KYRGYZ - Altynay Bektenalieva

8/9/2019 KYRGYZ - Altynay Bektenalieva

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PUBLIC DEBT

OF THE KYRGYZ REPUBLIC

Prepared by A.A. BektenalievaHead of Public Debt Management Unit

of the Public Debt and Assets Department

Kuala Lumpur, November 2009


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Contents

I. Background: public debt in the Kyrgyz Republic

II. Goals of public borrowings

III. Public debt structure IV. Legal framework

V. Measures taken to reduce debt burden

(Reasons and outcomes of applying to the Paris Club)

VI. Public Debt Management Policy in the KyrgyzRepublic


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I . Background: Public Debt in the KyrgyzRepublic

Prior to 1992 - no experience in attracting externalcredits and loans Prior to 1992 - no administrative and institutional

standards for external financing

1992 - Central Bank of Russia provided short-term,interest free technical credits to a number of SICcountries to finance their trading transactions

1993 Russian Government suspended extension oftechnical credits, while already provided loans were

consolidated in convertible currency at marketinterest rate and market ruble exchange rate. CIScountries signed a number of credit agreements.


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Financing of Structural Reforms in the

Kyrgyz Republic by International Financeand Credit Institutions

IMF, WB, EBRD, ADB, IBR Donor countries (Japan, Germany,

Switzerland)

Outcome more than 140 stateenterprises turned into joint-stock

companies


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II . Goals of Public Borrow ings

1. Financing of the state budget deficit

2. Financing of public investments

3. Covering public debt related costs, andrefinancing of public debt

4. For other purposes provided for in the

legislation of the Kyrgyz Republic


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II I. Kyrgyz Republic: Public Debt

Structure(as of 31.12.2008)

Public debt of the Kyrgyz Republic totaled2 319 395 thousand USD, out of which:

(thousand USD)

Bilateral concessionary 414 567

Bilateral non-concessionary 259 594 Multilateral concessionary 1 446 191

Multilateral non-concessionary 1 020

Contingent liabilities 6 513

Domestic debt 191 510

% of GDP - 45,3%Note: Discount rate of the National Bank: 1 USD = 39.4181 soms as of 31.12.2008


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Kyrgyz Republic: Public Debt

Structure31.12.2008

Multilateral

concessionary

62.35%

Bilateral

concessionary

17.87%

Dom es tic debt8.26%

Contingent

liabilities

0.28%

Bilateral

non-concessionary

11.19%

Multilateral

non-concessionary

0.04%


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0

50

100

150

200

250

300

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

..


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Debt currency profile as of the end

of 2008(million USD equivalent and percentage)

262,68

11,3%

191,51

8,3%13,58

0,6%

16,59

303,08

13,1%

1 396,78

60,2%38,38

1,7%

87,66

3,8%

9,14

0,4%

SDR

USD

Local currency

KWD

KRW

JPY

ID

EUR

CNY


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Macroeconomic indicators

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

0,0%

20,0%

40,0%

60,0%

80,0%

100,0%

120,0%

140,0%

Inflation GDP growth Public debt/GDP


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Allocation of External Assistance

in 2008

100.02 295.7Total

0.818.4Environment10

8.9204.9Energy9

3.171.6Private8

33.2763.3

Support to the budget and balance

payments (national currency)7

0.36.0Tourism6

17.4400.5Transport and communications5

11.1254.7Social4

17.9410.1Agriculture and irrigation3

5.1117.9Industry2

2.148.3Public Administration1

% of the

total

Agreed amount

million USDSector


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Public Debt Service Profile

for debt outstanding on 31.12.2008

-

20,00

40,00

60,00

80,00

100,00

120,00

2009

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037

2039

2041

2043

2045

.U

SD

Domestic Debt

Bilateral Debt

Multilaterral Debt


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Public Debt Service and

Disbursement in 2008(million USD)

67.0Domestic debt*

*contains items that are borrowed and repaid

several times within the year (e.g. 3,6 months T-

bills)

95.1External debt

116.9Disbursements

63.5Domestic debt*

31.4External debt87.6Principal

18.9Domestic debt

16.3External debt

25.7Interest


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External Debt SustainabilityIndicators

4%7%10%26%14%

External debt service to budget

revenues

3%3%5%19%13%External debt service to export

45%53%66%78%87%External public debt / GDP

20082007200620052004Indicators


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IV. Key regulatory legal acts regulating

public debt managementWe have a legal framew ork for publicdebt management

LAW OF THE KYRGYZ REPUBLICOn Public and Non-public Debt of the Kyrgyz Republic

LAW OF THE KYRGYZ REPUBLIC

On the National Bank of the Kyrgyz Republic


On Basic Principles of the Treasury of the KR


On Budget Law Basic Principles in the KR

Public Debt Management Strategy of the KR for 2009-2011, 400, dated June 23, 2009

Country Development Strategy for 2009-2011


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V. Why the Issue of the ExternalDebt Became so Relevant?

Economic reforms in the Kyrgyz Republic, - mainly financedat the expense of external borrowings, - were aimed atimplementation of the Public Investment Program,structural reforms and covering the budget deficit.

As a result, the external public debt increased from 36% tothe GDP in 1995, to 136% - in 1999.

This resulted in the problem with liquidity and debt

sustainability; to solve this problem, the Kyrgyz Republicapplied to the Paris Club requesting for the relief of bilateraldebt.


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Main objective of the Paris Club -1:

Resolution of the medium-term liquidity problem

Outcomes of the PC-1:

Consolidation of payments subject to payment from December

2001 to December 2004, and extension of repayment period

Reduction in the amount of service:

from 109 million USD subject to repayment for 2001-2004 to

7.5 million USD

Debt restructuring under theParis Club in 2002


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Debt Restructuring under theParis Club in 2005

Main objective of the Paris Club-2:

Settlement of the solvency problem for the medium-term period

Outcome of the PC-2:

Reduction in the accumulated bilateral external debt at NetPresent Value (NPV)

Reduction in the amount of debt:

50% at nominal value 20 million USD;

50% at Net Present Value 102 million USD

Extension of the grace period and repayment period


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Measures taken to reduce theexternal debt

As a result of negotiations, a number of bilateral creditorsprovided debt relieve:

Pakistan: 9.58 million USD

China: 6.65 million USD

Germany: 0.78 million euro (debt swap)

India: 1.02 million USD

Russia: 193.5 million USD (part of the debt as a debt-equity swap)

Transactions on swapping the debt for public shares inenterprises, and implementation of projects under Chineseloan (8.12 million USD) and Germany (2.25 million euro)

are under negotiation.


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Measures taken to reduce theexternal debt

In order to reduce the burden of the external debt for

the budget, in compliance with Resolution of the

Government of the KR No. 135- dated 24.05.07,

Peoples Account for Repayment of the External

Debt of the KR was opened with the National Bank

for the national and foreign currencies.

As of 01.10.2009, the total amount in this account

reached: 803 816 soms and 350 US dollars


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Medium-term Public Debt

Management Strategy

The current Medium-term Public Debt Management Strategyis for 2009-2011

The Strategy is aimed at achieving the following results:

Reduce the level and the share of the external public debt; Attract new external borrowings with, at least 35% grant

element (reduction from 45%);

Increase in the share of domestic borrowings in public

debt;

Implementation and strengthening of Risk Management

Developing of secondary market


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DSA. EXTERNAL DEBT SUSTAINABILITY ANALYSIS

The Kyrgyz Republic is rated as a mediumperformer based on the World BanksCountry Performance and Institutional

Assessment Index for low income countries.

The relevant policy-dependent thresholdsfor countries in this category are 40 percentfor the PV of the debt-to-GDP ratio, 150percent for the PV of debt-to-exports ratio,

250 percent for the PV of debt-to-revenueratio, 20 percent of the debt service-to-exports ratio, and 30 percent of the debtservice-to-revenue ratio.

Source: from most recent IMF/WB DSA


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A. Basel ine

The baseline scenario points to a cautiously favorableimprovement in the external debt outlook over time.Already by end-2008, the PV of debt-to-exports and the PV ofdebt-to-revenue ratios, at 43 and 94 percent respectively, werewell below their policy-based indicative thresholds.2 Only the PV

of PPG debt-to-GDP ratio, at 27 percent, is closer to its relevantthreshold of 40 percent in 2008. Over the DSA horizon, all debtratios move steadily on a downward path underpinned bysteady growth, fiscal consolidation, and prudent debt

management.


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Debt service is expected to remain manageablethroughout the DSA horizon. This reflects the highconcessionality of both the outstanding multilateral debt and theassumed new borrowing over the medium term. The PPG debtservice ratio would increase slightly from 3.5 percent of exports

(5.3 percent of revenues) in 2008 to 7.5 percent of exports(11.4 percent of revenues) in 2029, driven by less-concessionalnew borrowing and the repayment of the previouslyrestructured bilateral debt.


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Thank you for the attention!

KYRGYZ - Altynay Bektenalieva

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