New York/Bishkek: An International Monetary Fund (IMF) team, led by Christian Beddies, visited Bishkek July 16–20, 2012 to discuss the country’s current economic situation with the Kyrgyz authorities. This interim visit by the Fund mission took place ahead of discussions for the third review scheduled for September-October 2012 and followed the completion of the second review of the Extended Credit Facility (ECF) program in April 2012.
“The program remains broadly on track. Geological factors are delaying access to gold deposits in the high-grade zone, shifting a significant portion of the current year’s gold production to 2013–14. This, together with unfavorable weather conditions which impact agriculture, is expected to lead to a decline in growth to 1 percent, from the previously projected 5 percent,” said Beddies in a statement.
He said that the receding global food and fuel inflation, combined with prudent monetary policy, led to a sharp reduction in headline inflation (to -0.5 percent year-on-year at end June).
“Nonetheless, the persistence of nonfood inflation suggests that inflationary expectations remain entrenched, warranting continued tight monetary policy. Absent any exogenous shocks, end-2012 inflation is expected at 8 percent,” Beddies added.
He asserted that medium-term fiscal consolidation remains a “critical component” of the ECF.
The statement further said, “While the deferral of gold production is affecting tax revenues negatively, the revenue-smoothing arrangement between the government and the Kumtor gold mining company, together with stronger-than-expected customs revenue, is expected to offset the shortfall from gold revenues in 2012.”
Beddies welcomed the Kyrgyz authorities’ commitment to the principles of good governance and transparency in the context of the planned establishment of a State Development Bank (SDB).
“Following the recent parliamentary approval of the SDB law, continued close dialogue with the IMF and other donors will be instrumental to ensure that internal rules and regulations governing the operations of the SDB also reflect these principles,” he concluded.