IMF approves $ 106 million loans for Kyrgyzstan

WASHINGTON, June 21 (Itar-Tass) - Executive Board of the International
Monetary Fund has approved a three-year $ 106 program of lending to
Kyrgyzstan "to support the economic recovery in the short term and place
the country on the road to stronger sustained and inclusive growth in the
medium term."
The approval of the lending program by the IMF opens the doors to an
immediate allocation of the first tranche in the amount of $ 15 million to
the government in Bishkek.
"The Kyrgyz Republic suffered from a deep political crisis in 2010,"
the IMF said in a press release. "The fallout from the domestic crisis has
posed significant challenges. The economy contracted last year, straining
the government's financial position, further exacerbated by critical
reconciliation, recovery and reconstruction needs."
The banking sector also suffered from diminished depositor confidence
and the economic effects from the events in the south, the document
indicates. "Moreover, the global food and fuel price shock triggered a
sharp rise in inflation, eroding real incomes of the most vulnerable part
of the population."
The new Fund-supported program will provide a coherent macroeconomic
framework that will support the authorities' efforts to sustain economic
recovery, promote inclusive growth in a low inflation environment, restore
macroeconomic stability, achieve medium-term fiscal consolidation, address
weaknesses in the financial sector, improve the country's governance, and
catalyze critical donor support, the press release said.
"Domestic political turmoil in the Kyrgyz Republic in 2010 disrupted
economic activity and negatively affected near-term growth prospects,"
Deputy Managing Director Naoyuki Shinohara said. "Real GDP contracted, the
current account shifted to a deficit, international reserves coverage
declined, and credit growth stalled."
"Moreover, rising international food and fuel prices have increased
inflation and eroded real incomes," he said. "Faced with these challenges,
the authorities have developed a strong program, which aims at restoring
macroeconomic stability, rebuilding policy buffers, catalyzing donor
assistance, and promoting private sector-led inclusive growth."
"A limited fiscal expansion in 2011 will support the nascent economic
recovery, but policies will need to be carefully balanced to curb
inflationary pressures," the press release quoted Shinohara as saying.
"Significant fiscal consolidation in 2012 and beyond will be critical
to ensure medium-term fiscal and debt sustainability and support efforts
to reduce inflation," he said. "The central bank has already tightened
monetary policy and stands ready to tighten further if necessary."
"Strengthening the supervisory independence of the central bank will
play a pivotal role in restoring confidence in the financial sector,
mitigating vulnerabilities, and ultimately enabling banks to perform their
key function of intermediating scarce resources," the press release said.
"While the authorities have made progress in reforming the regulatory
framework related to the business environment, addressing longstanding
governance issues will be key to enhancing the role of the private sector
and fully realizing the economy's long-term growth potential," the
document said.