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The Kyrgyz Republic Building a Brighter Future in the Heart of Central Asia

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The Kyrgyz Republic Building a Brighter Future in the Heart of Central Asia Development Effectiveness Brief The Kyrgyz Republic Building a Brighter Future in the Heart of Central Asia Development Effectiveness Brief The Kyrgyz Republic Building a Brighter Future in the Heart of Central Asia © 2013 Asian Development Bank All rights reserved. Published in 2013. Printed in the Philippines. Publication Stock No. ARM135375-2 The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. ADB encourages printing or copying information exclusively for personal and noncommercial use with proper acknowledgment of ADB. Users are restricted from reselling, redistributing, or creating derivative works for commercial purposes without the express, written consent of ADB. Note: In this report, “$” refers to US dollars. 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines Tel +63 2 632 4444 Fax +63 2 636 2444 www.adb.org For orders, please contact: Department of External Relations Fax +63 2 636 2648 [email protected] Printed on recycled paper Contents The Kyrgyz Republic Economic Indicators iv The Kyrgyz Republic and ADB: A Strong Partnership through Years of Transition 1 ADB’s Contribution to Development and Poverty Reduction 6 Regional Cooperation—Strength in Numbers 6 Transport—Unlocking the Economy 9 Private Sector—Driving Commerce 10 Education—Learning to Prosper 11 Health—Good Medicine 13 Energy—Powering Growth 14 Operational Effectiveness: Improving Efficiency and Performance 16 Future Challenges 17 iii The Kyrgyz Republic Economic Indicators Item 2011 2012a A. Income and Growth 1. GDP per capita ($, current) 1,116.6 1,143.5 2. GDP growth (% in constant prices) 6.0 (0.9) a. Agriculture 1.9 1.2 b. Industry 7.0 (13.8) c. Services 6.9 6.2 B. Savings and Investment (current and market prices, % of GDP) 1. Gross capital formation 25.5 ... 2. Gross saving 19.8 ... C. Money and Inflation (annual % change) 1. Consumer price index (period average) 16.6 2.8 2. Broad money 14.9 23.8 D. Government Finance (% of GDP) 1. Revenue and grants 27.2 28.6 2. Expenditure and onlending 31.9 35.2 3. Overall fiscal surplus (Deficit) (4.8) (6.6) E. Balance of Payments 1. Merchandise trade balance (% of GDP) (26.9) (46.2) 2. Current account balance (% of GDP) (6.1) (20.9) 3. Merchandise export growth 27.7 (13.1) (annual % change) 4. Merchandise import growth 32.0 26.2 (annual % change) F. External Payments Indicators 1. Gross official reserves ($ million) 1,834.5 2,066.6 (in months of merchandise imports) 5.6 5.0 2. External debt service (% of exports) 11.5 11.3 3. Total external debt (% of GDP) 78.6 83.4 G. Memorandum Items 1. GDP (current prices, billion soms) 286.0 304.4 2. Exchange rate (period-average, soms per $) 46.1 47.0 3. Population (million) 5.6 5.7 … = data not available, () = negative, GDP = gross domestic product. a Preliminary data. Sources: Asian Development Outlook 2012 IMF Country Report No. 08/175 (June 2008); IMF Country Report No. 08/381 (Dec 2008); IMF Country Report No. 09/209 (July 2009); IMF WEO (April 2011); Joint Economic Assessment Report (Aug.2010), IMF Country Report No. 10/336 (October 2010); IMF Country Report No. 12/111 (May 2012); IMF Country Report No. 12/329 (December 2012); National Bank of the Kyrgyz Republic (NBKR); National Statistics Committee (NSC); and Ministry of Finance of the Kyrgyz Republic (MOF). Ministry of Economy. iv The Kyrgyz Republic and ADB: A Strong Partnership through Years of Transition Landlocked and picturesque, the mountainous to optimism for positive change and new Kyrgyz Republic has always been deeply priorities. Despite the political instability the influenced and challenged by its neighbors. country has experienced since independence, It has undergone painful societal transitions the Kyrgyz Republic’s economic growth and and struggled to retain its democratic development progress have been impressive. institutions. Its leaders have recognized that The national poverty rate declined rapidly, from they must pursue creative solutions if the 56.4% in 2001 to 31.7% in 2008. country is to prosper. The Kyrgyz Republic declared its independence Economic growth and from the Soviet Union in August 1991. Democratic elections were held in October development progress have 2010 to form the parliament and in October been impressive, with poverty 2011 to choose the president, giving rise declining rapidly The sun sets behind the Sulaiman-Too mountain, as seen from the Osh–Gulcha road. Its rehabilitation resulted in more trips by freight vehicles and lower vehicle operating costs. 1 Development Effectiveness Brief: Since 2010, however, poverty has increased. The focus on both economic The Kyrgyz Republic Progress stalled because of a harsh winter in growth and poverty reduction 2008 and the effects of the global economic crisis in 2009. Remittances, an important is the key principle underpinning source of support for families, especially in the ADB’s strategy in the south, dropped, and the economy grew by only Kyrgyz Republic 2.9%. After the political events of 2010, the Kyrgyz Republic’s economy contracted by 0.5%, and the poverty rate rose slightly, to 33.7%. Poverty rose further in 2011, to 36.8%, despite the service delivery; transport infrastructure; energy recovery of the economy, which grew by 6.0%. development, including the construction of electric power plants and transmission lines; There is a significant correlation among mining support; agriculture and irrigation; education, employability, and poverty. Poverty education; health; and social security. is greater in rural than in urban areas (40.4% versus 30.7% in 2011). Low agricultural After joining ADB in 1994, the Kyrgyz Republic productivity and wages, as well as limited first concentrated on economic growth. opportunities for off-farm employment, Over the years, the country has increasingly appear to explain rural poverty, while emphasized poverty reduction, as well as underemployment and unemployment cause achieving the Millennium Development urban poverty. Goals for eradicating extreme poverty and hunger, ensuring environmental sustainability, The government’s plan to achieve human and developing a global partnership for development goals, despite the internal development, according to the United Nations and external shocks, is presented in the Development Programme. The focus on both government’s Mid-Term Development Program economic growth and poverty reduction is for 2012–2014. It identifies 40 priority projects the key principle underpinning ADB’s strategy (amounting to $8.3 billion) and the sectors in the Kyrgyz Republic. ADB supports public requiring reforms or investments, among infrastructure, institutional reforms, and them public administration, including public vocational education to encourage sustainable Women work in a field near the city of Osh. Agriculture and irrigation are among the government’s priorities. 2 growth and broader private sector participation, partnership strategy, 2007–2010 was crafted The Kyrgyz Republic both of which will create jobs in close coordination with the government and and ADB: A Strong and raise incomes. The country is eligible Partnership through development partners. Years of Transition for grants and loans from ADB’s Asian Development Fund (ADF). As of 31 December 2012, ADB’s portfolio amounted to $521 million in active loans and The Kyrgyz Republic has been a leader in grants to the country. To encourage investment, donor harmonization—the coordination of ADB assistance has focused on creating international development partners’ activities tangible development assets—both physical to maximize their impact. ADB’s country infrastructure and human capital—and on Children study in a school language laboratory in the village of Panfilov. ADB is the lead international agency supporting education in the Kyrgyz Republic, and has been the primary investor in the sector since 1997. Medical personnel care for newborns in a maternity hospital in Gulcha. Road projects have brought social services closer to the people. 3 Development Effectiveness Brief: ADB Loan, Grant, and Technical Assistance Portfolio in the Kyrgyz Republic The Kyrgyz Republic 1994– 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1 Approvals ($ million) 564 44 33 1 67 67 81 169 55 98 1a – ADF loans and grants 533 40 31 – 66 65 80 168 55 95 1b – Technical assistance projects 31 3.90 1.80 0.83 1.70 1.25 1.25 1 0.45 2.70 2 Contract awards ($ million) 237* 48 20 37 47 52 41 53 106 76 3 Disbursements ($ million) 256* 54 30 43 32 49 45 28 103 82 4 Disbursement ratio (%)** 24.5* 32.8 20.3 32.6 27.6 33.1 36.6 14.6 28.3 19.0 ADF = Asian Development Fund. * ADF loan and grant data from 1998–2003. ** Ratio is computed based on disbursements of ADF loans only. Latest information as of 31 December 2012. Sources: Project performance reports, technical assistance performance reports, Loan Financial Information System, Grant Financial Information System, quarterly portfolio update reports, Operations Dashboard reports. ADB Loan and Grant Assistance ADB has focused on building to the Kyrgyz Republic physical infrastructure and (ongoing projects) reforming financial and public Total = $521 million, as of 31 December 2012 sector management introducing institutional reforms into financial Others Education (industry and trade, and public sector management. These efforts 18% multisector) have included rehabilitating roads that connect 25% regions within the country, and the country with its neighbors; improving power sector performance; upgrading preschool and other Urban educational facilities; and advancing public services 9% health by providing clean water and sanitation to urban and rural areas.
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