1. society
2. work
3. unemployment

WORLD BANK GROUP– KYRGYZ REPUBLIC PARTNERSHIP
PROGRAM SNAPSHOT
October 2014
RECENT ECONOMIC AND SECTORAL
DEVELOPMENTS
trade flows (both the re-exports as well as exports of
Kyrgyz products).
Slow Growth and High Risks
Inflation picked up to 8.5 percent in June 2014 from
4 percent in December 2013. Consumer prices have
increased across the board, responding to the
depreciation of the som against the U.S. dollar. In
addition, there has been further pressure on domestic
fuel prices due to sale price increases by the oil refinery
plants in Russia since April 2014. With increases in
tariffs for hot water and heating, inflation could reach
close to 10 percent by the end of the year.
Economic growth moderated in the first half of 2014
due to the gradual stabilization of gold production,
slower growth in Russia, and increased tensions in
trading relations with countries in the region.
Output expanded by only 4.1 percent year-on-year (y-oy), a significant slowdown compared to the 8.1 percent
growth in the same period of 2013. Gold production at
the Kumtor mine increased by 11.1 percent, down from
45.9 percent one year earlier, as the mine returned to
normal operations following the disruptions in 2012.
The non-gold economy growth was also weaker at 3.7
percent y-o-y (compared to 5.8 percent one year ago), as
declining remittances, stable wages, and difficulties in
trading relations affected consumption and exports.
Investments were robust (up 20.6 percent y-o-y),
supported by strong domestic residential demand and
government capital spending, though growth has been
softening in recent months. The latest projection for
growth in 2014 is roughly 4 percent, though with
significant downside risks due in part to a potential
energy crisis resulting from low water levels at the
Toktogul reservoir.
Consumption growth has slowed as wages grew
moderately and remittances and government nonwage consumption declined. Consumption increased
by 5.1 percent (y-o-y) in the first quarter of 2014, down
from 6.4 percent in the same period one year ago.1 Retail
trade and tax collection data suggest that the trend has
continued in the second quarter. Real wages grew by
only 1.7 percent in the first five months of the year. At
the same time, increasing credit to the private sector
appears to continue to support consumption growth.
On the other hand, remittances declined (down by about
9 percent), due to lower growth in Russia as well as the
depreciation of the Russian ruble against the U.S. dollar.
In addition, government spending on goods and services
declined by around 5 percent.
Border tensions also hampered economic activities
in the first half of the year. For example, the Kadamjai
antimony plant had to reduce production because the
supply of raw materials from Tajikistan was suspended.
Production at the South cement plant that exports
cement to Tajikistan also declined. Stringent controls on
the Kyrgyz-Kazakh border are significantly affecting
The current account balance improved. With greater
gold exports and lower imports the current account
deficit narrowed to 21.7 percent of GDP in the first
quarter of 2014 from 27.5 percent one year ago.2 Similar
trends continued in the second quarter. According to
the latest data, total exports in U.S. dollar terms
increased by 14.2 percent (y-o-y) in the first half of 2014
as gold exports grew by 45 percent, accounting for 34
percent of total exports. On the other hand, slower
economic activity and a disruption in fuel supplies
coming through the territory of Kazakhstan led to a 10
percent decline in imports in U.S. dollar terms. The
improvement in the current account allowed the
National Bank of the Kyrgyz Republic to recover some
of the reserves lost in the first quarter of the year, with
reserves increasing to US$2.2 billion by mid-2014. At
the same time, the som appreciated by around 5 percent
(against the U.S. dollar), recovering most of the value it
had lost during the first two months of the year.
The slowdown in economic activity and faster
implementation of foreign-financed projects led to a
significant widening of the fiscal deficit. The deficit
reached 6.8 percent of GDP in the first half of 2014, up
from 0.5 percent in the same period last year (table 1).
Slower economic activity and lower imports reduced the
tax revenues to 22.8 percent of GDP in the first half of
this year, down from 23.5 percent in the same period
one year ago. At the same time, foreign-financed
investments increased to 8.1 percent of GDP in the first
half of 2014 from 2.6 percent in the same period last
year, largely due to more intensive work on a few large
infrastructure projects financed with Chinese loans,
including the Datka-Kemin power transmission line
project and the modernization of the Bishkek thermal
plant. In the absence of cost-cutting measures, the
deficit could increase to around 4.6 percent of GDP for
the year, above the targeted 4.2 percent.
Based on the preliminary report of the National Bank of the
Kyrgyz Republic. Data for the first half of 2014 are not
available yet.
2
1
Data for the first half of 2014 are not available yet.
2
Figure 1. GDP growth has slowed down markedly
(in percent)
12
100
15
10
10
8
50
6
5
0
4
0
2
-5
-10
0
-2
Figure 2. Reflecting moderation of economic activity
across the board. (Contribution by sector, in percentage points)
2008
2009
2010
2011
Non-Kumtor real GDP (RHS)
Real GDP (LHS)
2012
2013 Jan-Jul
2014
2008
-50
2009
2010
Agriculture
Industry
Transport&communication
Kumtor (RHS)
2011
2012
2013
Construction
Trade
Other
Jan-Jul
2014
Source: Kyrgyz authorities.
On the production side, economic activity was
marked by stabilizing gold production, a poor
harvest, and slowing demand for services. Industrial
production growth was 8.4 percent (y-o-y) in the first
eight months of 2014, down from 16.7 percent one year
earlier as gold production at Kumtor gold mine
gradually returned to full capacity operations. NonKumtor industry output growth reached 3.8 percent (it
was 1 percent in the same period of 2013), mainly due to
a 12.7 percent growth in the food industry, as some
producers were able to meet Customs Union standards
and regained market access in Kazakhstan. On the other
hand, output in the textile and clothing industries
declined (-11.1 percent, y-o-y) reflecting lower demand
from Russia and more stringent border controls.
Agriculture output fell to 2.5 percent in January–August
2014 from 2.6 percent growth in the same period one
year ago. This decline was largely due to the lower yields
of wheat and barley affected by adverse weather
conditions. Construction grew by 13.5 percent (y-o-y)
owing mainly to strong demand for residential housing,
a deceleration compared to the same period last year
when it registered 20 percent growth. Similarly, services
sector growth moderated to 2.7 percent (y-o-y) in
January–August 2014 from 5 percent (y-o-y) one year
ago, mainly reflecting somewhat slower growth in the
trade and tourism sectors and almost flat output in
transport.
While gold exports performed well, weaker external
demand, the closure of the Manas Transit Center,
and a more difficult trade facilitation environment
affected exports. Total exports increased by 4.3 percent
in January–July 2014 as the 34.4 percent increase in gold
exports offset the 5.6 percent decline in non-gold
exports, mostly due to declining re-exports. The reexport of kerosene declined as the operations of the
Manas Transit Center were winding down. Imports
declined by 10 percent as slower consumption growth
added to the reduced demand for re-exports. Private
transfers, which in addition to remittances from the
large Kyrgyz diaspora (mostly migrant workers in
Russia) also include unregistered exports of goods and
services, remained almost flat in the first seven month of
2014, though they have also become more volatile as
uncertainty over developments in Russia increased. As a
result, the current account deficit declined to 17.4
percent of GDP in the first six months of 2014 from
29.8 percent one year earlier. On the financing side,
lower foreign direct investment (FDI) was offset by
increased borrowing, mostly for the public sector’s
infrastructure projects. Higher debt-creating flows
pushed the external debt to 84.7 percent of GDP at the
end of the second quarter of 2014 and allowed the
National Bank to keep reserves at around US$2.2 billion,
maintaining the import coverage at around four months
of imports.
The monetary authorities are trying to balance
slowing growth with higher inflation. 3 Annual
inflation surged to 7.8 percent in July 2014 up from 4
percent in December last year, as consumer prices
increasingly responded to the depreciation of the som.
In addition, higher prices of oil at refinery plants in
Russia put further pressure on domestic fuel prices,
which increased by close to 20 percent y-o-y (Figure 3).
In an effort to balance these competing objectives, the
National Bank opted for a moderate, 50 basis points
(bps) increase in its main policy rate in July 2014,
bringing the discount rate to 6.5 percent. This increase
appears to have had a limited impact on monetary
conditions, with credit growth moderating only slightly
Starting in early 2014, the National Bank moved to a new
operational framework for monetary policy, using the interest
rate to achieve its goal of price stability rather than targeting
monetary aggregates.
3
3
Despite some recent losses, the level of reserves
remains adequate. Gross official reserves stood at
around US$2.2 million at end-August 2014, as the
National Bank interventions in the foreign exchange
market were offset by increased official foreign inflows.
The current level of reserves exceeds three months of
imports and almost fully covers the broad money
supply.
Figure 3. Prices have been increasing
In percent, year on year change
20
15
10
5
0
-5
Headline
Food
Fuel
Core inflation
Source: NBKR.
to around 40 percent y-o-y,4 reflecting to a large extent
the degree of dollarization,5 low monetization, and the
preference for cash holdings.
The National Bank stepped up interventions in the
foreign exchange market to smooth the volatility of
the exchange rate. Following a sharp depreciation of
the Russian ruble and the devaluation of the Kazakh
tenge in early February 2014, the som came under
pressure. In line with its policy of intervening in the
foreign exchange market only to smooth sharp
fluctuations of the exchange rate, the National Bank
stepped up its interventions. By end-April 2014 and
following the sale of around US$195 million, or roughly
9 percent of the country’s international reserves, during
the first four months of 2014 the som stabilized at a
level around 10 percent below its value against the U.S.
dollar at the end of 2013. However, by end-June, the
som regained almost half of its value as transfers from
Russia and the value of the ruble recovered in the
second half of 2014. The foreign exchange market came
under pressure again in the second half of August and
early September, most likely reflecting worsening
expectations
from
the Ukraine
crisis
and
economic sanctions on Russia, with the National Bank
making a sale of an additional US$100 million. Higher
inflation in the Kyrgyz Republic than in its main trading
partners led to a 3 percent real appreciation in the first
seven months of 2014.
Risks are partly mitigated by the healthy deposit growth,
which is keeping the loan-to-deposit ratio below 1, the robust
capital adequacy ratio of above 20, and the number of
nonperforming loans (NPLs) low.
5 As of August 2014, 53 percent of the deposits in the banking
sector and 54 percent of loans extended by banks were in
foreign currency. In Kazakhstan, these ratios were 37 percent
and 44 percent, respectively, and in Ukraine, 43 percent and
46 percent, respectively.
4
While slowing demand is likely to reduce pressures
on prices, a number of factors could increase
inflation above the National Bank target of around
7 percent. Price pressures subsided in August 2014 as
domestic demand slowed and the som recovered some
of its value. However, the latest depreciation of the som
could again reignite pressure over prices. Also, the
Government adopted new mid-term tariff policies for
2014–17 for hot water, heating, and electricity supply,
envisaging a gradual increase in prices starting in the
second half of the year. Higher exports of food products
to Russia in response to the retaliatory bans introduced
by Russia on countries that have imposed sanctions are
likely to elevate prices in the country.
The fiscal deficit widened to 3.1 percent of GDP in
January–July 2014 from 1 percent one year earlier.
The increase is due to higher capital spending financed
by foreign loans, as lower tax revenues due to slower
growth were offset by more generous donor support
and non-tax revenues. Total revenues increased to
almost 40 percent of GDP in January–July 2014, largely
due to a 2.2 percent increase in non-tax revenues.
Table 1: General Government Budget
2013
2014
Jan-Jul
37.7
34.9
27.9
6.8
0.2
2.8
Jan-Jul
39.9
36.7
27.8
8.8
0.1
3.1
Total expenditure (incl. net lending)
Current expenditure
Capital expenditure
Net lending
38.7
34.0
5.1
-0.4
43.0
33.8
9.6
-0.4
Overall balance
-1.0
-3.1
Financing
External
Domestic
1.0
3.7
-2.7
3.1
8.0
-4.9
Total revenues and grants
Total revenues
Tax revenues
Non-tax revenues
Capital revenues
Grants
Grants increased by 0.3 percent of GDP, reflecting
support from multilateral agencies and bilateral
partners (Russia). Total spending soared to 43 percent
of GDP in January–July 2014 from 38.7 percent in the
same period one year ago, mainly due to public
investment projects. At the same time, current
expenditures fell slightly as a higher wage bill and social
4
spending were offset by lower purchases of goods and
services. The authorities are currently amending the
2014 budget to increase the annual deficit to around 5.7
percent of GDP from the earlier target of 4.2 percent,
on account of the faster implementation of foreignfinanced projects.
Structural reforms remain imperative for medium
fiscal sustainability and improved public services.
While the strong performance of 2013 and increased
donor support in 2014 improved fiscal buffers slightly,
the underlying weaknesses of the budget remain and will
resurface as economic activity slows down. The 2015–17
fiscal framework envisages a strong investment stimulus
financed by foreign loans, bringing the deficit to 7.3
percent of GDP in 2015 before returning to a path of a
gradual reduction to 4 percent of GDP by 2017. The
deficit levels may actually be higher, given the optimistic
assumptions on growth and the ability of the authorities
to control current spending. Without public expenditure
reforms, additional spending pressures may emerge from
current spending levels. There are a number of areas
where expenditures could be brought down and
outcomes of public spending improved: better targeting
of social welfare programs, more efficient spending in
education and health, pension reforms, public
investment management, and intergovernmental
transfers. Furthermore, in the absence of reforms and a
gradual introduction of cost-recovery pricing in
infrastructure sectors, one-off interventions in
infrastructure will have only a temporary and limited
impact.
Governance
Improved governance and reduced corruption
continue to feature prominently in the
Government’s priorities, including in the National
Sustainable Development Strategy, resulting in
some progress. Weak economic governance and a high
level of perceived corruption have been seen as key
hurdles to development in the country, although recent
efforts have resulted in some improvements. While the
country scores poorly on key governance indicators, it
has made modest—but more importantly, continuous—
gains recently on several Worldwide Governance
Indicators (WGI), including voice and accountability,
rule of law, and control of corruption. The country has
also made progress on other indicators, albeit from low
levels, such as Transparency International’s Corruption
Perception Index (TI CPI), ranking 150th out of 177
countries in 2012, compared to 164th out of 183 in
2011, so the fact that an improvement in the rankings is
registered is encouraging. However, both the BEEPs
Survey and the World Economic Forum’s Global
Competitiveness Report 2013–2014 found corruption and
political instability to be the most problematic factors
for doing business in the country. Levels of public trust
are low, 6 and citizens have an especially negative
perception of economic governance in the energy and
mining sectors and in the area of public financial
management, particularly public procurement.
As part of its governance reform program, the
Government has adopted a comprehensive view of
governance and has committed to a series of
reforms across different sectors to increase
transparency and accountability in the public
sector. The Government adopted a medium-term AntiCorruption Program (2012–14), centering around three
priorities: eliminating corruption schemes in the public
sector; reforming incentives in the public sector to
prevent corruption; and partnering with civil society as
an anti-corruption tool. The implementation of the plan
has been progressing and is discussed at government
meetings every six months. The recent adoption of a
government regulation on the mandatory use of
monitoring and evaluation methodology for the anticorruption action plan should further strengthen the
process. The authorities also recently completed the first
verification of asset declarations of selected public
officials, an activity that can become an important tool
in the anti-corruption agenda. In late 2013, the Defense
Council secretariat was assigned the role of coordinating
body for anti-corruption activities; while its broad
membership headed by the president does allow it to
have a wide outreach, its capacity remains limited. The
authorities are also drafting a Law on Conflict of
Interest, expected to be adopted by the Parliament later
this year.
Higher standards in public accountability, the
enforcement of control over the budget, and
stronger management of public assets are being
introduced. Budget transparency is improving and all
extra-budgetary funds (except the Social Fund) have
been consolidated in the budget. Approved budget laws,
revised budgets, the medium-term budget framework,
and monthly and annual budget execution reports are
being published and made accessible to the public. The
draft Budget Code adopted by the Government and
submitted to the Parliament in late 2012 proposed a
number of improvements in the budgeting process (the
draft is currently being reviewed by the Parliament). In
addition, parliamentary oversight and public debates in
the Parliament have made it more difficult to misuse
public resources. Budget hearings open to the public
6
5
Life in Transition Surveys 2006, 2010, 2013.
have been introduced. The full Extractive Industries
Transparency Initiative (EITI) compliance certificate,
awarded to the country by the EITI Board in 2011,
demonstrates progress in and continuing commitment
to reducing corruption in the mining and extractive
sector. An Energy Sector Transparency Initiative has led
to the establishment of a Supervisory Council (with
public representation) at the Ministry of Energy to
oversee the management and reporting of energy sector
accounts. A new Public Procurement Law, currently in
the parliamentary approval stage, should bring the
institutional framework for public procurement in line
with good international practice.
reform priorities. Still, implementation of all public
sector reforms in the Kyrgyz Republic suffers from
weak institutional capacity, and visible changes will take
time to be seen on the ground.
Transparency and governance are at the center of
the World Bank Group Country Partnership
Strategy (CPS) for FY14–17. The main objective of the
CPS is to improve governance, largely focusing on three
broad areas: public administration and public service
delivery; the business environment and investment
climate; and the management of natural resources and
physical infrastructure. The Bank is actively using all its
instruments in this process. For example, the ongoing
Development Policy Operation (DPO) series supports
governance reforms in anti-corruption, the judiciary,
public financial management, and energy, as governance
improvements in these areas are crucial to the country’s
ability to move forward on this agenda. The policy
dialogue under the DPO is effectively supported by the
Public Financial Management Trust Fund, which
supports fiscal governance, particularly the improvement
of the budget process, public procurement reform, and
energy sector activities. The International Finance
Corporation (IFC) and the World Bank provide
investment climate advice. The Bank’s Public Expenditure
Review is at the same time providing the analytical
foundations for improved governance in a number of
sectors, including wage-bill management, education,
social protection, and energy. A technical assistance
project supports the Office of the First Vice-Prime
Minister in the development of the Public Sector
Reform Roadmap.
The institutional and legal frameworks for
improved governance continue to evolve. The
authorities recently adopted the first Judicial Sector
Development Program for 2014–2017, which identified
clear activities, a timeframe, the cost, an executing
agency, and progress indicators. The main objective of
the program is to increase public confidence in the
justice system through the improvement of transparency
in the system, and to ensure the independence of judges
and enforcement of their decisions. Currently, the
authorities have already started publishing court
decisions in pilot courts and are revising the judge
selection process to reduce subjective influences. Most
recently, measures in six subareas of public sector
reform (anti-corruption, judicial reform, public financial
management, public administration, civil service, and
sectors with a large share of state ownership) were
consolidated under a Public Sector Reform Roadmap,
which set specific short-, medium-, and long-term
Figure 4. Recent Trends in Governance in the Kyrgyz Republic and Central Asia
Voice and Accountability
Political Stability
0.0
-0.5
-1.0
0.0
-0.2
Kyrgyz
Rep.
2010
Regulatory Quality
Central
Asia
-0.4
-0.6
Central
Asia
-1.5
-2.0
2009
Government Effectiveness
0.0
2011
-0.8
2012
-0.2
-0.4
Kyrgyz
Rep.
-0.6
-1.0
-0.8
-1.2
2009
-1.0
2009
2010
2011
2012
Rule of Law
Kyrgyz
Rep.
Central
Asia
2010
2011
Control of Corruption
6
2012
0.0
-0.2
-0.4
-0.6
Kyrgyz
Rep.
-0.8
Central
Asia
-1.0
-1.2
2009
2010
2011
2012
-1.0
-1.1
-1.1
-1.2
-1.2
Kyrgyz
-1.3
Rep.
-1.3
-1.4
2009
2010
-1.0
-1.1
Central
Asia
-1.1
Kyrgyz
Rep.
-1.2
Central
Asia
-1.2
2011
2012
-1.3
2009
2010
2011
2012
Source: Worldwide Governance Indicators.
Public Financial Management
Progress
on
improving
public
financial
management systems since 2005 can be traced
through the Public Expenditure and Financial
Accountability (PEFA) assessments. Figure 5 shows
that budget credibility, budget predictability, and control
over budget execution have deteriorated, while some
progress
has
been
achieved
in
budget
comprehensiveness, in linking the budget with policies,
accounting, and reporting, and in external scrutiny and
audit over 2005–09. A new PEFA assessment will be
conducted in 2014.
Figure 5. Dynamics of PEFA Indicators, 2005–09
The Government terminated its contract with its
software vendor at the end of 2013 and is currently
considering options on how best to achieve automation
of the treasury and other financial management
functions.
Other key reforms necessary for advancement in
public financial management include strengthening
the budget processes, improving budget transparency,
strengthening the link between a Medium-Term Budget
Framework and the annual budget, introducing
performance budgeting, and continuing the capacitybuilding process.
Financial Sector Development
Source: PEFA Assessments Reports 2005, 2009.
The World Bank supports public financial
management through the Capacity Building for Economic
Management Project, the Multi-donor Trust Fund for Public
Financial Management, and the Government Technical
Assistance Project, which was closed at the end of 2013. A
major step forward in public financial management will
require implementation of two basic foundations: an
automated financial management information system
that meets international standards and a sound legal
framework in the form of a Budget Code. The draft
Budget Code has undergone a first reading in the
Parliament, and comments on the draft received from
various stakeholders have been forwarded to the
Government for its consideration.
The Kyrgyz financial system remains small and
bank
dominated,
although
microfinance
organizations are playing an increasingly important
role. There are 24 commercial banks, 16 insurance
companies, two pension funds, and a large number of
non-bank financial institutions (NBFIs), such as
exchange offices, microfinance organizations, and credit
unions. Foreign banks (mainly Kazakh and Russian)
account for about 48 percent of banking system assets.
Microfinance organizations are playing an increasingly
important role, while the role of the other NBFIs
remains limited. Money markets are shallow and short of
instruments, and there are few participants other than
banks. Excluding transactions in foreign currency, the
interbank market is dormant. Capitalization of the stock
market is under 2 percent of GDP. Private credit to
GDP was at 15.4 percent at end-2013 and at 17.3
percent at end-May 2014.
The banking sector remains relatively stable and
profitable. As of May 2014, capital adequacy and
liquidity ratios stood above the minimum regulatory
requirements of 12 and 30 percent, respectively. While
the capital to risk-weighted asset ratio fell to 22.6
percent at the end of May 2014 due to an increase in
credit to the private sector, it remains well above the
7
legal minimum threshold of 12 percent, suggesting there
is significant capacity in the sector should opportunities
for growth emerge. Other financial indicators also
indicate improvements in the stability of the sector.
Meanwhile, there has been a notable decline in
nonperforming loans (NPLs) to 4.8 percent at the end
of May 2014, the lowest level since 2009. Provisions
covered 60.4 percent of the NPLs that were classified as
substandard (31 percent of NPLs), doubtful ( 32
percent), and loss (36 percent).
The low level of financial intermediation is broadly
in line with income level. The economy remains
heavily cash based. Growth in credit to the private
sector increased to 42.2 percent y-o-y in June 2014
from 35 percent one year earlier, with most of the
expansion in industry and agriculture. Increased credit to
the private sector further contributed to strong domestic
demand, especially in manufacturing (95 percent growth
y-o-y) and agriculture (65 percent growth y-o-y). The
growth of loans with maturity of more than three years
was 77.2 percent y-o-y in June 2014, which could
suggest growing investor confidence. However, despite
this growth, financial intermediation in the Kyrgyz
Republic remains among the lowest in the region, with
low credit and deposit penetration. Doing Business 2014
ranked the country 13th on the getting credit indicator,
which compares favorably with the Europe and Central
Asia (ECA) region average of 53. The score on the
strength of legal rights index is 10 (0–10) and on the
depth of credit information index it is 4 (0–6), while
private bureau coverage is 32.1 percent of adults (48.2
percent for ECA).
Although declining, the state presence in the
banking sector remains significant. There are
currently two state-owned banks that account for about
20 percent of total banking sector assets: (i) Ayil Bank,
which mainly lends to small farmers and has certain
restrictions on collecting deposits; and (ii) Settlements
and Savings Company (RSK Bank), which is a fully
fledged commercial bank. The Kyrgyz Post Office also
offers a limited range of financial services under an
agency agreement with banks. In addition, the state has a
program that provides up to 400 million Kyrgyz soms
for loans to farmers. Plans to privatize RSK Bank have
no clear timeline, and there are no plans to privatize Ayil
Bank.
Policy priorities should include measures that
enhance access to finance, given the limited
financial intermediation in the Kyrgyz Republic. A
number of obstacles prevent a deepening of financial
services, including the low outreach of deposit services
and weaknesses in the supporting infrastructure and
secured transactions framework. Stronger consumer
protection and improved financial literacy will also
improve the quality of financial services.
The World Bank Group supports financial sector
development through policy advice, technical
assistance, and financial support. The Bank has
provided diagnostics and recommendations on financial
sector vulnerability, access to finance, banking sector
supervision, and the deposit insurance system. In 2013,
the World Bank and the International Monetary Fund
(IMF) completed a Financial Sector Assessment
Program (FSAP), which assessed the financial sector’s
strengths, weaknesses, and vulnerabilities to financial
and macroeconomic shocks, as well as its contribution
to growth and development. The FSAP concluded with
recommendations on the supervisory and regulatory
frameworks,
financial
sector
soundness
and
restructuring, crisis management and bank resolution,
access to finance, the role of the state, financial
infrastructure, pensions, and insurance. A US$9 million
Financial Sector Development Project focuses on
strengthening the legal, regulatory, and supervisory
framework for banks, microfinance organizations, and
credit unions; expanding financial services via the
Kyrgyz Post Office’s network; and modernizing the
movable collateral and debt resolution regimes. In
August 2013, the Financial Sector Development Project was
complemented by a World Bank–executed Swiss State
Secretariat for Economic Affairs (SECO) Trust Fund
under which the Bank has been providing technical
assistance for developing and implementing a risk-based
supervision framework in line with international best
practices; enhancing the National Bank’s capacity to
undertake dynamic stress tests and scenario analyses;
and strengthening consumer protection and financial
literacy.
IFC invests in financial markets to expand access to
finance for micro, small, and medium-sized
enterprises (MSMEs). IFC’s recent local currency
investments in microfinance organizations aim at
increasing access to finance for micro and small
entrepreneurs, including women, in rural areas. IFC’s
advisory services in housing microfinance, institution
building, and the promotion of responsible finance in
the Kyrgyz microfinance sector presently complement
these financial market investments. In addition, IFC has
been implementing advisory services projects focused
on improving the financial infrastructure, specifically
credit information-sharing systems and risk management
education.
8
Private Sector Development
The role of the small and medium-sized enterprise
(SME) sector in the Kyrgyz economy cannot be
overemphasized in terms of its contribution to GDP
and employment generation. Formal SMEs and
individual entrepreneurs (without farms) contribute up
to 19 percent of employment and up to 37 percent of
GDP.
The Kyrgyz Republic’s private sector is
concentrated in a few sectors, with employment
largely in the informal sector. While the country’s
exports and value added are relatively concentrated in
metals and minerals (particularly gold), employment is
concentrated in labor-intensive activities such as
agriculture, garment production, and the retail trade.
Most private sector employment occurs in small
economic entities, mainly farmers, small enterprises, and
individual entrepreneurs.
The economy is open, and the country performs
well on a number of measures of the investment
climate. Doing Business ratings on trading across borders
is among the lowest in the world and has not changed
over the past six years. The policies of neighboring
countries have not made the situation easier. Table 2
focuses on the Kyrgyz Republic’s efforts and explains
why this indicator is low:
Table 2. Doing Business Indicators
There are a number of areas where the environment
for the private sector could be strengthened. The
country’s performance on Doing Business is inconsistent,
with a relatively poor performance on a number of other
topics. For instance, it is ranked below 120 on resolving
insolvency, paying taxes, and getting electricity. Overall,
the country ranked 68 on Doing Business in 2014. On
another measure of the environment for private
business—the Global Competitiveness Index—the country’s
position was 121 in 2013–14. The Kyrgyz performance
on these measures occurs despite legislative and
institutional reforms, whose impact has been attenuated
by a gap between laws and their implementation.
Contributing to this problem is that many of the
government agencies
understaffed.
concerned
are
new
and
The Government is focused on continuing to work
to strengthen the private sector. In 2013, the
authorities issued a draft five-year Strategy for
Sustainable Development (SSD) 2013–17 that targets
annual GDP growth averaging 7 percent. This growth is
to be achieved through governance reforms and
economic diversification based on an expanding private
sector. The strategy calls for entrenching the rule of law,
expanding democratic institutions and practices,
securing governance improvements, and bolstering
national unity through strengthened interethnic
relations. Agribusiness, energy, mining, transport, and
tourism are cited as promising areas for diversification
and growth, with human capital and skills development
to be addressed through social sector reforms.
The World Bank Group has launched a number of
programs and initiatives to support private sector
development. Continuing assistance will be provided to
the Ministry of Economy to develop the National
Private Sector Development Strategy and its mediumterm action plan. This will help clarify the Government’s
vision for improving competitiveness and the
investment climate, and will be used as an instrument
for donor coordination. Results from the study, “The
Garment Sector: Impact of Joining the Customs Union
and Options to Increase Competitiveness,” have been
delivered to the Ministry of Economy. This study has
reviewed ways to mitigate the potential risks to the
country’s competitiveness in strategic industries, such as
garments and textiles. In addition, the Private Sector
Development Policy Dialogue program is supporting
investment climate reforms by bringing together existing
Bank activities and providing advisory services on
insolvency reforms. Meanwhile, the Tax Reform and
Gender Project aims to reduce the implementation gap
between de jure and de facto tax regulations and their
discriminatory impact on female entrepreneurs. The
project team had focus group discussions and in-depth
consultations with businesses and private sector
representatives from Bishkek, Osh, and Jalalabad. Based
on this and consultations with state tax authorities,
certain areas for pilot interventions and their impact
assessments have been determined and proposed for
consideration.
Reducing Technological Barriers to
Entrepreneurship and Trade Project strengthened
The
the institutional governing quality of Kyrgyz
products; created opportunities for the regional
collaboration of quality systems authorities in Central
Asia; and most importantly, established a culture of
9
quality, evidenced by the sizable stream of producers
willing to pay for quality enhancement services provided
by Kyrgyz laboratories. IFC’s Central Asia Tax Project
supports the Kyrgyz Tax Service’s capacity in terms of
risk-based audit, the implementation of a fully functional
value added tax (VAT) refund system, and a reduction in
the frequency of tax reporting and payments for SMEs.
In July 2013, IFC began implementation of a new
project, focusing on improving the business
environment, with a particular emphasis on the
agricultural sector and enhancing the investment policy
framework, in particular in the areas of investment entry
and protection and the transparency/governance of
investment incentives. The project aims to generate
substantial compliance cost savings and investment as a
result of a reduction in the inspections coverage of
businesses and an improved regulatory framework for
investment policy.
cannot afford the minimum food basket (which was
estimated to cost 16,249.10 soms per year per capita).
The regional poverty picture is uneven at the oblast
level. Absolute poverty rates vary significantly across
oblasts and range from 20 percent of the population in
Bishkek to 54 percent in Batken oblast. Bishkek appears
to be the region with the least poverty; in the capital,
one resident out of five was poor in 2013. As seen in
figure 7a, there appear to be two groups of oblasts:
those with high and those with low absolute poverty
rates. Bishkek, Talas oblast, and Chui oblast currently
fall into the low-poverty category at rates below 25
percent of their population. The remaining five oblasts
have poverty rates exceeding 40 percent and fall into the
high-poverty oblasts.
Figure 6. National Poverty Rates, Absolute and Extreme
Poverty Rates, 2011-13 (in percent of population)
36.8
38.0
37.0
IFC also helped the Government to adopt
amendments to the Kyrgyz law on joint-stock
companies, introducing mandatory cumulative voting
and implementing an assessment of corporate
governance.
4.5
2011
Poverty
The official poverty rate in the Kyrgyz Republic
declined slightly in 2013. According to recently
released information from the National Statistics
Committee, the absolute poverty rate was 37 percent in
2013 despite GDP growth estimated at 11 percent. 7, 8
This constitutes a decline of about one percentage point
compared to the 2012 poverty level, though it remains
above the 2011 rate (see figure 6). In 2013, around 2.14
million persons out of a total population of 5.7 million
lived below the poverty line of 27,768.50 soms per year
per capita. 9 Extreme poverty decreased by 1.6
percentage points from 2012 to 2.8 percent of the
population. In absolute terms, about 159,000 persons
The “extreme” and “absolute” poverty rates refer to the
share of the population that is unable to meet its food
consumption requirement and total (food and nonfood)
needs, respectively. The extreme poverty line is also referred
to as the “food” poverty line.
8 At present, the World Bank does not have access to the
primary dataset that would be needed to measure the standard
errors of the poverty estimates.
9 The poverty line was calculated using the “cost of basic
needs” approach in 2011 and subsequently inflated to account
for food and non-food price changes in 2012 and 2013. Thus,
the poverty lines are in nominal Kyrgyz soms.
7
4.4
2012
Absolute
Extreme
2.8
2013
Source: National Statistics Committee, 2014.
Poverty rates display large annual variations across
oblasts without exhibiting any specific patterns.
The largest increases in poverty from 2012 to 2013
were observed in Batken and Issyk-Kul, where the
incidence has increased by 20 and 11 percentage
points, respectively. Unlike in Issyk-Kul and Batken
oblasts, the poverty rates in Talas, Osh, and Jalal-Abad
declined significantly in 2013 (see figure 7b). Poverty
rates increased modestly in Naryn oblast by 3.9
percentage points. Across the regions, the highest
extreme poverty rate has been observed in Batken
oblast, where the incidence has increased from 2.4 to
8.0 percent of population. At the other end of the
spectrum, the extreme poverty rate in Talas oblast was
estimated at almost zero. Jalal-Abad oblast has been
the most successful in reducing its extreme poverty to
the level of 1.4 percent from 14.1 percent. As seen in
figure 8, changes in poverty rates varied considerably
across oblasts between 2011 and 2012 and 2012 and
2013.
10
Figure 7a. Oblast Poverty Rates in 2013
(in percent of oblast population)
Figure 7b. Changes in Absolute Poverty Rates in Oblasts, 2011–12,
2012–13 (in percentage point changes per year)
25
20
15
10
5
0
-5
-10
-15
-20
20
2011-12
2012-13
11
10
7
7
4
3
-1
-1
-11
Bishkek
-17
Talas
-1
-8
-12
Chui
Issyk-kul
Osh
-9
-10
Naryn
Jalal-Abad Batken
Figure 8. Changes in Poverty, by Urban and Rural Sector, 2011–13 (in percent of population in rural and urban sectors)
Absolute Poverty Rates
Extreme Poverty Rates
40.4
41.4
39.6
5.7
30.7
35.4
4.5
3.3
28.5
1.6
4.2
2011
2012
Urban
2013
2.6
2011
2012
2013
Rural
Urban
Rural
Source: National Statistics Committee, 2014.
The previous convergence in rural and urban poverty
rates reversed in 2013 due mainly to a sharp decline
in urban poverty. Previous trends since 2004 showed a
narrowing gap between the rural and urban poverty rates,
but in 2013, the gap started to widen again. By 2013, rural
poverty increased by 1.8 percentage points, reaching 41.4
percent of the rural population, while urban poverty had
declined sharply by 7 percentage points, leveling at 28.5
percent of the urban population. The observed dynamics
underline the great degree of annual volatility of regionallevel poverty rates, and rural poverty rates may be
correlated to low growth in the agriculture sector, though
this requires further analysis. The poverty rate based on
the extreme poverty line in urban areas has declined from
4.2 percent in 2012 to 1.6 percent in 2013, perhaps in part
because food prices remained largely unchanged in 2013.
Rural extreme poverty rates show a continuation of a
declining trend over recent years.
The poverty gap ratio declined during 2012 and 2013,
indicating that the poor were better off than
previously. An additional important indicator of poverty
changes is the poverty gap ratio, which shows how far the
poor’s consumption per capita lies below the poverty
threshold. The reported poverty gap and poverty severity
index (i.e., the squared poverty gap) narrowed by 0.7 and
0.4 percentage points, respectively, in 2012–13, indicating
that inequality among the poor and the depth of poverty
are on a decreasing trend. Poverty gaps for food poverty
approaches zero.
Social Protection
Enhancing the effectiveness of social protection
expenditure, including its impact on poverty, is one
of the key challenges facing the Kyrgyz Republic.
Non-contributory social protection expenditure increased
more than twofold between 2008 and 2013 making 2.4
percent of GDP (higher than the ECA average of 2
percent and significantly higher compared to peer
countries). However, the performance of the system
measured in terms of coverage of the poor, targeting
accuracy, and impact on poverty has not improved. The
increase in spending has often favored categorically
targeted programs that mostly benefit better-off
individuals. As a result, more than two-thirds of social
assistance spending goes to poorly targeted programs. At
the same time, the Monthly Benefit for Poor Families
with children (MBPF), the program with the greatest
potential to alleviate extreme poverty and contribute to
equalizing opportunities in the early years—critical for
success in adulthood—has seen drops in coverage and
been underfinanced. The MBPF is well targeted on the
poor, but more than 60 percent of children in the poorest
quintile remain uncovered. In addition, the benefit
amount is inadequate to meet even the most basic needs.
The Government has taken steps to improve the
performance of social assistance expenditure.
Spending in the regressive cash compensation program
(former privileges) has reduced significantly, thanks to
11
efforts to keep the number of beneficiary categories and
benefit amounts in check. The Guaranteed Minimum
Income (GMI) was increased by 57 percent in 2012 and
10 percent in 2013, improving the adequacy of the
MBPF. There are plans to increase it further by at least
10 percent in 2014. However, more decisive action is
necessary in order to improve the coverage of children
in the poorest quintile. Improving the effectiveness of
social protection in the context of fiscal consolidation
calls for a shift from a largely categorically targeted
system to a poverty-targeted one, and for the
reallocation of spending away from badly targeted
programs.
Figure 9. Distribution of Benefits by Quintile,* selected
programs
increasing risk of pressure on the Government to raise
labor pensions and the cost of the system growing even
further. The Government is in the process of
elaborating a National Pension System Reform Strategy
that should address a broad range of issues, including
fiscal sustainability, coverage, and administrative
efficiency.
The World Bank supports the social protection
sector via a component of the Second Health and Social
Protection Project. This project supports the deepening of
reforms in the system of social assistance, the
modernization of services for the disabled, and further
development of the social protection management
information system. Previous activities under the project
included direct budget support to increase the benefit
level under the MBPF, and support to the development
and rollout of the social protection management
information system. These activities are complemented
by a technical assistance program to strengthen the
capacity of the Ministry of Social Development,
financed by the Rapid Social Response Multi-Donor
Trust Fund, and a public expenditure review of noncontributory social protection and pensions.
Gender
* Quintile 1 stands for the poorest 20 percent of the population, and
quintile 5 is the richest 20 percent. MSB is the Monthly Social
Benefit.
Source: World Bank calculations based on the Kyrgyz Integrated
Households Survey 2011.
The pension system suffers from the effects of the
prevailing macroeconomic, fiscal, and labor market
conditions, as well as from systemic pension design
issues. Though about 90 percent of the elderly
population is now receiving labor pensions, only about
30 percent of the working-age population is accruing
pension rights with the pension system, leaving almost
half of the future old-age population with low social
pensions and thus potentially increasing poverty rates
among the elderly. Public pension spending levels have
increased over the past few years from below 5 percent
in 2007–08 to about 9 percent in 2012–13. Basic
pension financing and the growth of the number of
social pension recipients will dramatically increase
government pension spending. As a result, unless
reforms are implemented, the total public pension
spending is projected to increase to 11–12 percent of
GDP over the next two–three decades and further to
14–15 percent in the longer run, posing a challenge to
the financial sustainability of the pension system. In
addition, inadequate benefit levels make the system
unsustainable from the social standpoint, with an
There are noticeable gender differences in the
demographic structure in the Kyrgyz Republic.
Although the population is relatively young, there are
gender misbalances in the demographic structure. In the
age group over 35 years old, the number of women
exceeds the number of men, and the number of men is
two times lower than women among people 80 years old
and older. The difference in life expectancy at birth is
lower for boys (of 15 years) by eight years and correlated
to the death rate; the mortality rate for men is 1.5–1.6
times higher than the rate for women. Furthermore,
about two-thirds of migrants are men, which also
reduces the male population of prime-age men.
Women face disadvantages in access to economic
opportunities. Economic activity among women is
almost 1.5 times lower than among men. Employment
varies significantly across age groups. The highest gap is
observed in the age groups of 25–34 years and 55–64
years, due to childbirth and childcare for the first age
group and to earlier retirement for the second age group
(figure 10).
12
Figure 10. Level of Employment of Population as per
Gender and Age Groups (in 2003 - 2012; percentage)
100
89
80
66
20
26
37
92
68
53
60
40
91
56
92
76
91
increase in noncommunicable diseases (NCD). Although
life expectancy is comparable with most neighboring
Central Asian countries, it is almost 10 years lower than
the Organisation for Economic Co-operation and
Development (OECD) average. In addition, the
efficiency of public spending on health and the
governance of health institutions need further
improvement.
85
77
75
66
58
48
33
24
16
13 11
5
0
15- 20- 25- 30- 35- 40- 45- 50- 55- 60- 65- 70
19 24 29 34 39 44 49 54 59 64 69 and
Men
older
Women
Total population
Source: National Statistic Committee of the Kyrgyz Republic.
Although the country continues to make strides in
giving men and women equal status and protection
under the law, 10 women are underrepresented in
managerial positions in private companies and the
government. There were 25 women (21 percent) out of
120 seats in the Parliament in 2012 and only 15 percent
of women in ministerial positions in the Government.
About 60 percent of all public servants are male. At the
working level, including senior staff appointments in
government ministries, women are prevalent and hold
professional and senior positions.
Health
The Government’s new strategy emphasizes actions
on the prevention and effective management of
cardiovascular diseases, maternal and child health
(MCH) improvement, and tuberculosis and HIV/AIDS
prevention and control, as well as measures to improve
the coordination between health care levels. The
implementation of the strategy is being jointly supported
by development partners in a sector-wide approach. The
success of the strategy is closely monitored under the
Joint Assessment Framework, which is part of the
Memorandum of Understanding signed in February
2014 by the Government and joint financiers. Under the
memorandum, the financiers pool funds together to
achieve the objectives set out in the Den Sooluk
program. To assess implementation progress and discuss
key policy and programmatic issues in program
implementation, development partners agreed to have
one Joint Annual Review, two High-level Thematic
Meetings, and two Internal Reviews per year by
combined teams of Ministry of Finance, Ministry of
Health, and Mandatory Health Insurance Fund (MHIF)
staff with partner representatives from the German
Technical Cooperation Agency (GIZ), the German
Development Bank (KfW), the Swiss Agency for
Development and Cooperation (SDC), the United
Nations Population Fund (UNFPA), the United Nations
Children’s Fund (UNICEF), United Nations AIDS
(UNAIDS), the U.S. Agency for International
Development (USAID), the World Health Organization
(WHO), and the World Bank.
Implementation progress for “Den Sooluk” priority
programs for 2012–13:
The Ministry of Health developed a new health
strategy “Den Sooluk,” which aims to address key
shortcomings in the current health care delivery
system. Despite structural and organizational reform
efforts, Kyrgyzstan is still struggling to catch up to the
epidemiological changes in the morbidity and mortality
patterns over recent years. The Kyrgyz Republic today
faces the dual challenge of the unfinished Millennium
Development Goals (MDG) agenda and a record
In 2011, the Electoral Law was amended and now specifies
a 30 percent quota for either sex on electoral lists (Code on
Elections, Article 60 (3)).
10
The MCH program has demonstrated good
progress on several impact and outcome indicators.
Kyrgyzstan is on track to achieve MDG4 by reducing
perinatal mortality due to effective perinatal services,
neonatal care, and resuscitation; exclusive breastfeeding
starting soon after birth; regionalization, etc. There was
a 42 percent decline in the under five mortality rate
(U5MR) between 1990 and 2012 (from 71 to 27 per
1,000 live births), with a 4.4 percent annual rate of
reduction. The infant and neonatal mortality rates have
been reduced at the same rate. In contrast, the country is
off track on MDG5, considerably lagging behind the set
13
targets. The maternal mortality rate in the past decade
never approached the target benchmark of 15.7 per
100,000 live births The trend of the maternal mortality
indicator is volatile; its lowest value was observed in
2001 (43 per 100,000 live births) and the highest in 2009
(63.5). The data for 2013 show a decrease in the
maternal mortality ratio down to 38.2, which is a result
of efforts undertaken in recent years. Furthermore, a
strategic plan has been developed to reduce it by
identifying and overcoming barriers (as part of an
acceleration of progress toward MDG5). At the same
time, the following strategic goals were identified for
2014: (i) greater involvement of civil society in MCH
issues; (ii) improvement in access to MCH services
through strengthened principles of regionalization and
timely referral to an appropriate level of health care
services; (iii) development of a system of mentoring to
strengthen the capacity of medical workers and improve
the quality of provided services at the level of health
facilities; and (iv) a strengthening of the role of
management and middle-level health workers.
The possibility of achieving the target indicators on
MDG6 (combat HIV/AIDS, malaria, and other
diseases) is of particular concern. The Kyrgyz
Republic has not achieved its targets in any of the
specified indicators; in fact, the trend shows a
deterioration in most of these benchmarks.
The cardiovascular diseases (CVD) program has
demonstrated good progress on impact and
outcome indicators, suggesting that the overall strategy
of stepping up population activities and strengthening
primary health care is appropriate and is leading to
expected results. The particularly large decline in male
premature mortality due to CVD is a welcome
development, as it is harder to reduce mortality from
CVD among males due to the high prevalence of
smoking and obesity in this population. The main
achievements in 2013 included a slight increase in the
tobacco tax; the continued action of village health
committees in detecting hypertension and referring
patients to primary health care (PHC) facilities, laying
the foundation for a greater role for nurses in the
detection and management of hypertension and diabetes
(observation cabinets, charts, and checklists); and further
guidelines and quick guides for doctors on hypertension
and diabetes.
The key impact indicators of the tuberculosis
program have not yet shown significant
improvement, though the overall strategy is
appropriate and in line with international good
practice, and some outcome and results indicators are
providing cause for optimism. Overall, a substantial
percentage of the activities planned for 2012 and 2013
have been accomplished, thanks to coordination
between the National Tuberculosis Program, the
Ministry of Health, and development partners investing
in Den Sooluk through parallel financing. A number of
structural changes are under implementation to support
a new vision for delivering tuberculosis services, such as
the restructuring and optimization of the tuberculosis
system, and the establishment of an electronic database
that can unify the recording/reporting system
throughout the country and assist with drug forecasting.
The HIV program has yet to demonstrate
significant improvement in halting the rise in new
HIV cases, the main impact indicator for this
program. Strengthening the leadership role of the
Ministry of Health in coordination and alignment with
partner support would be the key for reaching progress
under the 2014 work program.
The key policy actions that are essential for the
implementation of the Den Sooluk Health Reform
Program involve:
•
•
•
•
Promoting tobacco control: medium-term costeffective actions should include: (i) a gradual
increase in the tobacco tax to 40–75 percent of retail
price by 2020; (ii) the enforcement of smoke-free
areas; and (iii) more visable warning labels on
cigarette boxes. The mobilization of political
support and momentum is critical to step up antitobacco policies.
Further developing primary health care:
measures to improve coordination between health
care levels as well as to address inadequate staffing
in some regions.
Increasing health expenditures: maintaining the
level of the state health budget to at least the level
of 13.5 percent of the total government budget in
2014, and further increases in the medium term.
Advancing
health
financing
reforms:
strengthening strategic purchasing and provider
payment mechanisms, redefining the State
Guarantee Benefit Package, and ensuring the
transparency of public health financing.
Education
The Kyrgyz Republic has a literacy rate of nearly 99
percent and a strong history of education. The
Government allocates a solid 20 percent of its
expenditure to the education sector, with universal
primary enrollment. The key challenge is to turn this
spending into better learning outcomes for all. Informed
14
by the results from national (National Sample Based
Assessment [NSBA]) and international (Program for
International Student Assessment [PISA]) assessments,
which report that more than 80 percent of Kyrgyz
students were deemed “functionally illiterate” in
mathematics, reading, and science according to the PISA
methodology, the Government has initiated a set of
reforms elaborated in its Action Plan for 2012–2014, to
be followed by a subsequent Action Plan for 2015–2017.

The key priorities include an expansion of the
coverage of preschool education, reform of
curricula and assessments, the enhancement of
teacher pedagogical practices, and a deepening of
financing reforms through an expanded per student
financing approach.

Aligned to support these country-driven reforms,
the World Bank leverages its concessional
International Development Association (IDA)
assistance with additional financing from other sources,
including the Global Partnership for Education (GPE)
and a Russian Trust Fund, to finance a coherent
program aimed at achieving better education outcomes
that boost the human capital the country desperately
needs for reduced poverty and shared prosperity.



2,135 preschool classes opened countrywide for an
enrollment of more than 55,000 children aged 5–6
to support a smooth transition to primary school in
2013. These classes will continue to expand the
enrollment to cover 80,000 children of the same
cohort by 2017.
An additional 3,254 teachers were trained and made
qualified for preschool education in the same period
in 2013, with more teachers to be trained between
2014 and 2017.
90 percent of the teachers in newly established
kindergartens will be certified after training.
2,135 packages of children’s learning materials, toys,
and furniture were provided to schools to support
the operation of these services in 2013. 100 percent
of school preparation classes will receive a package
of essential learning and teaching materials by 2017.
About 100 new community-based kindergartens will
be established in poor and rural communities with
target enrollment of 10,000 children of 3–5 years
old between 2014 and 2017.
Improved school quality and management
Teacher effectiveness
 About 10,000 teachers will be trained for enhanced
classroom practice for grades 1–11 in 2014–15.
The program consists of an IDA-financed Sector
Support for Education Reform Project focusing on
school quality and management; a GPE-financed
Early Education Project, increasing equitable access to
preschool education and school readiness; and a Russian
Trust Fund–financed Russia Education Aid for
Development (READ) program to strengthen the
national assessment system.
Critical inputs for learning
 100 percent of schools and students in grade 3–4
will receive and use new textbooks in their native
tongue, math, and motherland studies by 2014.
 3 million copies of textbooks, teacher guides, and
learning materials will be printed and distributed
between 2014 and 2017.
 A new curricum for grades 5–9 will be introduced.
The earlier pilot and the ongoing reforms through
the above program have contributed and will
continue to contribute to the following results areas:
Accountability
 Schools operate under a new financing model and
are accountable for annual budget and expenditures.
 An expansion of the use of school report cards to
the community and other stakeholders on
performance and budgets.
Strengthened student assessment system
Teacher capacity for classroom assessment
 10,000 teachers were trained for classroom-based
assessments in all oblasts in 2014.
Expanded access to preschool education

Access to preschool education was increased to 50
percent in 2013 from a low rate of 18.2 percent in
2011. It will continue to rise to 100 percent by 2017.
Improved instruments
 A new graduation test for grade 11 was piloted in
2014.
 A national sample-based assessment at grade 4 was
carried out in 2014.
15

A new instrument for classroom assessment will be
adopted in 2014.
Improved policy for assessment
 A new strategy for a national assessment has been
developed in 2014.
Agriculture and Irrigation
The agricultural sector generates about one-fifth of
the country’s GDP, about one-third of its
employment, and about 13 percent of total exports.
Farm incomes are driven by irrigated agriculture (1.3
million hectares) and pasture-based livestock production
(9 million hectares). The sector expanded rapidly
between 1996 and 2002 but growth has been modest
since then, averaging between 2 and 3 percent per
annum. Productivity remains low and in some cases
even falling. This is can be explained by the lack of good
inputs, deteriorated infrastructure, outdated agricultural
machinery, weak farming skills, and fragmented, mostly
subsistence, farming. Except for a few larger private and
collective farms, the arable land is owned or used by an
increasing number of small farmers. In the late 1990s,
Kyrgyzstan was a leader among the Commonwealth of
Independent States (CIS) countries in land refom and
land privatization. The mass distribution of land proved
to be an effective measure to regain the value of
agricultural production lost pre- and post-independence.
It also provided an effective safety net and food security
for the majority of the population. However, the
fragmentation of land is increasingly seen as an
unfavorable factor for the productivity and
competitiveness of the sector, while the process of
fragmentation still continues. For example, the number
of private farms increased from 318,815 in 2009 to
356,642 in 2012, dropping the average arable land
holding from 2.73 hectares to 2.5 hectares per farm. The
share of state owned farms and collective farms was
only 2.2 percent of total agricultural production in 2012,
while the share of household plots production was 37
percent with the balance going to peasant farms.
The extension services and other public services such as
laboratories are seriously underfunded and heavily
dependent on donor funding.
Reforms and investments in the irrigation subsector
remain a big item on the agenda. While the Law on
Water Users Associations has been implemented
successfully, the implementation of the Water Code and
water resources management reforms is still a challenge.
The water fee charged for the state irrigation service to
the Association of Water Users was set in late 90s and is
has not been revised since then making it completly
inadequate for cost recovery albeit the collection rate is
realtively high standing at 85-90 percent. In the
livestock sector, a new paradigm of pastures
management has been set by the Pasture Law, which
delegates the responsibility of pastures management to
the local community through unions of pasture users.
Important initiatives on animal disease control have
resulted in halving the number of brucellosis cases, both
among people and livestock. These interventions will be
continued through current or future projects.
Current projects include the Second On-Farm Irrigation
Project, the Agricultural Investments and Services Project, and
the Agricultural Productivity Assistance Project. There are
some results:
 The establishment of 481 water users associations
and the rehabilitation of 175,000 hectares of
irrigation schemes;
 The establishment of 454 pasture users unions for
the community-based management of pastures and
the demarcation of pasture boundaries nationwide,
and increased access to an additional 51,000
hectares of pasture through community investment
in bridges, tracks, and watering points;
 A halving of the incidence of brucellosis in humans
nationwide following mass vaccinations and a public
information campaign;
 The training and equipping of over 1,000 private
veterinarians and the establishment of the
Veterinary Chamber to accredit veterinarians;
 The creation of 358 community seed funds with
over 9,000 member households;
 Technical assistance to 44 agri-processing
enterprises and the facilitation of the sale of
agricultural products worth US$17.5 million; the
financing of 82 subloans; and the mobilization of
US$14.8 million in investments in the agribusiness
sector.
16
Support to the agriculture sector will be continued
through new projects. These include (i) National Water
Resources Management Project, funded by a US$7.75 million
grant from SDC, (ii) Agricultural Productivity and Nutrition
Improvement Project, funded by a US$38.0 million grant
from the Global Agriculture and Food Security
Program, (iii) Pasture and Livestock Improvement Project with
US$15.0 million in financing from IDA, and (iv) the
Central Asia Agri Finance Program (currently funded with
US$2 million from Austria), which in Kyrgyzstan
focuses primarily on dairy sector development.
Energy
The energy sector is one of the most important in
the Kyrgyz economy, accounting for roughly 3.9
percent of GDP and 16 percent of industrial
production. The bulk (about 90 percent) of the country’s
current generating capacity is hydropower, developed
for the dual purpose of generating electricity and serving
as the irrigation water supply for the Kyrgyz Republic
and downstream countries.
The country’s hydropower-generating resources
used to provide reserve capacity and frequency
regulation for the Central Asia Regional Power System
in the past. Currently, these services are procured by
Kazakhstan only. The sector has a significant potential
for export that is not fully realized. Other features of the
power sector are the relatively low cost of hydropower
generation, its reliance on clean sources of energy, and
the near universal access to the power supply.
However, the energy sector does face several
challenges. These include: the poor reliability of the
energy supply and inadequate service quality; the weak
financial standing of the sector leading to chronic
underspending on operating and maintenance
expenditures and a delay in necessary capital
expenditures; and governance issues throughout the
sector, which is at the core of many of the operational
and financial issues in the sector. Although collection
rates remain high (more than 95 percent), the sector
suffers from high losses and exceptionally low tariffs,
among the lowest in the world, and old and severely
undermaintained assets. There is an emerging gap
between the available winter generation capacity and
winter demand, which is projected to grow unless
serious reforms and investments are undertaken. In
winter 2014–15, Kyrgyzstan expects a deficit of 2 billion
kilowatts per hour (kwh) (1–1.5 months of
consumption).
In May 2012, the Government adopted a power
sector development strategy for 2012–15. Measures in
the strategy include (a) further improvements in the
efficiency and transparency of sector operations,
particularly focusing on the management of power
export proceeds, (b) the development and adoption of a
medium-term tariff policy, which would need to be
accompanied by properly designed revisions of social
protection schemes, and (c) a number of important
energy investments, such as the Datka-Kemin
transmission line, the Kambarata hydropower plants,
and the Kara-Keche greenfield coal-firing power plant.
The Kyrgyz Republic has also taken steps to initiate
a process of improved governance and transparency
in the sector. In July 2013, the Government adopted an
Action Plan on reforming the energy sector. The plan
envisages a comprehensive set of reform measures,
including the establishment of a Settlement Center for
the transparent operation of the wholesale market; the
adoption of a tariff-setting methodology and policy that
will ensure the gradual attainment of cost-recovery levels
of tariffs; the adoption of a new Energy Law delineating
the functions of policy making, economic regulation,
and anti-monopoly monitoring; the transparent and
competitive procurement of fuel resources; and escrow
accounts for power export revenues for the power
generation and transmission companies. In June and
August 2014, the Parliament and the president approved
the amendments to the legislation in the energy sector
and also the Mid-Term Tariff Policy from 2014–17 for
heat and electric energy, which envisage a gradual
increase in heating and power tariffs.
In 2010–13, the World Bank supported the sector
through emergency operations, which funded essential
repairs, rehabilitation, and fuel to keep the system
running. Technical assistance to strengthen the sector
regulator through transparent and predictable tariffsetting methodology and the introduction of Key
Performance Indicators for measuring service quality is
in the final stage. The Government plans to make these
products operational by the end of October 2014.
The World Bank is also assisting with the
identification of viable winter heating solutions. In
17
addition, the Bank is preparing investment operations to
support the country with the development of export
markets (the regional CASA-1000 project 11 ), and with
improvements in the reliability of the electricity supply
in the service area of the largest distribution company;
and to strengthen the governance of the company’s
operations through the establishment of a transparency
and accountability framework (Electricity Supply
Accountability and Reliability Improvement Project).
Municipal and Community Services
In the Kyrgyz Republic, the World Bank has
provided financing since the early 2000s to improve
access to basic public services. The ongoing projects
focus on water supply, sanitation, local roads, and other
public services, in both urban and rural areas. The
availability of public services has dramatically declined
since the 1990s, as the infrastructure decayed and the
service providers suffered from underfunding and the
loss of staff. Expanding, semi-formal residential areas in
the major cities of Bishkek and Osh, small towns, and
rural settlements are especially suffering from the lack of
efficient and regular services.
Thus far, a large portion of the Bank’s investments
in the sector have addressed the need for
emergency repairs to the fast deteriorating
infrastructure. Since 2000, Bank financing has
contributed to improved water and urban services in
Bishkek, Osh, 23 small towns, and over 200 villages.
The projects also address the institutional and capacitybuilding needs of local utilities.
Currently, the World Bank is supporting improved
access to municipal and community services
through the Second Village Investment Project and the
Bishkek-Osh Urban Infrastructure Project, which also include
investments in small towns. The Bank has also
supported the Second Rural Water Supply and Sanitation
Project, which has experienced implementation problems
11
CASA-1000 refers to the Central Asia South Asia Electricity
Transmission and Trade Project.
since its approval in 2009 but is now on an
improvement path, thanks to a change in
implementation arrangements and revived Government
attention to the sector.
As an example of the projects’ impact on the
ground, the Second Village Investment Project has:

Trained more than 70,900 local government officials
and community members in the principles of
budgeting and planning;

Helped 1,698 villages to improve their social and
economic infrastructure;
Benefited approximately 2.3 million people through
the completion of about 6,000 microprojects. These
include over 317,000 beneficiaries of drinking water
microprojects, 131,000 of electricity microprojects,
570,000 of new or rehabilitated primary health
facilities, and about 1,028,700 of school
construction and rehabilitation microprojects.

The Bishkek and Osh Urban Infrastructure Project
has so far:
 Rehabilitated 21 kilometers of roads (for about
30,745 beneficiaries) in Bishkek and the water
supply system (about 50,000 beneficiaries) in Osh;

Allowed about 210,300 residents of Osh and
Bishkek to benefit from 77 social investment
projects;

Equipped 28 trucks with GPS trackers, developed
data base and electronic data management in Osh,
and supported the solid waste management utility
(Spetsavtobaza) in Osh to improve its operations. In
Bishkek, supported the automation of services and
the introduction of a database in a number of
municipal territorial administrations;

Expanded collaboration with Bishkek city and will
provide support in developing Municipal Asset
Management Information System, which would
improve
management,
accountability,
and
transparency in municipal governance.
In 2012, the project was scaled up with US$15.8
million in Additional Financing, enabling the project
to: i) support a third phase of the social investments
component to cover Osh, semi-informal settlements or
so-called “novostroiki” in Bishkek, and 29 small towns;
and ii) finance investments in the water supply in
Bishkek (Bashkara-Suu water intake) to supply water to
over 100,000 residents of novostroiki in Bishkek, and
water supply and sanitation investments in Batken,
Naryn, Talas, Isfana, Tash-Kumyr, and Shopokov.
18
Thus far under the Additional Financing for the
Bishkek and Osh Urban Infrastructure Project:

Five large contracts are ongoing, including
Bashkarasuu water intake in Bishkek and water
supply systems rehabilitation in the five abovementioned towns.

The project is supporting the development of a
Network
Information
System
(NIS)
in
Bishkekvodocanal water utility.

A total of 102 community subprojects in Bishkek,
Osh, and 29 small towns have been approved. To
date, 16 are in the process of tendering with the rest
being at implementation or completion stage.
rural water supply and sanitation planning and
management.
Transport
One of the core challenges of the Kyrgyz Republic
is to create reliable transportation connections12 that
link people and markets to opportunities at the
local, regional, and international levels.
The Second Rural Water Supply Project has
achieved the following:






Rectification works in 23 out of 35 villages are
completed or at the stage of completion,
benefiting over 52,000 people.
UNICEF, which was contracted to implement the
Hygiene and Sanitation Program, has completed
the works, particulalry a Knowledge, Attitude,
Practice survey in the target villages with a focus
on schools and awareness campaigns on hygiene
and sanitation promotion, including a media tour,
video clips, TV programs, and website
development. Additionally, a baseline survey
covering 34 schools in three oblasts (Talas, IssykKul, and Naryn) has been conducted to derive
data on children’s knowledge about personal
hygiene and the practice of hand washing with
soap after using the toilet and before meals in
target areas. Over 20,000 school students have
been trained on personal hygiene practices.
The new construction and rehabilitation of toilets
is at the completion stage in 10 and eight schools,
respectively.
The project has supported the Government in
developing the State Water Supply and Sanitation
Sector Strategy, which was approved by the
Government on Septermber 24, 2014 and
submitted to the Parliament.
The project has also supported a review of current
water supply and sanitation legislation, financial
modeling, and water desinfection technolgies.
So far the project has trained 199 Community
Drinking Water Users Union members on fee
collection and the management of the water and
sanitation schemes. Fully 572 staff members of
the Department for Drinking Water Supply and
Sanitation and Ayil Okmotu have been trained on
The rehabilitation of strategic road links is
therefore a priority of the Government, given that 92
percent of all passenger flows and 59 percent of all
freight traffic in the country is carried by road. The road
network is one of the country’s largest public assets and
provides connections to remote communities and links
to neighboring countries. Mountains make travel
difficult; roads cross mountain passes of 3,000 meters in
altitude and are subject to frequent natural disasters,
such as mudflows, stonefalls, landslides, and avalanches.
Improved connectivity, however, will be achieved only if
reforms in areas of trade facilitation and logistics are
addressed simultaneously. Trade and logistics costs are
very high (about 18 percent of the value of
imports/exports) as reflected in the Logistics
Performance Index (149th out of 160 countries).
With a complex regulatory environment and a
rolling stock and air fleet that are almost entirely
obsolete, most network infrastructure still requires
significant investments in rehabilitation and
reconstruction. Only about 67 percent of the road
network, for example, is in sustainable condition
requiring routine or periodic maintenance, while the
remainder (33 percent) is in need of rehabilitation or
reconstruction. Adopting a more liberal air transport
policy (open skies) to allow both local and foreign
carriers to operate from and to any airports in the
country is also currently under consideration but would
The transportation network under the responsibility of the
Ministry of Transport and Communications consists of 18,650
kilometers of public roads, 425 kilometers of railways, and 11
airports.
12
19
require further work on setting up the right institutional
framework. Those changes may result in positive
improvements but would not necessarily guarantee
increased capacity or lower transportation costs.
The World Bank supports the development of the
roads sector through the ongoing National Road
Rehabilitation (Osh-Batken-Isfana) Project (US$51
million equivalent). Alongside other donors, the Bank
is financing the rehabilitation of about 50 kilometers of
the Osh-Batken-Isfana road, one of the six strategic
corridors of the Kyrgyz Republic, and the only
connection for about 1 million inhabitants linking
Batken oblast with the rest of the country. The
rehabilitation of 32 kilometers from Pulgon to Burgandy
has been completed, resulting in an increase of vehicles
from 3,046 per day in 2009 to 4,509 per day in 2013 and
a tenfold increase in truck traffic. Travel time has also
halved, thus improving the access of the population to
services and markets. Rehabilitation works on the
Nookat pass (18 kilometers) and Osh bypass and airport
road are ongoing and are expected to be completed by
December 2014.
million equivalent) was approved by the Board of
Executive Directors in April 2014 and is currently
awaiting effectiveness, covering road links connecting
Batken and Isfana cities to the border crossing points at
Kyzyl-Bel/Guliston and Kairagach/Madaniyat with
Tajikistan. Improvements in road operations and
maintenance practices will also be financed out of the
proposed project. Other development partners have
expressed their intention to provide parallel financing.
In particular, the Japan International Cooperation
Agency (JICA) is currently in the process of project
approval on financing the rehabilitation of an adjacent
section along the Osh-Khujand corridor.
In the railways sector, the World Bank provided
advisory services to the MOTC on the proposed
development of a new rail link connecting China
with Uzbekistan through the Kyrgyz Republic. This
work was funded by the Trade Facilitation Facility. The
findings on the operational, financial, and economic
aspects of the proposed project were discussed with the
Government of the Kyrgyz Republic in October 2013.
Disaster Risk Management
The project has also provided funds to repair and
rehabilitate roads in and around Osh and JalalAbad cities and at the same time created temporary
jobs. The project supported the routine repair of 350
kilometers of municipal roads and provided temporary
employment in the amount of 4,502 person-months.
Additionally, with project funds, a Road Safety
Strategy and Action Plan have been developed that
has been accepted by the line ministries and is in
the process of legal formalization by the Ministry of
Justice. Given the strategic importance of road
maintenance and its funding, the Ministry of Transport
and Communications (MOTC) has also requested
support for maintenance planning, programming, and
budgeting, and for monitoring the performance of the
road network against the background of budget
constraints through the establishment of a Road Asset
Management System. The ministry also reviewed quality
management practices within the roads sector to
improve performance and pursue higher fiduciary
standards, financed by an Institutional Development
Fund (IDF) grant.
Initiated by the Government of the Kyrgyz Republic
and neighboring countries, the World Bank is
providing financing toward a regional program
(Central Asia Road Links, CARs) which has the
objective of improving cross-border road transport links
and enhancing regional economic development. The
Central Asia Road Links Project – Phase 1 (CARs-1) (US$54
The Kyrgyz Republic is prone to multiple low- to
medium-level disasters due to its mountainous
landscape and location in a highly active seismic
zone. The country is affected by earthquakes, landslides,
mudflows, avalanches, and floods, as well as heavy
winter snows, giving it roughly 14,000 hazard-prone
sites. On average, natural disasters cause approximately
US$30–$35 million of damage and losses annually, but
the Government’s annual allocation for disaster
response and risk reduction currently does not exceed
US$6 million.
The World Bank is supporting the Central Asia
Hydrometeorology Modernization Project aimed at improving
the accuracy and timeliness of weather, climate, and
hydrological service delivery in the Central Asia region,
with a particular focus on the Kyrgyz Republic and the
Republic of Tajikistan. The project will assist hydromet
services in these two countries to make better weather
forecasts and share weather data with other countries.
20
As an example of the projects’ impact on the
ground:
 Kyrgyz Hydromet will transform into a useroriented service provider, recognized by the central
government,
relevant
ministries,
partners,
politicians, and the public.
 The concept for business development, focusing on
an ambitious transformation until 2017, has been
developed, also recognizing that regulatory
frameworks may need amendments in order to
create the necessary enabling environment.
The World Bank supports the Government’s
Disaster Risk Management strategy. In 2012, the
World Bank initiated an activity, “Strengthen the Kyrgyz
Republic Disaster Risk Reduction and Response
Institutions,” funded by the Global Facility for Disaster
Reduction and Recovery. Results of this activity include:


Introduction of a national methodology on a PostDisaster Needs Assessment, which was approved by
the National Scientific Council and Inter-Ministerial
Commission on Civil Protection;
Establishment of the Kyrgyz Republic risk data
platform, as well the necessary policies, data, and
tools, to support efficient and effective decision
making for disaster risk management in Kyrgyzstan.
In close collaboration with the World Bank, the
Ministry of Emergency Situations is implementing
the Disaster Risk Management Project supported by the
Global Facility for Disaster Reduction and Recovery.
The project aims to upgrade the management
information and early warning systems, improve
countrywide operations of the management center for
crisis situations, develop a nationally integrated system
of information and warning, and implement a single
state emergency dispatcher service. This project so far
has:
 Conducted a “Feasibility Study and Design and
Estimate Documentation for the Development of
Components of the Unified Information
Management System in Emergency and Crisis
Situations in the Kyrgyz Republic”;
 Delivered a comprehensive analysis of the risk
communications framework.
To better understand seismic hazards and risks, the
Global Facility for Disaster Reduction and
Recovery and the World Bank are launching a new
project that will develop new seismic risk information in
the Kyrgyz Republic. These results will be used to
develop a country-level analysis of the highest risks to
settlements, government assets, and selected
infrastructure. This work will inform the Ministry of
Finance and the Ministry of Emergency Situations on
the greatest priorities and options for disaster mitigation
measures.
THE WORLD BANK PROGRAM IN THE
KYRGYZ REPUBLIC
Since the Kyrgyz Republic joined the World Bank
in 1992, the Bank has approved US$1.3 billion for IDAfunded projects and Recipient Executed Trust Funds
(RETFs), out of which US$1 billion has been disbursed.
To date, 42 operations for US$888 million have been
completed and closed, and 17 projects (13 IDA projects
and four large stand-alone Trust Funds) for US$362.5
million are ongoing. Additionally, two IDA-funded
Central Asia regional projects for US$51 million are
being implemented in the Kyrgyz Republic. There is one
additional project, CASA-100, with US$45 million
allocated for the Kyrgyz Republic. From 1992 until
2000, the Kyrgyz portfolio had a significant focus on
budget support; beginning in 2001, however, there was a
gradual shift toward investment projects that lasted until
2010. To achieve macroeconomic stability in the country
after the political turmoil in April 2010, the Government
requested that the Bank provide budget support. There
have been two budget support operations since the July
2010 Donors Conference, and the multiyear
programmatic budget support program is envisioned
until FY17.
Owing to uncertainties in the country that followed
the political turmoil and violence of April–June
2010, Bank Group activities in FY11 were guided by
a Joint Economic Assessment and during FY12–13,
by an Interim Strategy Note. On July 25, 2013, the
Board of Executive Directors approved a new Country
Partnership Strategy (CPS) for the Kyrgyz Republic for
the period FY14–17. This CPS marks the Bank Group’s
return to a standard assistance framework for the
Kyrgyz Republic.
Despite important progress since 2011, the country’s
overriding
development
challenge
remains
improved governance. The CPS’ strategic goal is
therefore to help reduce extreme poverty and promote
shared prosperity through support for improved
governance. The CPS proposes three broad areas of
engagement: (i) public administration and public service
delivery, (ii) the business environment and investment
climate, and (iii) the management of natural resources
and physical infrastructure. Support for these three areas
of engagement would be provided through the existing
portfolio, by new IDA lending averaging US$55 million
annually (supplemented where appropriate by trust fund
21
financing), and by intensified analytical and advisory
activities that emphasize practical, problem-solving
advice. A balance of investment and development policy
lending is envisaged. The CPS is predicated on decisive
implementation by the Government of its medium-term
National Sustainable Development Strategy. Under the
CPS the following operations are planned to be
delivered in FY15–16: the Electricity Supply Accountability
and Reliability Improvement Project, the Pasture and Livestock
Management Improvement Project, the Village Investment Project
-3, the Climate Adaptation and Mitigation Program for Central
Asia, two Development Policy Operations, the Forestry and
Climate Change Management Project, and the Regional Animal
Health Project.
The portfolio performance is relatively good; there
are three problem projects out of 17 ongoing projects.
Due to lengthy and unpredictable internal government
procedures, which involve the Parliament at the
negotiation, signing, and ratification stages, two projects
are in problem status, as they have just become effective
more than one year after ratification. In order to resolve
these portfolio issues, the Bank team intensified dialogue
with members of parliament, and conducted a risk
management portfolio review focusing on problem
projects with the Ministry of Finance, implementing
agencies, and project implementation units once per
quarter.
Trust Funds. In addition to the IDA portfolio, the
program includes a significant number of cofinancing
and stand-alone Trust Funds. Currently, the RETFs
Portfolio has a total value of US$64 million, out of
which US$16 million had been disbursed as of August
2014. Four sectors—agriculture, education, health, and
governance—receive most of the Trust Funds. The
largest Trust Funds are the Agricultural Productivity
Assistance Project (US$6.85 million), Capacity Building in
Public Financial Management (US$7.49 million), Kyrgyz
Health Results Based Financing (US$11 million), Kyrgyz
Second Health and Social Protection Swiss TF (US$11.96
million), and Kyrgyz Global Partnership for Education
(US$12.7 million). Trust Funds are mainly provided to
cofinance IDA operations and to support capacitybuilding activities. The main contributors have been the
European Union (EU), Switzerland, and the United
Kingdom.
International Finance Corporation
Since becoming a member of IFC in 1993, the
Kyrgyz Republic has received commitments
totaling more than US$113 million from IFC’s own
funds to finance 33 projects in the financial sector,
including banking and microfinance, the mining sector,
agribusiness, and the pulp and paper sectors. In FY12–
14, IFC committed about US$22 million in 12 projects
representing the banking, microfinance, and
infrastructure sectors. As of December 31, 2013, IFC’s
committed portfolio stood at US$30 million, which
included investments in financial markets and
manufacturing sectors.
IFC advisory programs implemented in the Kyrgyz
Republic focus on: i) improving financial markets
infrastructure, specifically credit information sharing
systems and risk management education; (ii) promoting
the institutional and capacity building of financial
intermediaries; (iii) promoting microfinance and housing
microfinance development; (iv) enhancing the
investment climate and tax administration; (v) improving
corporate governance in local companies; (vi)
developing agri-finance; and (vii) designing publicprivate partnership (PPP) projects, currently in the
health and power sectors.
IFC’s role in the CPS is to support the development
and diversification of the private sector, contributing
to the country’s greater competitiveness and improving
employment opportunities. IFC prioritizes activities
aimed at improving the investment climate, increasing
access to finance, and promoting corporate disclosure
standards, while at the same time exploring a greater role
for energy efficiency and renewable energy and looking
for opportunities in the area of PPPs jointly with IDA.
In the banking sector, IFC aims to increase access to
finance for MSMEs by improving the regulatory
framework, strengthening local financial institutions,
expanding microfinance organizations, and providing
credit lines for MSME financing to local banks. In the
real sector, IFC aims to improve corporate business
practices while looking for emerging opportunities to
invest across a variety of sectors, particularly in
agribusiness, mining, and infrastructure.
Multilateral Investment Guarantee Agency
MIGA’s current portfolio in the Kyrgyz Republic
consists of one project, financed by Austrian and
Italian investors, in support of the country’s
manufacturing and services sector. The outstanding
gross exposure from this investment is US$5.8 million.
The project relates to the cargo handling and storage
services at Manas International Airport and contributes
to the strategic goals of improving the environment for
business and economic growth.
22
IDA Projects
1. Programmatic Development Policy Operation 1
2. Programmatic Development Policy Operation 2
3. Pasture and Livestock Management Improvement Project
4. Electricity Supply Accountability and Reliability Improvement Project
5. Financial Sector Development Project
6. Bishkek and Osh Urban Infrastructure Project
7. National Road Rehabilitation (Osh-Isfana) Project
8. Second Village Investment Project
9. Second Rural Water Supply & Sanitation
10. Second On-farm Irrigation Project
11. Sector Support for Education Reform Project
12. Health and Social Protection Project
13. Second Health and Social Protection Project
14. Central Asia Road Links Project – Kyrgyz Republic
Total (current IDA portfolio)
Major Trust Funds
15.
16.
17.
18.
Kyrgyz Global Partnership for Education (GPE) - 3
Kyrgyz Health Results Based Financing
Capacity Building in Public Financial Management
Agricultural Productivity Assistance Project (Russia Food Price Crisis Rapid Response Trust Fund)
Total
IFC
Investments Portfolio (as of March 2014)
Advisory Services Projects (funds managed by IFC)*
*Donors/partners: UK, Switzerland
MIGA
“Manas Management Company”
US$ million
25
25
15
25.47
13
27.8
51
23
10
31
16.5
45
16.5
324.27
US$ million
16.27
11
7.49
6.85
41.61
23
8.8
5.8
23
KYRGYZ REPUBLIC: PROGRAMMATIC DEVELOPMENT POLICY OPERATION SERIES
DPO1 (P126034) & DPO2 (P126274)
Key Dates:
DPO1
Approved: July 25, 2013
Effective: December 6, 2013
Closing: September 30, 2014
DPO2
Approved: June 10, 2014
Effective: July 11, 2014
Closing: December 31, 2015
Financing from all co-financiers, million US Dollars:
Financier
DPO1
DPO2
IDA Credit
13.75
13.75
IDA Grant
11.25
11.25
Total Project Cost
25.0
25.0
World Bank Disbursements, million US Dollars *:
DPO1 Disbursed
Undisbursed
IDA Credit
13.78
13.78
0
IDA Grant
11.39
11.39
0
DPO2 Disbursed
Undisbursed
IDA Credit
13.47
13.47
0
IDA Grant
10.77
10.77
0
* Source Client Connection as of September 5, 2014.
Note: Disbursements may differ from financing due to exchange rate
fluctuations at the time of disbursement.
The objective of the programmatic series of Development Policy Operations (DPOs) is to support the Government in laying
the foundations for faster growth, reduced poverty, and shared prosperity through improving public sector governance and
enhancing the business environment. The program is anchored in the 2013–2017 National Sustainable Development Strategy
of the Kyrgyz Republic. The DPO2 builds on the measures supported under the DPO1, which supported important measures
such as the adoption of a new Budget Code, the streamlining of business registration, etc.
This DPO program supports key areas of the reform program with the objectives of improving transparency and accountability
in managing public resources and promoting simpler and more efficient business regulation and a stronger financial sector.
To improve public sector governance, the DPO2 supports a number of important measures, including:
 completing the verification of asset declaration for a selected group of public officials
 adopting a judicial sector development program (i.e., an independent budget for the judiciary)
 improving the functioning of the internal audit system
 bringing the Law on Public Procurement in line with international good practice
 improving transparency and accountability in the state-owned enterprises in the energy sector
The DPO2 is also addressing some of the bottlenecks to a more vibrant development of the private sector and a stable financial
sector. This includes:
 implementing a risk-based approach to inspections in key inspection agencies in the Bishkek region;
 strengthening the accountability of executive directors through amendments to the Law on Joint Stock Companies;
 developing a credit registry within the National Bank of the Kyrgyz Republic as well as amendments to the Law on
Deposit Protection to improve the functioning of the system.
Results to be achieved:
 Increased compliance with anti-corruption regulations;
 A more independent judiciary as well as a more efficient public financial management structure (internal audit
function, budget code, and public procurement);
 Lowered burden of inspections of business activities and a more stable financial sector.
Key Partners: Ministry of Finance; Ministry of Economy and Industry; and National Bank of the Kyrgyz Republic.
24
KYRGYZ REPUBLIC: ELECTRICITY SUPPLY ACCOUNTABILITY AND RELIABILITY
IMPROVEMENT PROJECT (P133446)
Key Dates:
Approved: July 15, 2014
Effective:
Closing: December 31, 2019
Financing from all cofinanciers, million US Dollars:
Financier
Financing
IDA Credit
13.75
IDA Grant
11.25
Total Project Cost
25.00
Disbursements, million US Dollars *:
Total Disbursed Undisbursed
IDA Credit
13.75
0
13.75
IDA Grant
11.25
0
11.25
*Source Client Connection as of September 5, 2014.
Note: Disbursements may differ from financing due to exchange rate
fluctuations.
The objective of the Electricity Supply Accountability and Reliability Improvement project (ESARIP) is to improve
the reliability of the electricity supply in the capital city Bishkek and the Chui and Talas regions—an area served by the
state-owned power distribution company Severelectro JSC—and to strengthen the governance of Severelectro’s
operations. By focusing on the service area of Severelectro, the project will ensure that benefits accrue to the largest
share of customers, since it is the largest distribution company, serving more than 40 percent of all residential customers
in the country and delivering more than 50 percent of total electricity consumption.
Specifically, the project will aim to:
 Improve power supply reliability in the service area of Severelectro by strengthening its distribution infrastructure
(including investments in new substations to eliminate overloads and in advanced meters);
 Enhance the quality of services to customers by providing Severelectro with better information management tools
for a faster and more effective response to service interruptions and customer complaints;
 Improve the financial viability of Severelectro through a reduction in technical and nontechnical losses in its service
area;
 Strengthen governance and internal controls in Severelectro through the provision of access to real time and reliable
corporate and commercial information, as well as institutional strengthening.
Results to be achieved:

The project will enhance the reliability of the power supply in Severelectro’s service area and make the
company more responsive and accountable to customers for the quality of its services. For example, the
incorporation of management information systems and business process reengineering will facilitate customers’
communication with Severelectro through a 24/7 customer call center, and ensure that customer inquiries and
complaints are executed in a timely, accountable, and transparent manner.
Key Partners: Ministry of Energy and Industry, Severelectro OJSC.
25
KYRGYZ REPUBLIC: FINANCIAL SECTOR DEVELOPMENT PROJECT
P125689
Key Dates:
Approved: March 08, 2012
Effective:
Closing: June 30, 2018
Financing from all co-financiers, million US Dollars:
Financier
Financing
IDA Credit
4.05
IDA Grant
5.07
Total Project Cost
9.12
World Bank Disbursements, million US Dollars *:
Total Disbursed Undisbursed
IDA Credit
3.93
0.00
3.93
IDA Grant
4.91
0.43
4.48
*Source Client Connection as of September 5, 2014.
Note: Disbursements may differ from financing due to exchange rate fluctuations
at the time of disbursement.
The political turmoil of 2010 in the Kyrgyz Republic led to significant financial sector instability, causing the collapse of
its largest bank and stress in several other financial institutions. This in turn impacted access to financial services in the
country, as the number of nonperforming loans and funding constraints grew and lending slowed. This further reduced
the already low level of access to formal financial services in the Kyrgyz Republic. Bank credit and deposit penetration in
the country are among the lowest in Europe and Central Asia, and interest rates are among the highest and constitute
one of most significant constraints to private sector development. While non-bank financial institutions, such as
microfinance organizations, are filling some of the gaps for smaller borrowers, including in rural areas, they remain small
and face high operational and funding costs as well as legal, regulatory, and institutional constraints that inhibit their
expansion.
The Project Objectives are: to enhance financial sector stability and increase access to financial services throughout the
Kyrgyz Republic, including in remote rural areas. Specifically, the project will: (i) strengthen banking regulation and
supervision, including by means of a new IT system for bank supervision; (ii) support reforms in the Kyrgyz Post Office
to expand its financial services; and (iii) modernize the movable collateral registry to expand the use of movable
collateral, such as equipment, livestock, and accounts receivable.
Results to be achieved:
The project is expected to benefit existing and new clients of banks, microfinance organizations, credit unions, and the
Kyrgyz Post Office, as it is expected to increase the safety of these institutions and their outreach.
Those living in remote or rural areas will benefit from significantly improved access to financial services through:
 New points of sales in post offices
 Possibilities to better leverage their assets to obtain loans
 An enhanced consumer protection and financial literacy framework
 Greater access to safe deposit facilities
 Expanded payment and remittance services
Given the explicit targeting of women as good clients by many microfinance organizations and credit unions, it is
expected that women will particularly benefit from this project.
The project is also expected to support the Government’s objectives of improving governance, encouraging economic
stabilization, and promoting social stabilization.
Increasing access to a variety of financial services, especially deposit services, for the poor, vulnerable, and other
underserved populations will help them manage shocks (e.g., food prices, illness, unemployment), especially in rural areas
and remote regions of the country, and will enhance employment opportunities.
Key Partners: National Bank of the Kyrgyz Republic, Kyrgyz Post Office, and the Movable Collateral Registry.
Key Development Partners: Swiss State Secretariat for International Affairs (SECO).
26
KYRGYZ REPUBLIC: BISHKEK-OSH URBAN INFRASTRUCTURE PROJECT
P104994
Key Dates:
Approved: March 18, 2008
Effective: July 29, 2008
Additional Financing (AF): effective on July 13, 2012
Closing: June 30, 2015
Financing from all cofinanciers, million US Dollars*:
Financier
Financing
IDA Grant
12.0
IDA Grant – AF
7.1
IDA Credit - AF
8.7
Government of the Kyrgyz Republic
2.35
Total Project Cost
30.15
World Bank Disbursements, million US Dollars*:
Total Disbursed Undisbursed
IDA Grant
12.0
11.6
0.4
IDA Grant – AF
7.10
5.76
1.34
IDA Credit - AF
8.70
2.65
6.05
*Source Client Connection as of September 5, 2014
Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of
disbursement.
To control the effects of growing migration on urban development in Bishkek and Osh, the Kyrgyz authorities in the early years of
independence began allocating agricultural land to migrants for housing construction in semi-informal settlements, so-called
novostroiki (literally “areas containing new construction”). The creation of such novostroiki continued throughout the 1990s and
early 2000s at a relatively moderate scale, but accelerated significantly after 2005. Today, Bishkek has about 50 such settlements, with
a population of between 125,000 and 200,000, or up to one-fifth of the city’s total population. Osh has eight, with a total population
of possibly in excess of 50,000. Developing these novostroiki was instrumental to preserving a reasonably orderly urban fabric and
averting the emergence of slum-like neighborhoods, but it did little to provide minimally acceptable living conditions to the residents
of these areas or help secure their integration into the urban community. As a result, the two cities have become surrounded by a
ring of settlements whose inhabitants are generally poor, lack basic infrastructure, and have limited access to social, educational, and
other services.
The Project Objective is to increase the availability of basic urban services and social infrastructure in the novostroiki in the cities
of Bishkek and Osh, as well as in selected small towns. The outcome of the project will be improvements (that can be monitored) in
the quantity and quality of basic services (water supply, roads, etc.) available to novostroiki residents. Specifically, the project’s
performance will be assessed against criteria such as: (i) increase in the number of residents benefiting from the 12-hour availability
of safe potable water, (ii) increase in the number of residents with access to piped potable water within a distance of less than 150
meters, (iii) increase in the number of residents with access to roads open to public transportation within a distance of less than 500
meters, and (iv) the completion of a number of community investment projects.
Results achieved:
 In Bishkek, 21.5 kilometers of roads have been constructed and rehabilitated, thereby providing access to a year-round
transportation network to about 30,745 novostroiki residents. In Osh, construction of water mains and distribution networks have
been completed and are now supplying water to about 25,000 residents. Works, financed by the Additional Financing, for the
rehabilitation of water supply and wastewater services in Naryn, Talas, Batken, Shopokov, and Isfana are ongoing and are about to
start in Tashkumyr. Works are also progressing well at the Bashkarasuu water intake in Bishkek.
 A total of 102 community subprojects in Bishkek, Osh, and 29 small towns have been approved. To date, 16 are in the process of
tendering with the rest being at the implementation or completion stage, directly benefiting 210,000 beneficiaries..
 Initiated technical assistance to the Bishkek Municipality, including assistance with the development of a 2030 City Development
Roadmap, which will help the Municipality to identify and prioritize key areas for urban integrated development, and with a
household survey covering both formal and informal new settlements.
 The project financed (i) in Osh, two new billing systems for the Osh solid waste utility and Osh municipal housing and
maintenance utility; the systems are fully operational; (ii) in Bishkek, an electronic data management system has been installed in a
number of municipal territorial administrations. The bidding for a network information system for the Bishkek Water Utility has
been completed and works have been started.
Key Partners: Community Development and Investment Agency (ARIS) and municipalities.
27
KYRGYZ REPUBLIC: SECOND RURAL WATER SUPPLY AND SANITATION PROJECT
P110267
Key Dates:
Approved: April 21, 2009
Effective: August 19, 2009
Closing: October 31, 2014
Financing from all co-financiers, million US Dollars*:
Financier
Financing
IDA Credit
5.5
IDA Grant
4.5
DFID
1.33
Government of Kyrgyz Republic
1.75
Total Project Cost
13.08
World Bank Disbursements, million US Dollars*:
Total Disbursed Undisbursed
IDA Credit
5.7
5.62
0.08
IDA Grant
4.65
3.68
0.97
*Source Client Connection as of September 15, 2014
Note: Disbursements may differ from financing due to exchange rate
fluctuations at the time of disbursement.
Prior to independence in 1991, rural water supplies were managed by a state service provider, the now-dismantled Kyrgyz Ayil
Suu (KAS, or Rural Water Supply Entity). Water was supplied almost free of charge and systems were designed to a high standard,
even providing sufficient storage and pressure to support fire hydrants. However, with independence came the end of centralized
budgetary support, and KAS became unable to sustain the previous levels of operation and maintenance of the systems, which
started to deteriorate. KAS was eventually dismantled and the responsibility for rural drinking water supply has since migrated to
several ministries and agencies, including the Department for Rural Water Supply under the Ministry of Agriculture, Water
Resources, and Processing Industry and the National Agency of Local Self-Governance Affairs. This location aimed at a more
transparent and efficient management of the sector through closer links between the Department for Rural Water Supply and the
rural self-government entities—aiyl okmotu. However in 2009, responsibility moved again under the agency in charge of irrigation
services. Since 2011, the sector has been housed under the State Agency for Architecture, Construction and Communal Services.
The Project Background: The poor state of rural water supplies and the sanitation infrastructure led the World Bank to support
the Rural Water Supply and Sanitation Project in 2001 (closed in 2008). The Kyrgyz Government requested financing for a
second, repeater operation in 2008.
The Project Objectives are to improve: (i) access to potable water to the participating communities; and (ii) hygiene, sanitation,
and water-related practices at the individual, family, and institutional levels in the rural areas. It is being restructured to strengthen
the institutional framework of the sector.
Results achieved:
“Water Supply Infrastructure and Equipment”: Rectification works have been completed in 23 out of 35 villages benefiting from the
project, with over 52,000 people gaining access to drinking water through standpipes or household connections with metering.
For a remaining 13 villages, design works have been completed.
“Sanitation and Hygiene Promotion Program”: The United Nations Children’s Fund (UNICEF) is conducting awareness campaigns on
hygiene and sanitation promotion, including media tours, video clips, TV programs, and a website. Additionally, a baseline survey
covering 34 schools in three oblasts (Issyk-Kul, Naryn, and Talas) has been conducted to derive data on children’s knowledge
about personal hygiene and the practice of hand washing with soap after using the toilet and before meals in target areas. Over
20,000 school students have been trained on personal hygiene practices.
“Institutional Development”: The project has supported the Government in developing the State Water Supply and Sanitation Sector
Strategy. As part of these activities, a study tour to Scotland has been organized. 159 Community of Drinking Water Users Union
members have been trained on fee collection and water and sanitation scheme management. 572 staff members of the
Department for Drinking Water Supply and Sanitation and Ayil Okmotu have been trained on rural water supply and sanitation
planning and management. Additionally, the project is supporting a review of current water supply and sanitation legislation.
Key Partners: The State Agency for Architecture, Construction and Communal Services has been the home for the Water Supply
Sector since the end of 2011; the Department for Drinking Water Supply and Sanitation (DDWSS) has been since located within
the Agency, and it remains the main interlocutor for the project’s work on sector policy. The Community Development and
Investment Agency (ARIS) has been effectively playing the role of implementing entity; it also facilitated the sector strategy work
of the Department, and the inter-ministerial working group has been established.
28
KYRGYZ REPUBLIC: PASTURE AND LIVESTOCK MANAGEMENT IMPROVEMENT PROJECT
P145162
Key Dates:
Approved: July 15, 2014
Effective:
Closing: March 31, 2019
Financing from all cofinanciers, million US Dollars:
Financier
Financing
IDA Credit
8.25
IDA Grant
6.75
Total Project Cost
15.00
Disbursements, million US Dollars *:
Total Disbursed Undisbursed
IDA Credit
8.25
IDA Grant
6.75
*Source Client Connection as of September 15, 2014.
Note: Disbursements may differ from financing due to exchange rate
fluctuations.
Objective of the Project is to improve community-based pasture and livestock management in the project area.
The project will support 140 pasture user unions (PUUs) and 420 private veterinarians in Chui and Talas oblasts in the north
of the country. The PUUs and private veterinarians in the remaining five oblasts will receive a similar program of support
from parallel-financed International Fund for Agricultural Development (IFAD)-funded projects under common terms and
conditions. The project will also pilot community-based pasture management in five forestry enterprises (out of 42 nationally)
in Chui and Talas oblasts as a basis for a future program nationally.
The project is expected to generate improved incomes for livestock owners as a result of higher livestock productivity due to
improvements in animal nutrition and health. Improved animal nutrition from pastures will be generated from the better
alignment of stocking rates with pasture carry capacity, the restoration of degraded pastures, and improved access to
underutilized pastures.
Improved animal health and reduced mortality will result from better animal disease control and improved nutrition. Other
benefits that were not quantified in the analysis include: more equitable access to pastures, including for vulnerable groups and
women, as a result of better governance of PUUs; improved public health as a result of a reduced incidence of zoonotic
diseases; improved incomes from nongrazing pasture use; reduced soil degradation; and reduced water runoff in pastures,
which are an important part of the watershed, and improved carbon sequestration. Fiscal benefits to the Government will
include improved land tax revenues as a result of greater pasture user willingness to pay and improved land tax collection
rates.
Results to be achieved:
 About 190,000 rural households in Chui and Talas oblasts will benefit from improved PUUs and private veterinarian
services. About 10 percent of these households are female-headed households.
 140 PUUs (out of 454 nationally), currently responsible for the community-based management of about 1.2 million
hectares of pastures and 2,100 pasture committee (PUU executive body) members, as well as 420 private veterinarians,
in the project area, will benefit from capacity building under the project.
 In addition, about 48 veterinary graduates will receive equipment and benefit from training.
 The Pasture Department, the Veterinary Chamber, and to a lesser extent, the Livestock and Pasture Research Institute
(LPRI), Rayon Departments for Agrarian Development (RUAR), and SAEPF will all benefit from capacity building
under the project.
Key Partners: Ministry of Agriculture and Melioration, Community Development and Investment Agency (ARIS), the State
Agency for Environmental Protection and Forestry (SAEPF), the Pasture Department, the Veterinary Chamber, The Kyrgyz
National Agrarian University (KNAU), the Livestock and Pasture Research Institute (LPRI), the State Inspectorate for Food
Veterinary Safety.
29
KYRGYZ REPUBLIC: SECOND VILLAGE INVESTMENT PROJECT
P098949, P115524
Key Dates:
Approved: August 3, 2006
Effective: December 5, 2006
Additional financing (AF) approved: November 3, 2009
Additional financing 2 (AF2) approved: December 20, 2012
Closing: October 31, 2014
Financing from all cofinanciers, million US Dollars:
Financier
IDA Grant
IDA Grant - AF
IDA Credit – AF
IDA Grant – AF2**
IDA Credit – AF2**
DfID (£8.46m)
Government of Kyrgyzstan
Total Project Cost
Financing
15.00
3.6
4.4
1.9
2.3
15.2
7.5
49.9
World Bank Disbursements, million US Dollars *:
Total Disbursed
IDA Grant
IDA Grant - AF
IDA Credit – AF
IDA Grant – AF2**
IDA Credit – AF2**
15.0
3.6
4.4
1.9
2.3
Undisbursed
15.94
3.53
4.59
1.99
1.7
0.0
0.0
0
0
0.55
* Source Client Connection as of September 15, 2014.
Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement.
The Second Village Investment Project provides grants to communities to implement community investment plans. Thus it
supports capacity development at the community level to plan, prioritize, and implement local investments and to manage financial
resources efficiently and transparently. All rural communities are eligible to participate. Through a participatory and transparent
process, villagers identify local problems, establish their own priorities for the grant scheme, and prepare microprojects that address
their needs. The participatory process has helped to strengthen female participation in community leadership roles, in the local and
village investment committees, and as leaders of microproject groups. Examples of investments include the rehabilitation of rural
schools, construction of rural bridges, rural health care facilities, roads, electric substations, and rural information-resource centers.
Community members contribute at least 25 percent to investment costs in cash and/or kind, and they are also fully responsible for
the subsequent operation and maintenance of the facilities. Investments are implemented as much as possible by the local
beneficiaries themselves and/or by local contractors in order to support the development of local small-scale enterprise.
The Project Objective is to assist the Recipient with: (a) improving governance and capacity at the local level; (b) strengthening
the provision of, and access to, essential infrastructure services; and (c) supporting private group–owned small-scale enterprise
development.
Results achieved:
 The project supported all 475 aiyl okmotus (rural self-government entities) and has gained strong recognition among the rural
population. The project allowed them to voice their concerns, trained them to prioritize their needs, helped to develop strategic
investment plans, and provided grant financing for their microprojects.
 More than 70,900 local government officials and community members have been trained in the principles of budgeting and
planning, and 1,698 villages have improved social and economic infrastructure.
 Approximately 2.3 million people have benefited directly from the completion of about 6,000 microprojects. These include over
317,000 beneficiaries of drinking water microprojects, 131,000 beneficiaries of electricity microprojects, 570,000 beneficiaries of
new or rehabilitated primary health facilities, and about 1,028,700 beneficiaries of school rehabilitation microprojects.
The project is implemented by the Community Development and Investment Agency (ARIS), in close cooperation with local
communities. All activities carried out by VIP2 were cofinanced by a US$15 million DfID grant, which closed on June 30, 2012.
Key Partners: Community Development and Investment Agency (ARIS), an implementing agency.
Key Development Partners: DfID (cofinancing), German Development Bank (KfW) (parallel financing).
30
KYRGYZ REPUBLIC: SECOND ON-FARM IRRIGATION PROJECT
P096409
Key Dates OIP-2:
Approved: June 19, 2007;
AF Approved: June 28, 2011
Effective: October 31, 2007; AF Effective: December 15, 2011
Closed: December 31, 2013; AF Closing: December 31, 2015
Financing from all cofinanciers, million US Dollars:
Financier
Financing
IDA Grant (OIP-2)
IDA Grant (Additional Financing)
IDA Credit ( Additional Financing)
Government of Kyrgyz Republic
Total Project Cost
16
6.7
8.3
4.55
35.55
World Bank Disbursements, million US Dollars *:
Total Disbursed Undisbursed
16.0
15.84
0.16
6.4
5.10
1.28
7.9
0
8.03
IDA Grant
IDA Grant - AF
IDA Credit - AF
*Source Client Connection as of September 5, 2014
Note: Disbursements may differ from financing due to exchange rate
fluctuations at the time of disbursement.
Irrigation has been practiced in the Kyrgyz Republic for centuries. Since 1991, due to technical, managerial, and financial
constraints, the deterioration of the irrigation and drainage infrastructure has led to an unreliable supply and distribution of
irrigation water, as well as drainage and waterlogging problems. With the assistance of the first On-Farm Irrigation Project
(OIP-1), 450 water users associations (WUAs) were established, and 63 WUAs with a total command area of 122,000 hectares
benefited from rehabilitation. After OIP-1, a large unfinished agenda remained. Insufficient investment in rehabilitation and
modernization left many farmers without access to adequate and timely water resources, and the assistance to WUAs needed
to be redirected toward developing the skills necessary to sustain their infrastructure and maximize utilization.
The Project Objective is to improve irrigation service delivery on a sustainable basis that will contribute to increased
agricultural productivity among irrigation farmers.
The project will achieve its objective through (i) assistance to ensure that WUAs are able to efficiently and productively utilize
their rehabilitated on-farm irrigation systems on a sustainable basis, with special emphasis on water and asset-management
aspects; (ii) the rehabilitation and modernization of the irrigation and drainage infrastructure for around 29 WUAs
commanding 51,000 hectares under the OIP-2, and an additional 18 WUAs (34,800 hectares) under the Additional Financing.
Results achieved:
 OIP-2, closed on December 31, 2013, met its development objective. Rehabilitation works were completed in 30 WUAs
covering around 70,000 hectares, which significantly exceeds the project target of 51,000 hectares. 30 subprojects were
completed.
 There are now 392 WUAs nationwide, with well-informed water users actively interacting with WUA management
through their zonal representatives and taking part in WUA activities.
 As result of the rehabilitation of systems and capacity-building support under OIP-1 and OIP-2, 182,888 hectares have
improved irrigation and drainage services.
 WUA Support Units were initially constrained in their work as a result of government budget deficits, but with the
funding of some of their operational costs, their performance in supporting WUAs continues to improve.
 An additional 24 WUAs are supported under the Additional Financing, which became effective in December 2011.
Currently, the status of WUAs selected for rehabilitation works is as follows: rehabilitation works have started in 11
WUAs; contract signing is planned on two WUAs for September 2014; one tender has been conducted and the evaluation
of tender bids is ongoing; the development of detailed design works is ongoing for five WUAs; and the development of
preliminary design works is ongoing for one WUA.
Key Partners: Department of Water Resources and Land Improvement, which is responsible for project implementation
through its Project Implementation Unit (PIU); Ministry of Agriculture and Melioration; and Ministry of Finance.
31
CENTRAL ASIA ROAD LINKS– KYRGYZ REPUBLIC
P132270
Key Dates:
Approved: April 22, 2014
Effective:
Closing: April 30, 2019
Financing from all cofinanciers (US$ million): 54 mln
Financier
Financing
IDA Credit
36.8
IDA Grant
8.2
Government
9.00
Total Project Cost
54.00
Disbursements of IDA Credit/Grant (US$ million)*:
Total
Disbursed Undisbursed
IDA Credit
36.8
0
36.8
IDA Grant
8.2
0
8.2
*Source Client Connection as of September 5, 2014
Note: Disbursements may differ from financing due to exchange rate
fluctuations at the time of disbursement.
The Central Asia Road Links (CARs) Program, the result of a collaborative effort initiated by respective governments in
the Central Asia region, has been developed as a regional, multiphase program considered to be a regional transformational
project. The program has the overall objective of increasing transport connectivity between neighboring countries in
Central Asia along priority cross-border road links while supporting improvements in road operations and maintenance
practices. The road links once rehabilitated will improve access along priority transport connections between major urban
agglomerations within the Central Asia region, thereby supporting the creation of an integrated economic region across
borders.
The CARs Program is designed as part of a series of projects (horizontal regional program) with multiple
countries. The program is horizontal in that not all countries would need to start at the same time, but rather each would
begin when ready, through a series of sequential phases. The proposed project in the Kyrgyz Republic is the first phase in
this program (CARs-1), since the country has demonstrated formal commitment and readiness. Tajikistan and Kazakhstan
have also expressed their interest in this program. The Second Phase of the CARs (CARs-2) in Tajikistan is already under
preparation. Discussions between the Government of the Kyrgyz Republic and the Republic of Kazakhstan are ongoing
with a view to increasing transport connectivity between the two countries in bordering Issyk-Kul oblast (Kyrgyz Republic)
with bordering Almaty oblast (Republic of Kazakhstan).
The Project Objective of the first phase of the CARs (CARs-1) is to increase transport connectivity between the
Kyrgyz Republic and the Republic of Tajikistan along priority cross-border road links in Batken oblast while supporting
improvements in road operations and maintenance practices. The road sections to be financed under CARs-1 prioritize
connectivity between the Osh and Batken oblasts in the Kyrgyz Republic and Sugd oblast in Tajikistan, as they build lateral
spurs from the Osh-Isfana axis to the Tajik border.
Results to be achieved:
 Rehabilitation of about 56 kilometers of road sections in Batken oblast along and within the close vicinity of the OshBatken-Isfana road corridor. Road sections include: Isfana-Kairagach/Madaniyat border crossing (36 kilometers),
Batken-Tortkul (14 kilometers), and Batken-Kyzyl Bel/Guliston border crossing (6 kilometers).
 Improvement of road operations and maintenance by the Osh-Batken-Isfana Roads Department, which is responsible
for routine maintenance and emergency works for the entire Osh-Batken-Isfana corridor.
 Financing Agreement was signed on July 25, 2014. Internal government ratification process is ongoing.
Key Partners: The Ministry of Transport and Communications of the Kyrgyz Republic (MOTC).
32
KYRGYZ REPUBLIC: NATIONAL ROAD REHABILITATION (OSH-BATKEN-ISFANA) PROJECT
P107608, P123291, P126606
Key Dates:
Original Project (approved): November 3, 2009
Effective: February 26, 2010
Additional Financing 1 (approved): September 30, 2010
Additional financing 2 (approved): June 28, 2011
Closing: December 31, 2014
Financing from all cofinanciers (US$ million):
Financier
Financing
Add. Financing 1 Add. Financing 2
IDA (Credit)
13.75
5.50
8.80
IDA (Grant)
11.25
4.50
Government
5.76
0.00
Total Project Cost
Disbursements of IDA Credit/Grant (US$ million)*:
Total
Disbursed
IDA Credit
28.05
18.39
IDA Grant
22.95
20.59
7.20
0.00
56.76
Undisbursed
9.66
2.36
*Source Client Connection as of September 5, 2014
Note: Disbursements may differ from financing due to exchange rate
fluctuations at the time of disbursement.
Rehabilitating the road network is a priority of the Government, as the Kyrgyz Republic is a mountainous country dependent on
international trade. Almost all passengers (92 percent) and most freight (59 percent) are transported on roads. Travel in most of the
country is severely constrained by the predominantly alpine topography; roads have to cross passes of 3,000 meters in altitude and are
subject to frequent natural disasters (e.g., mud slides, snow avalanches, rock falls). Travel in the southwestern part of the Kyrgyz
Republic has some specific constraints; the road between Osh and Isfana crosses Tajik and Uzbek enclaves and main territories, which
entails going through border formalities. The existing main roads network of the country is adequate for the level of economic and
social activity likely to occur in the medium term. However, roads are deteriorating; about 67 percent of the main network is in
sustainable condition, but the remainder requires heavy maintenance or rehabilitation. The focus of the Government’s program is
therefore on the rehabilitation of key road links. At the same time, the Ministry of Transport and Communications (MOTC) aims to
improve current road maintenance practices. Serious attention is also given to road safety, as road deaths and injuries in the Kyrgyz
Republic are unacceptably frequent: about 22 fatal crashes per 100 collisions with casualties, and one death for every 6.6 people injured
(whereas in the United Kingdom it is 1:65).
The Project Objectives are: (i) to contribute to the reduction of transport costs and travel time along the Osh-Batken-Isfana road
corridor; (ii) to improve road safety planning and road asset management; and (iii) to repair and rehabilitate road infrastructure in and
around Osh and Jalalabad cities, thereby creating temporary jobs. The completion of the project will make a significant contribution to
the level of reliability and connectivity offered, as about 1 million inhabitants, or 18 percent of the country’s population, will benefit
from the investment. The rehabilitation of the Nookat Pass (18 kilometers) and the Pulgon-Burgandy section (32 kilometers) of the
road corridor will also improve transit traffic between the Kyrgyz Republic and neighboring countries. In Osh city, road maintenance
works are being financed in order to create temporary jobs. International expertise is being brought into the country to advise on steps
to improve road safety planning and road asset management.
Results achieved:
 The Pulgon-Burgandy section of the Osh-Batken-Isfana road (32 kilometers) has been completed, resulting in the twofold reduction
in travel time and the tenfold increase in truck traffic.
 In Osh city, repair works have been completed, with 4,502 person-months of temporary jobs created to date.
 Rehabilitation works on Nookat Pass are progressing well and to be completed by the closing date December 31, 2014. The contract
for rehabilitation works on Osh city bypass road and Osh airport road was awarded and the works have started and are expected to
be complete by December 31, 2014. Based on an agreement with the MOTC, rehabilitation in the city of Jalal-Abad (3 kilometers)
will be financed from its own 2014 budget.
 The Road Safety Strategy and underlying Action Plan have been agreed to by all the line ministries and are now in the process of
legal enforcement by the Ministry of Justice. The bidding for road crash database procurement has been launched.
 Road Asset Management has been designated a strategic priority of the MOTC. A team of one international consultant and MOTC
staff began to work jointly on the establishment of a Road Asset Management System (RAMS). The international consultant is
visiting the country to train designated staff of the MOTC Road Department (DDH) on visual surveys and a roughness survey to
start filling the RAMS database.
Key Partners: The Ministry of Transport and Communications of the Kyrgyz Republic (MOTC).
33
KYRGYZ REPUBLIC: HEALTH AND SOCIAL PROTECTION PROJECT (HEALTH SWAp-I)
P084977, P112142, P125470
Key Dates:
Approved: December 15, 2005
Effective: June 8, 2006
Additional Financing approved: June 12, 2008 (US$6 million)
Additional Financing 2 approved: June 09, 2011 (US$24 million)
Closing: June 30, 2015
Financing from all cofinanciers, 2006-2015, million US Dollars:
Financier
Financing
Add. Financing 1 Add. Financing 2
IDA (Grant)
15
6
Other Donor (DFID)
17.32
Other Donor (KfW)
28.3
Other Donor (SIDA)
12.54
Other Donor (SDC)
8.97
Total Project Cost
112.13
World Bank Disbursements, million US Dollars *:
Total Disbursed
Undisbursed
IDA
45
41.96
3.040
24
*Source Client Connection as of September 16, 2014.
Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement.
This project is designed as a sector-wide approach in which joint financiers pool funds at the Treasury with government funds to
support the government health strategy. This approach to implementation resulted in a much stronger coordination among donors,
and contributed to a high level of aid effectiveness and government ownership of the reform process. The Project Objectives are to
improve the performance of the health sector, strengthen the targeting of social benefits, and improve and sustain the health and
nutritional status of vulnerable populations affected by food price shocks. Components: Supporting the government health strategies
Manas Taalimi and Den Sooluk programs to help finance the State-Guaranteed Benefit Package; Strengthening the administrative
system of the Ministry of Social Protection (MSP) to help it to design a social safety net strategy and build staff capacity; and Protecting
the health and nutritional status to support a package of nutrition activities targeting women and children.
Results achieved: The Government adopted a new health strategy Den Sooluk for 2012–16 to further strengthen primary health care
(PHC) and address delivery system deficiencies, especially for cardiovascular diseases, mother and child care, HIV, and tuberculosis
(TB) services. The implementation of the Den Sooluk Program 2013, supported by a Sector-Wide Approach (SWAp), remained largely
unfunded until July 2014, due to uncertainty with the approval and ratification of the Joint Financiers’ new contributions to SWAp-2.
Key results so far include:
 Infant and child mortality rates have begun to decrease and Kyrgyzstan is on track to achieve the Millennium Development Goal 4
(MDG), but it is off track to achieve MDG5 (maternal mortality); TB incidence and mortality have been on the decline, and
cardiovascular mortality among working-age adults has stabilized. HIV incidence continues to rise and the emergence and growing
incidence of multi-drug resistant TB is a worrying sign. It is critical for Den Sooluk to accelerate further progress toward improving
key health outcomes.
 With support from the SWAp-1, health expenditures increased from 10.6 percent out of total government expenditures in 2006 to
13 percent in 2010–13.
 The financial burden of the poorest 40 percent declined during 2003–09, and geographic and financial barriers to access have
decreased due to the introduction of the single payer system and the pooling of funds, efficiency gains obtained from restructuring,
and the expansion of the state-guaranteed benefits package (SGBP). No further reductions in financial burdens have taken place
since 2009. This leaves a continued agenda for Den Sooluk.
 The efficiency of resource allocation within the SGBP has improved: the share of health expenditures allocated to PHC has
increased from 29 percent in 2005 to 38 percent in 2009, and direct patient expenditures (drugs, supplies, food) have increased from
20 percent in 2005 to 30 percent in 2009, due to the optimization of excessive health infrastructure. However, a drastic increase in
the salaries of health workers in 2011 squeezed the share of non-salary expenditures. It is critical to ensure that it reach at least 35
percent in the next few years.
 The use of primary care services has risen slightly, although the further strengthening of primary care will be addressed in the new
strategy. Consensus has been reached that improving the quality of care needs to be the main driver of Den Sooluk.
Key Partners: Ministry of Finance, Ministry of Health, Ministry of Social Development, and Mandatory Health Insurance Fund.
Key Development Partners: DfID, SIDA, SDC, and KfW, which financially contributed to the project through pooled budget
support, and the World Health Organization (WHO), USAID, the United Nations Children’s Fund (UNICEF), United Nations
Population Fund (UNFPA), German Technical Cooperation Agency (GIZ), and others that provided parallel funding.
34
KYRGYZ REPUBLIC: SECOND HEALTH AND SOCIAL PROTECTION PROJECT (HEALTH SWAp-2)
P126278
Key Dates:
Approved: May 3, 2013
Effective: July 11, 2014
Closing: December 31, 2018
Financing from all cofinanciers, 2014-2019, mln US Dollars:
Financier
Financing
IDA Grant
7.43
IDA Credit
9.07
Other Donors:
30.4
Other Donor (KfW grant)
18.5
Other Donor (SDC grant)
11.96
Total Project Cost
46.9
World Bank Disbursements, million US Dollars *:
Total Disbursed
IDA Grant
7.43
0
IDA Credit
9.07
0
Undisbursed
7.57
9.11
*Source Client Connection as of September 15, 2014.
Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement.
The objectives of the Project are to improve health outcomes in four health priority areas in support of the Den Sooluk National
Health Reform Program 2012–2016; and support the Government’s efforts to enhance the effectiveness and targeting performance of
social assistance and services. The first component supports the implementation of the Den Sooluk Program through a Sector-Wide
Approach (SWAp). The areas focused are: improving the delivery of core services as defined in the Den Sooluk Program, strengthening
the health system, supporting the State Guaranteed Benefits Package (SGBP), and strengthening the fiduciary capacity in the health
sector. The second component involves strengthening the policy and administrative capacity of the Ministry of Social Development to
support the Government’s efforts to enhance the effectiveness and targeting performance of social assistance and social services aimed
at supporting the poor and the vulnerable. The third component is a contingency emergency response. The objective of this component
is to improve the Government’s response capacity in the event of an emergency.
Results to be achieved:
 Government health expenditures as a percentage of total government expenditures will be sustained at a level of 13 percent;
 Increased coverage of the enrolled population, with an increase in the percentage of detected cases compared to the number of
estimated cases under disease management programs with incentives for providers and patients (hypertension, diabetes, etc.);
 Financial burden of the two poorest quintiles will at least be sustained at the level of the achieved 22 percent;
 Share of social assistance spending on poverty-targeted programs will increase from 15.5 to 35 percent.
Health: Thematic meetings on health financing, curbing the tobacco epidemic, and refining primary health care (PHC) brought
together various stakeholders, including the Deputy Prime Minister, other policy makers; leaders of health organizations and
nongovernmental organizations (NGOs), and representatives from development partners. The meetings have identified the steps
needed to refine existing health purchasing/output-based provider payment methods and the model of PHC delivery and to implement
effective tobacco control measures:
 improving public finance and transparency; improving the primary care payment system and the refinement of a case-based hospital
payment system, and enchancing the State Guarantee Benefits package;
 increasing excise taxes, baning smoking in public places, using large pictorial health warnings on tobacco products, among others;
 fine-tuning the model of care with the further integration of outreach services provided by village health communities into family
medicine; revisiting the financial incentives by combining the current capitation mechanisms with a pay-for-performance incentive;
and reviewing and adjusting human resource policies and training with a focus on redefining the role of mid-level providers and
upgrading their training curriculum to reflect the expanded scope of work.
Concerted efforts are needed to push the PHC development and health financing refinement agenda forward. Strong leadership and
political commitment is a mandatory condition of further improvement.
Social Protection: (i) safety net reform, (ii) modernization of disability services, and (iii) capacity building, particularly in developing
plans and measures for the gradual reform of the social safety net to refocus it on protecting the poor from abject poverty and
mitigating the negative effects of various shocks on the poor.
Key Partners: Ministry of Finance, Ministry of Health, Ministry of Social Development, and Mandatory Health Insurance Fund.
Key Development Partners: KfW, SDC which financially contributed to the project through pooled budget support, and WHO,
USAID, UNICEF, UNFPA, GIZ, UNDP, Global Fund, and others that provided parallel funding.
35
KYRGYZ REPUBLIC: KYRGYZ HEALTH RESULTS-BASED FINANCING
(TRUST FUND) P120435
Key Dates:
Approved: April 18, 2013
Effective: July 29, 2014
Closing: June 30, 2017
Financing from all sources, million US Dollars:
Financier
Financing
TF Grant for pre-pilot project
0.5
TF Grant for pilot project
11.0
Total Project Cost
11.5
World Bank Disbursements, million US Dollars *:
Total Disbursed Undisbursed
TF Grant
11.5
0.3
11.2
*Source Client Connection as of September 16, 2014.
Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement.
The Project is to pilot performance-based payments for, and/or enhanced supervision of, the quality of maternal and
neonatal care in randomly selected rayon hospitals, and to strengthen the Government’s and providers’ capacity in
performance-based contracting and monitoring and evaluating (M&E) for results.
There are two components:
The first component would finance a randomized controlled trial to test two alternatives for improving the quality of
maternal and neonatal care at the rayon (regional) hospital level: a) an enhanced supervision scheme using a balanced score
card (BSC) together with a performance-based payment, and b) an enhanced supervision scheme using a BSC only.
The second component would finance training and technical assistance to providers in participating facilities to a)
understand their roles and responsibilities under performance-based contracting; b) enhance their capacity to conduct peer
verification of results; and c) increase their ability to conduct self M&E for results.
Results to be achieved:
 Performance-based payment for, and enhanced supervision of, the quality of maternal and neonatal care will be piloted
in selected rayon and small town hospitals;
 Government’s (Ministry of Health and Mandatory Health Insurance Fund) and providers’ capacity in performancebased contracting and M&E of results will be strengthened.
The pilot project has been declared effective.
Implementation of the pre-pilot project since fall 2013 in Chui rayon hospital provided an opportunity to develop and test
results-based financing (RBF) processes, procedures, and instruments, and to learn from the implementation before the
rollout of the pilot RBF. The pre-pilot demonstrated results by bringing changes to the management of the hospital. The
pre-pilot hospital’s performance has shown a steady improvement from a baseline 37 percent quality score in December
2013 to 53 and 67 percent in April and July 2014.
As a part of the preparation for the scale-up of the pilot RBF project, a randomization of 63 eligible rayon and small town
hospitals took place during the randomization ceremony on June 18, 2014, attended by various stakeholders, including
representatives of the Ministry of Health, the Mandatory Health Insurance Fund (MHIF), hospitals, professional
associations, and civil society to ensure the transparency of the process and broader understanding of randomization
principles. Hospitals were assigned to three groups using an iterative Stata computer program in front of the entire audience.
An intensive baseline survey of 63 hospitals in July–August 2014, using the BSC, showed a baseline quality score varying
between 0.4 to 42 percent, with the average score of 9 percent. 21 hospitals, assigned to group 1, will receive performancebased bonus payments based on the results of the baseline survey in early October 2014.
Critical actions over the remaining part of the pre-pilot project’s time will include: (i) finalization of the procurement of
technical assistance for the development of tablet-based software; (ii) the setting up of accounts; and (iii) the detailed
planning and scale-up of the pilot project rollout.
Key Partners: Ministry of Finance, Ministry of Health, Mandatory Health Insurance Fund, and civil society.
Key Development Partners: KfW, SDC, WHO, USAID, UNICEF, UNFPA, GIZ, UNDP, and others active in the area
of Maternal and Child Health
36
KYRGYZ REPUBLIC: SECTOR SUPPORT FOR EDUCATION REFORM PROJECT
P113350
Key Dates:
Approved: March 7, 2013;
Effective: March 26, 2014
Closing: July 16, 2018;
Financing from all cofinanciers, million US Dollars:
Financier
Financing
IDA Grant
7.45
IDA Credit
9.12
Total Project Cost
16.57
World Bank Disbursements, million US Dollars *:
Total Disbursed Undisbursed
IDA Grant
7.35
0.39
6.96
IDA Credit
9
0.85
8.15
*Source Client Connection as of September 15, 2014
Note: Disbursements may differ from financing due to exchange rate
fluctuations at the time of disbursement.
The objective of the Project is to create conditions for improved learning outcomes in basic education.
There are three components:
The first component focuses on enhancing classroom learning through (1) the design and implementation of an inservice training program for about 10,000 primary school teachers to improve teaching-learning practices in support of
the newly revised curriculum, and the design and implementation of training programs to enhance the capacities of
approximately 1,500 deputy directors, district-level methodologists, and inspectors to support primary level teachers to
teach the new curriculum; (2) the printing and distribution of approximately 3 million textbooks, teacher guides, and
student workbooks for primary and lower secondary schools, and the provision of a package of essential teachinglearning materials for primary schools; (3) support for the ongoing revision of curriculum for grades 5–9, focusing on
the piloting and finalization of subject standards and program content; and (4) a sample-based assessment of student
learning achievements at grade 4, and an assessment of teaching-learning practices at the primary level.
The second component aims to improve the management of education resources and accountability for their use.
The component would support: (1) the expansion of per capita financing (PCF) and operationalization of a monitoring
system for school budgets and expenditures, training, and technical assistance to key players at the local and central
levels; and (2) the strengthening of school leadership and management through the training of school directors and
accountants and the production of support materials.
The third component is communications and implementation support. This component has two subcomponents: (1)
communications and outreach activities to engage and inform stakeholders about the changes in the education sector;
and (2) implementation support to finance operating costs at the Ministry of Education and Science to implement the
project.
Results to be achieved:
 10,000 teachers trained to implement the revised curriculum and apply improved teaching learning practices.
 1,500 school directors and district-level methodologists trained to provide instructional support to teachers.
 3 million copies of textbooks, teacher guides, and student workbooks printed and distributed.
 All students in grade 3–4 using revised textbooks.
 A new curriculum for grades 5–9 piloted and a sample-based achievement test carried out for grade 4.
 Schools operate under a new financing model and are accountable for the annual school budget and
expenditures.
Key Partners: Ministry of Education and Science, Kyrgyz Academy of Education, Regional In-service Teacher
Training Institutes and Methodological Centers, local self-governance bodies (ayil okmotu), and schools.
37
KYRGYZ REPUBLIC: KYRGYZ EARLY EDUCATION PROJECT
GLOBAL PARTNERSHIP FOR EDUCATION
P132490
Key Dates:
Approved: April 2, 2014;
Effective: August 6, 2014
Closing: July 16, 2018;
Financing from all co-financiers, million US Dollars:
Financier
Financing
GPE Grant
12.7
Total Project Cost
12.7
World Bank Disbursements, million US Dollars *:
Total Disbursed Undisbursed
GPE Grant
12.7
0.00
12.7
*Source Client Connection as of August 1, 2014
Note: Disbursements may differ from financing due to exchange rate
fluctuations at the time of disbursement.
The Project Development Objective is to increase equitable access to preschool education, and to establish conditions
for improving its quality. The project has three components:
Component One: Expansion of quality preprimary education (US$11.60 million equivalent). The objectives of this
component are to increase access to preschool education for children aged 4–5 years in targeted areas and to enable all
children who are in the year prior to grade one to complete a full-year school preparation program. As such, this
component would finance: (i) the provision of teaching-learning materials and furniture to enable the opening or
expansion of kindergartens in poor communities with limited or no access to preschool services, as well as to enable the
universal coverage of the full-year preparation program; and (ii) the training of kindergarten and preparation program
teachers on the knowledge and skills needed to deliver appropriate education programs. The component is constituted of
three subcomponents that reinforce one another by promoting greater coverage, quality, and integration.
Component Two: Improved policy, programs, and system effectiveness (US$0.34 million equivalent). The objective of
this component is to improve policy, programs, and system effectiveness. To that end, it would finance technical
assistance, materials, and the monitoring of child development and classroom practices.
Component Three: Communications and implementation support (US$0.76 million equivalent). The objective of this
component is to finance communications and incremental operating costs generated by the roject.
Results to be achieved:


80,000 children 5–6 years old enrolled in the full-year school preparation program;
Up to 100 new community kindergartens established in targeted communities;

10,000 children 3–5 years old enrolled in community-based kindergartens in targeted communities;

100 percent of school preparation classes have received a package of essential learning and teaching materials;

90 percent of the teachers in newly established kindergartens are certified after training.
Key Partners: Ministry of Education and Science, Kyrgyz Academy of Education, Regional In-service Teacher Training
Institutes& Methodological Centers, local government and schools. UNICEF, Local Education Group.
38
KYRGYZ REPUBLIC: AGRICULTURAL PRODUCTIVITY ASSISTANCE PROJECT
(TRUST FUND) P118838
Key Dates:
Approved: June 30, 2011
Effective: March 27, 2012
Closing: March 31, 2015
Financing from all cofinanciers, million US Dollars:
Financier
Financing
Russia Food Price Crisis
6.85
Beneficiaries
0.78
Total Project Cost
7.63
Disbursements, million US Dollars *:
Total Disbursed Undisbursed
TF
6.85
6.44
0.41
*Source Client Connection as of September 9, 2014.
Input of beneficiaries: $1.9 mln.
Note: Disbursements may differ from financing due to exchange rate fluctuations.
Objective of the Project is to increase the agricultural productivity of the project beneficiaries. Project activities are aimed
at improving access to finance to support investments in farm inputs, agricultural machinery, and marketing infrastructure;
timely and reliable weather forecasts; and complementary training activities for farmers.
Investment Support for Improved Farm-Level Productivity Component provides a credit line to farmers and farmer
associations: (i) working capital loans for spring and fall planting and harvesting activities; and (ii) investment loans and
leases for farm machinery and investing in warehouses and other productive assets. It also finances the further expansion of
the community seed funds (CSFs) and women self-help groups (WSHGs) aimed at supporting poorer rural households with
high-quality seeds and fertilizer, as well as training for CSF and WSHG members.
Technical Support for Improved Farm-Level Productivity Component supports pilot delivery of weather information
to farmers, including early warnings for adverse weather events, to reduce crop losses due to such weather events; and
training and extension services to farmers and farmer cooperatives on modern, sustainable agricultural practices (including
integrated pest management) and quality management systems at the farm level to increase agricultural productivity and
reduce on-farm losses. The funding for the project is provided by the Russia Food Price Crisis Rapid Response Trust Fund
for the Kyrgyz Republic and Tajikistan.
Results achieved:
 505 subloans in the total amount of about US$3.9 million equivalent have been provided to farmers, including 96 women.
100 percent of the credit line proceeds have been used for investment, mainly in herd improvement and agricultural
machinery.
 A total of 95 CSFs have been established in all seven oblasts since autumn 2012 with an initial membership of 2,566
farmers, including about 13 percent women. The number of CSFs is higher than the initially proposed total number of 65
CSFs. The newly established CSFs have received 684.2 tons of seeds and 911.3 tons of fertilizer. In 2013, CSF members
achieved yields of about 56 percent and 49 percent for winter wheat and potatoes, respectively, higher than they achieved
before the project in 2012 and about 35 percent and 54 percent higher than national average yields.
 During 2013–14, 302 new WSHGs with 2,050 members have been created in 59 villages and provided with vegetable
seeds. A total of 0.301 tons of seeds were distributed among the WSHG members (tomato, cucumber, onion, carrot,
cabbage, red beet). In 2013, the women’s groups sold 1.438 tons of vegetables and earned more than KGS 22.5 million
from sales.
 320 farmers in the pilot rayons of Chui, Talas, and Issyk-Kul oblasts were subscribed to receive via short message service
(SMS) the three-day weather forecasts and adverse weather warnings produced by Kyrgyz Hydromet. Good collaboration
achieved with the Rural Advisory Services for disseminating information on forecasts among farmers.
 1, 419 training sessions on improved agro-technical practices and on-farm quality management have been provided to
approximately 4,033 poor farmers throughout the country, of which 2,371 were women heads of households. Surveys
indicate that over 80 percent of trainees rated the training as useful and efficient, while 73 percent of respondents reported
adopting at least one improved practice promoted by the training courses.
Key Partners: Ministry of Agriculture and Melioration, Ministry of Finance, Credit Line Management Unit under the
Ministry of Finance, Agribusiness Competitiveness Center, and Kyrgyz Hydromet.
39
CAPACITY BUILDING IN PUBLIC FINANCIAL MANAGEMENT (Trust Fund)
P112713
Key Dates:
Approved: November 25, 2008
Effective: December, 16, 2009
Closing: December 31, 2014
Financing in million US Dollars*:
Financier
Financing
Other Donors (EC)
2.84
Other Donors (DFID)
3.66
Other Donors (Seco)
0.52
Other Donors (Sida)
0.47
Total Project Cost
7.49
Disbursements, million US Dollars *:
Total
Disbursed Undisbursed
TF
7.49
5.08
2.41
*Source Client Connection as of September 15, 2014
Note: Disbursements may differ from financing due to exchange rate
fluctuations at the time of disbursement.
**Request to extend the project to May 31, 2015, is under review.
The 2009 Public Expenditure and Financial Accountability Assessment (PEFA) indicates the need for continued reform of the
public financial management (PFM) system in the Kyrgyz Republic, including budget preparation, budget execution, budget
transparency, internal audit, and cash management. Furthermore, the experience of PFM reform over the last decade indicates
that significant reforms have been achieved only when supported by external technical support and the provision of training
for civil servants. Thus the main part of the project focused on capacity building in PFM. Diverse donor support for PFM
reform in the past has not always been fully coordinated or focused on the key priorities for reform. There are immense
management challenges for public administration in the country and in particular, in the Ministry of Finance (MoF), to
implement PFM reforms effectively. In the past, a general criticism of various technical assistance projects has been that they
have provided substantial advice and guidance from international consultants but less in terms of direct capacity-building
activities. However, this need was addressed through the Multi-Donor Trust Fund (MDTF) project by conducting a
comprehensive assessment of capacity gaps/needs so that there will be adequate capacity to implement all key tasks outlined
in the project.
The Project Objective is to strengthen the effectiveness, efficiency, and accountability of PFM through strengthening the
budget process, the internal audit and control functions, and the institutional and human capacity of the MoF, as well as other
agencies involved in PFM in the country.
The project has the following components: (i) strengthening the budget process; (ii) improving the medium-term budget
framework, including the line ministries; (iii) enhancing internal audit and control; and (iv) strengthening capacity building for
PFM.
Results achieved: Strengthening the Budget Process. The project supported the MoF in developing a draft Budget Code. In June
2014, the Budget Code underwent the first reading in Parliament; comments were received from various stakeholders and
forwarded to the Government. The code is intended to establish a framework for budget management that will reflect best
international practices. Progress has made been on increased transparency through the provision of budget information to the
population in a user-friendly format, particularly the Citizen’s Budget, and budget hearings on the budget proposals for both
2014 and 2015 were arranged in four regions. Moreover, several additional initiatives of the MoF have been supported to
improve the transparency of budget information that have resulted in an improvement of the Open Budget Index (OBI) from
15 in 2010 to 20 in 2012.
Medium-Term Budget Framework. Elements of performance budgeting were developed for 28 agencies in 2014, and performance
budget classification is being developed. But a stronger linkage of the MTBF to the annual budget is a necessary next step.
Capacity Building for Public Financial Management. A Training Plan has been developed based on a needs assessment, and the
project is supporting the training activities envisaged in the plan. A business plan for the Training Center has been developed
to ensure the sustainability of the project’s capacity-building activities. Currently, the Training Center is developing an elearning strategy to efficiently build the capacity of MoF staff.
Key Partners: Ministry of Finance of the Kyrgyz Republic.
Key Development Partners: European Commission, DfID, SECO, SIDA.
40
KYRGYZ REPUBLIC: MANAS MANAGEMENT COMPANY
Project ID 1806
Fiscal year: 2010
Guarantee holder: Finrep Ges. m.b.H.
Investor country: Austria
Gross exposure: US$5.8 million
The project is the construction and operation of an air cargo complex and an air catering center at Manas International
Airport in Bishkek.
MIGA originally issued contracts to Italian Technology & Innovations S.r.l. (ITI) and MCC S.p.A. (MCC) (formerly
Mediocredito Centrale S.p.A.) in 1998 and 1999, respectively, for this project. MIGA reissued the contracts in FY02 to
accommodate changes in the commercial arrangements of the respective parties. Further details of the project appeared
in MIGA’s 1998 and 1999 annual reports.
MIGA has modified an existing contract of guarantee with Finrep Handles GmbH (Finrep) of Austria, increasing the
guarantee amount to US$5.8 million. This includes the coverage of shares and future retained earnings, reflecting a
revised 80 percent shareholding in Manas Management Company and extending the tenor of guarantee by two years.
MIGA’s coverage is against the risk of expropriation.
The project has been operating at Manas International Airport since 2001 as the sole licensed provider of cargo
handling and storage services, as well as in-flight catering services. The company is based and operates in a strategic
cargo and transportation hub with significant growth potential in the rapidly expanding Central Asian market.
Results achieved:
The cargo complex at Manas International Airport has enabled the airport to increase the volume of incoming and
outgoing airfreight, with broader economic benefits for the Kyrgyz Republic (which has only one international airport).
The complex has also provided the necessary infrastructure to improve the capacity of the airport. It was built and now
operates to the International Air Transport Association (IATA) standard. This will continue to make the airport a more
desirable destination for international airlines, leading to increased air traffic.
MIGA’s continuing support to Manas International Airport is consistent with the World Bank Group’s Joint Country
Support Strategy for the Kyrgyz Republic for 2007–10 and the Kyrgyz Republic’s Country Development Strategy for
the same period. The project contributes to the strategic goal of improving the environment for business and economic
growth.
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RECENT IFC INVESTMENTS IN THE KYRGYZ REPUBLIC
Financial
year
Project
2014
2013
Bai Tushum
Kyrgyz Investment and
Credit Bank (KICB)
2012
Kompanion Financial
Group
FINCA Kyrgyzstan
Demir Kyrgyz
International Bank
2011/2012
2012
2007/2011
2009/2011
2008
Magic Box
Kyrgyz Investment &
Credit Bank
Altyn-Ajydar
IFC
Financing
(US$ million)
4.0
12
6.0
DESCRIPTION
Loan for expansion of SME lending
US$10 million loan and US$2 million credit line under IFC
Global Trade Finance Program to support the bank’s lending
operations.
Loan to Kompanion for microfinancing activities.
10
2.0
Loan to FINCA Kyrgyzstan for microfinancing activities.
2.5
Loan to support expansion of the largest producer of
cardboard packages.
5.0
1.6
Loan to support the bank’s trade finance.
Loan to expand the bank’s lending operations.
Loan to finance a new plant to expand its production.
IFC ADVISORY SERVICES IN THE KYRGYZ REPUBLIC
Years of
operation
Project
2013 –
present
Investment Climate
Advisory Services
Project
2007 –
present
Central Asia
Corporate
Governance Project
2009 –
present
2008 –
present
2012-present
2012-present
2014-present
Azerbaijan-Central
Asia Financial Markets
Infrastructure
Advisory Services
Project
Micro Finance
Transformation
Project
Housing Microfinance
Advisory Services
Project
Central Asia Tax
Project
Central Asia Agrifinance Project
DESCRIPTION
Aims at building on the successful reforms achieved in investment climate reform,
with a focus on reducing the implementation gap, increasing investment, and
improving the investment climate for the agribusiness sector. Donor partners are
the Governments of Switzerland and the United Kingdom.
Helps local joint stock companies and banks strengthen their corporate
governance practices with a view to improving their operations and increasing
their ability to attract investment and financing. Donor partners are the
Governments of Switzerland and the United Kingdom.
Aims to expand secure access to finance for individual consumers and micro,
small, and medium-sized enterprises by improving the financial infrastructure of,
and regulatory environment for, credit bureaus and by developing a Risk
Certification Program. The project is implemented in partnership with the
Government of Switzerland.
Provides advisory services to microfinance institutions in Azerbaijan and Central
Asia to support their transformation processes. The project is implemented in
partnership with the Development Bank of Austria.
Helps improve housing conditions for low-income Kyrgyz households by
introducing an innovative housing microfinance lending product to local financial
institutions, enabling them to provide funding for home improvements to lowincome residents. The project is implemented in partnership with the Government
of Switzerland.
Helps government reduce tax compliance costs for businesses and promotes tax
transparency and financial disclosure. Donor partners are the Governments of
Switzerland and the United Kingdom.
The ultimate goal of the project is improved access to finance and markets for
farmers through the improved capacity of farmers, supply chain aggregators, and
financial intermediaries in Kyrgyzstan, Tajikistan, and Uzbekistan. Donor partner
is Austrian Ministry of Finance.
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KYRGYZ REPUBLIC: KYRGYZ INVESTMENT AND CREDIT BANK
IFC Investment Services:
Equity/Loan
Equity
Senior Loans (4)
Trade Finance
Amount
(US$ mln)
3.0
21.5
2
Year
2001/05/07
2013/11/09/07
2013
IFC Advisory Services:
- Leasing Operations (2006 – 2008)
- Risk Management (2011 – on going)
- Mobile Banking (2013 – ongoing)
Kyrgyz Investment and Credit Bank (KICB) is a closed joint-stock company, which was incorporated in the Kyrgyz
Republic in 2001. Since the bank was established, it has gradually developed as one of the leading providers of financial
services to private companies in the country. Currently, the bank is a long-term International Finance Corporation (IFC)
client. IFC first invested in KICB in 2001 when it was set up; IFC participated in two rights issues and provided three
loans over the years to expand the KICB’s lending to small and medium-sized enterprises (SMEs) in less-developed
regions of Kyrgyzstan. In addition, IFC provided KICB with advisory services to help it set up its leasing operations, to
improve its risk management function, and most recently to set up its mobile banking activities.
The Project Development Objective:
IFC’s investments helped the Bank offer wider financing options to Kyrgyz SMEs and to expand its SME lending
activities. Such financing is crucial for the sustainable development of the private sector across the country, which results
in improved economic development and poverty reduction. In addition, IFC’s trade finance guarantee facility will
support access to trade finance for local exporters and importers and address the counterparty risk that is slowing down
the growth of trade business in the country.
KICB has also benefited from IFC’s expertise and advice in such areas as leasing as an alternative financing product for
SMEs and mobile banking as an alternative channel for the delivery of banking services. IFC also helped the bank to
strengthen its risk management framework and practices, which a measure that was ultimately aimed at making KICB
more sustainable, robust, and able to serve the market in the future.
43