyz Republic.
Scientists concerned about Kambarata hydro power plants construction rate, by Jyldyzbek Ibraliev, December 14, 2007 (24 News Agency website)
Government, World Bank negotiate Kambarata construction funding, by Nargiza Yuldasheva, June 24, 2008 (24 News Agency website)
Country Strategies
World Bank Group
The Joint Country Support Strategy was prepared by the World Bank Group, United Nations, Swiss Cooperation, UK Department for International Development, and the Asian Development Bank.
Kyrgyz Republic Joint Country Support Strategy 2007-2010, multi-donor, May 23, 2007 (World Bank website)
EBRD
Kyrgyz Republic Country Strategy, EBRD, June 12, 2007 (EBRD website)
Asian Development Bank
Under the Joint Country Support Strategy, ADB has plans to invest approximately $120 million between 2007 and 2010.
Kyrgyz Republic Joint Country Support Strategy 2007-2010, multi-donor, August 2007 (ADB website, Acrobat pdf)
Kyrgyz Republic Country Strategy and Program Update 2006-2008, November 2005 (ADB website, Acrobat pdf)