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World Bank's New Strategy for Kyrgyz Republic to Support Country's Priorities in Transition Period

August 2, 2011

WASHINGTON, August 2, 2011 - The World Bank Board of Directors today discussed a new Interim Strategy Note (ISN) for the Kyrgyz Republic, which provides the framework guiding the World Bank's assistance to the country for July 2011 - June 2013. A number of meetings were held with various stakeholders, including civil society, government and donors to obtain feedback on the main elements of the Strategy.

This Strategy, prepared at a time when the Kyrgyz Republic is recovering from the dramatic events and economic crisis of 2010, is intended to assist the country to regain socioeconomic stability and resume pro-poor growth. It aims to support governance and accountability, social services, infrastructure, and essential spending during fiscal consolidation. The ISN has been guided by the insights of the World Bank’s World Development Report 2011 “Conflict, Security and Development”, and covers a period of high political, economic and social uncertainty.

The Strategy places governance at its center. World Bank projects will contain explicit stakeholder analysis as part of preparation and design, and a “conflict filter” will be applied to all projects to identify and address possible stress and social factors. In addition to its lending activities, the World Bank will provide a range of analytical and advisory services in support of the Kyrgyz Republic's development agenda.

What the Kyrgyz Republic needs most, as it recovers from the upheavals of 2010, is stability,” says Motoo Konishi, World Bank Regional Director for Central Asia. “The World Bank will support the stabilization of government finances and the banking sector, and strengthen the country’s social balance by financing health services, education and urban infrastructure. The Economic Recovery Support Operation approved by our Board today is specifically designed to provide much-needed resources to the budget to ensure that critical programs, particularly in the social areas, are fully funded.”

The World Bank Strategy focuses on three strategic objectives:

  • Improving governance, effective public administration and reducing corruption;
  • Economic stabilization for economic recovery, reconstruction and growth;
  • Social stabilization, through social services, community infrastructure, and employment.

These pillars closely correspond to the government’s main priorities, which are governance, macroeconomic stability, post-conflict economic recovery, and sustained peace building,” says Alexander Kremer, World Bank Country Manager for the Kyrgyz Republic.

The Strategy supposes a significant volume of support over the next two years amounting to around US$ 120 million. The program will embody a gradual shift in focus from the emergency response of 2010 to stabilization efforts and the continuation of longstanding sector reforms.

  • To improve governance, the Bank will extend a series of development policy operations starting in 2012 to strengthen governance reforms.
  • A  Financial Sector Development Project will bolster financial sector stability through helping the Central Bank to strengthen the legal, supervisory, and regulatory framework.
  • Additional Financing for the ongoing Bishkek and Osh Urban Infrastructure Project will further improve the living conditions in selected settlements (novostroiki) in Bishkek and Osh, the two largest cities of the country, by expanding water supply, road and other basic infrastructure.
  • The second Health and Social Protection sector-wide operation aims to introduce a new generation of reforms, addressing efficiency, access and quality of health care.
  • An Education Project will improve the quality of basic education through enhanced school accountability, incentives, and resources for results.

The Strategy also encompasses operations of the International Finance Corporation (IFC)—the World Bank Group’s private sector arm that lends to private companies, which aims to increase its investments to the private sector and sub-national companies in the Kyrgyz Republic up to US$ 20-40 million annually. However, the upper range of this target would only be achievable with (i) the greater opening of the infrastructure sector to private sector and foreign investments, and (ii) improved disclosure standards in the corporate sector.

The Bank’s response to the Kyrgyz Republic’s 2010 crisis

The Joint Economic Assessment prepared in the immediate wake of the 2010 conflicts laid the foundation for strong donor coordination and mutual accountability in the post-crisis response, set a strategic framework for the Bank’s interventions in the last years, and has provided the basis for the current Strategy.

The World Bank delivered two emergency operations in September 2010.  The US$ 70 million Economic Recovery Operation extended financing for post-conflict critical rehabilitation needs in the energy sector and provided budget resources for essential post-conflict social spending.  About 70 percent of the project is disbursed already. US$ 10 million additional financing for the National Road Rehabilitation Project is designed to repair and rehabilitate roads in and around the southern cities of Jalalabad and Osh, thereby creating 5500 person-months of temporary employment.

The Kyrgyz Republic was then allocated an additional US$ 56 million, bringing total IDA commitments to US$ 136 million in FY 2011. Three recently approved operations are also focusing on the south - the Health Additional Financing supports sector reforms, public recurrent spending, and capital expenditures, with an emphasis on the south through investments in mental health care and hospital rationalization in Osh city and oblast. The Irrigation Additional Financing supports agricultural livelihoods in the south and emphasizes socially equitable mechanisms of water management and access to irrigation. The Second Additional Financing for the National Road Rehabilitation Project will rehabilitate an additional section of the Osh-Batken-Isfana road corridor which is in dire need of repair, and improve road asset management, thereby reducing travel time, lowering vehicle operating costs, and providing reliable access to social services and economic activities in the south. 

The World Bank’s overall mission in the Kyrgyz Republic is to promote economic growth, reduce poverty, and encourage a better quality of life. 45 percent of the World Bank’s assistance to the Kyrgyz Republic is in the form of grants. The other 55 percent is in highly concessional credits – no interest, and only a 0.75 percent service charge. Credits are repayable in 40 years, including a 10-year grace period, while grants require no repayment. The financial assistance to the Kyrgyz Republic since 1992 amounts to over US$ 1 billion, in the form of grants and highly

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