PROJECT FACTS

Timeframe: July 2007 – 2009

Project Location: Kyrgyzstan

Implementing Agency: Debt Relief International

Budget: USD 132,000

Donor: The Swiss State Secretariat for Economic Affairs (SECO)

BACKGROUND

The Kyrgyz Government, although eligible, has decided in 2007 not to participate in the HIPC (multilateral debt relief) Initiative, for a variety of reasons including difficulties to reach agreement on triggers for debt relief with the IFIs. All government members except the Minister of Finance – who now requests technical assistance - voted against Kyrgyzstan's entry into the HIPC Initiative. In March 2007 the government was almost completely reshuffled with the notable exception of the Finance Minister. The new cabinet talked then about reopening the HIPC discussion. The IFIs, however, made it clear before the HIPC decision that due to a relatively favourable macroeconomic performance the Kyrgyz Republic would no longer be eligible at end-2006 data. The Government realized only late the implications of what could be regarded as a missed opportunity, also because successful HIPC participation represents a pre-condition for eligibility to the Multilateral Debt Relief Initiative, MDRI.

Since the debt issue remained high on the agenda, the authorities felt that there is a strong need to formulate an external financing strategy in a "non-HIPC" context. Switzerland was asked to urgently provide support for developing a comprehensive debt management strategy, including analysing all further potential debt relief options with Paris Club and non-Paris Club members. SECO is seen as the prime partner for such assistance as it has supported building capacity at the technical level for external debt recording and management, and has provided support for successful Paris Club negotiations since 2002. The present request builds upon this past experience at a strategic level. The Executive Director's Office at the World Bank also recommends providing this support.

PROJECT DESCRIPTION

Following the March 2002 and March 2005 Kyrgyz Republic’s framework agreement with Paris-Club creditors on rescheduling of Kyrgyz official bilateral external debt, the now-completed  IMF technical assistance project on external debt, funded by SECO,  addressed training needs and advising of officials in the area of debt negotiation and debt reorganization. This need had largely been due to the country’s limited experience in this area and partly due to the fact that bilateral negotiations for seeking comparable treatment from non-Paris Club creditors proved to be a long and often a laborious process. While the external debt TA project’s efforts in this area, among others, were instrumental in achieving desirable debt management outcomes, efforts in seeking comparable debt relief from non-Paris Club creditors had faced limited progress.  As elaborated in the recently issued action plan on public debt management, the Government intends to further pursue its external debt relief efforts.

Managing the debt situation in all its aspects is a high government priority. This includes hedging and minimizing financial risks such as for example currency and interest rate risks. It also includes liquidity risks, respectively advice on the maturity structure. It will also include advice on how to approach multilateral and bilateral donors in the future.

Along the lines of the recently developed Government’s draft public debt strategy and for the purpose of implementing the action plan on public debt management, the Government seeks the services of a short-term experienced international external debt policy advisor to perform the following tasks:

-          Finalization of the public debt strategy;

-          Advice on settlement and reaching final agreements with non-Paris Club creditors;

-          Advice on pending legal issues related to external public debt (e.g. guaranties);

-          Advice on the regulation and recording of private-sector and public-enterprises; external debt not guarantied by the Government (private non-guaranteed debt, PNG);

-          Designing guidelines for the future approach to external public debt management, including regular risk assessment, benchmark setting;

-          Advice on the possibility and modality of modifying the currency composition of external debt through swap operations;

-          Recommending a strategy to restore the countries reputation as a borrower on international markets and enhance its credit worthiness;

-          Recommending alternative debt relief schemes (e.g. debt swaps);

-          Review of the most recent debt sustainability analysis (DSA) and provide refresher training to staff to undertake regular DSA;

-          Suggesting appropriate approaches to harmonize planning for externally financed public investment program (PIP) with the general public debt management strategy

OUTLOOK

Subject to the findings of the initial mission, consultants with very specific technical expertise will support the government so as to make as much progress as possible on the different top priorities within the “action plan”. It is proposed to structure the assistance through two additional missions. Each of these missions will provide more detailed advice and recommendations on specific areas, together with any supporting draft documents needed for government decisions, as well as (if necessary) on-job training/briefing for government officials in those areas, and would end with a debriefing for senior officials/policymakers.

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Contacts

Project Manager: Ms. Alison Johnson

Debt Relief International Ltd.(DRI)

4th Floor, Lector Court,

151-153 Farringdon Road

London, EC1R 3AF

E.mail: mail@dri.org.uk

Tel. : +44(0) 20 7278 0022

Fax : +44(0) 10 7278 8622

Project’s Partner: Ms. Alia Kerimbaeva

Advisor to the Minister of Finance of KR

Ministry of Finance, 58 Erkindik Ave.

720040, Bishkek, Kyrgyzstan

Tel: (+996 312) 620421

Fax: (+996 312) 661645

e- mail: alia.kerimbaeva@gmail.com