WASHINGTON, June 10, 2014 – The World Bank’s Board of Executive Directors today approved a US$25 million Second Development Policy Operation (DPO-2) for the Kyrgyz Republic. This is the second in a series of two budget support projects accompanying the Government’s 2012-14 reform program. The operation is a mix of a highly concessional credit of US$13.89 million and a grant of US$11.11 million to be paid directly to the Kyrgyz budget, and is aimed at supporting the efforts of the Kyrgyz authorities to improve public sector governance and enhance the business environment.
The first thematic area of the DPO-2 – improving public sector governance – supports increased accountability and transparency in the use of public resources. The four key actions by the Kyrgyz Government supported under this thematic area are: implementing and monitoring the anticorruption plan; improving the functioning of the internal audit system; bringing public procurement in line with international good practice, and increasing the transparency of the public companies in the energy sector.
The second thematic area of the DPO-2 – enhancing the business environment – supports improved business inspection systems, a more effective judiciary, improved banking supervision, and a stronger deposit protection framework.
“The World Bank’s budget support accompanies Government reforms set out in the 2013-17 National Sustainable Development Strategy. For example, the Government has submitted to the Parliament a new Public Procurement Law that introduces good international practices in public procurement,” said Alexander Kremer, World Bank Country Manager in the Kyrgyz Republic. “Another accomplishment is the establishment of a new credit registry that aims to enhance the ability of the National Bank to effectively supervise the financial sector. The Bank also welcomes the submission to the Parliament of the program aimed at increasing the financial independence of the judicial sector.”
“Strengthening public sector governance through policies supported by DPO-2 will improve allocation of public resources,” said Kamer Karakurum-Ozdemir, World Bank Task Team Leader of the DPO-2 Program. “Combined with measures to enhance the business environment and boost private sector activity, this will improve the institutional basis for sustainable growth and will have positive repercussions for equity and shared prosperity.”
The DPO-2 will complement the World Bank’s assistance through several ongoing and completed projects. The Governance Technical Assistance Project aims to strengthen the capacity of the government in budget formulation and budget execution, with critical policy dialogue support provided by the DPO series. Internal audit reforms, supported by the DPO-2, are linked to the ongoing Capacity Building for Public Financial Management project as well as the future Capacity Building for Public Sector Internal Audit Project. Also, the introduction of risk-based approach to inspections has been the focus of assistance from the International Finance Corporation (IFC).
The World Bank development policy financing aims to help the countries achieve sustainable growth and poverty reduction through non-earmarked general budget financing that support the countries’ economic and sectoral policies and institutions
The World Bank’s overall mission in the Kyrgyz Republic is to reduce poverty, promote economic growth and shared prosperity. 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 with 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 Bank’s financial assistance to the Kyrgyz Republic since 1992 amounts to over US$1 billion, in the form of grants and highly concessional credits.