The Executive Board of the International Monetary Fund (IMF) today completed the second review of Kyrgyz Republic’s economic performance under the program supported by a three-year, SDR 66.6 million (US$103.1 million) Extended Credit Facility arrangement that was approved by the IMF’s Executive Board on June 20, 2011 (Press Release No. 11/245). The Board's decision was taken on a lapse of time basis.¹ Approval of the review makes SDR 9.514 million (US$14.7 million) available to the Kyrgyz Republic. This would bring total disbursements under the arrangement to SDR 28.542 million (US$44.2 million).

Strong adherence to the policies agreed under the Fund-supported program has played an important role in achieving economic recovery and macroeconomic stabilization. Economic growth was strong and broad-based, supported by political stability, a favorable external environment and credit growth. Inflation has dropped substantially, although underlying inflationary pressures remain. Fiscal adjustment is on track and system-wide banking sector indicators are improving. The government established a commission to oversee public financial management reforms and is advancing the overall structural reform agenda. In light of the uncertain global economic outlook, downside risks remain.

The fiscal stance for 2012 is appropriate and reflects pressing social and infrastructure development needs. Over the medium term, fiscal consolidation supported by strong revenue measures and prudent expenditure policies remains key to safeguard macroeconomic stability and rebuild policy buffers. Continued tight monetary policy this year will help to further reduce inflationary pressures.

To sustain strong growth over the medium term, it is essential to improve the business climate, strengthen governance and key institutions, move expeditiously in implementing financial sector reforms, and press ahead with public financial management and tax reforms. Continued implementation of sound policies under the ECF arrangement will help to strengthen the Kyrgyz Republic’s resilience to external shocks, improve the prospects for stable and sustained economic growth and poverty reduction, and facilitate external support.

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¹ The Executive Board takes decisions under its lapse of time procedure when it is agreed by the Board that a proposal can be considered without convening formal discussions.