Kyrgyzstan's Debt Dilemma
Kyrgyzstan's Debt Dilemma
Before the Kyrgyz government joins an international debt relief programme, it will first need to do some serious public awareness-raising to neutralise opposition to the plan at home, NBCentralAsia analysts warn.
Kyrgyzstan is intending to join the Heavily Indebted Poor Countries Initiative, HIPC, a programme established jointly by the World Bank and International Monetary Fund to reduce the debt burden of the poorest countries.
Finance Minister Akylbek Japarov said on September 26 that if the country implements the programme's requirements successfully, its external indebtedness would be reduced by 800 million US dollars, or 40 per cent of its two billion dollar total foreign debt.
Entry to HIPC was first considered back in 2000, but the government of the day rejected the idea. In October 2005, President Kurmanbek Bakiev revived the scheme, and in March 2006 the government officially expressed an interest in joining the programme.
The announcement immediately drew hostile criticism: non-government organisations, public figures, political parties and members of parliament all spoke out against it. Even the foreign ministry said taking such a step would harm the country's image abroad and reduce investor confidence.
Opponents of HIPC argue that the government can do perfectly well without it if it runs a strong tax policy and at the same time wages war on corruption and the shadow economy. They cite cases where certain Latin American and African countries have failed to make substantial economic progress after taking part in HIPC.
Despite strong public opposition to the idea, NBCentralAsia analysts believe President Bakiev and his government will base their final judgement on economic considerations rather than anything else.
Should Kyrgyzstan decide not to go into the HIPC programme, the government will have to set aside a significant proportion of its budget revenues to service the foreign debt. That would mean drastic cuts in government spending on social welfare and development, and a freeze on public-sector spending in the next few years.
NBCentralAsia political commentators say the reason why public opinion is so negative on this issue is that the reasons for joining HIPC and its potential benefits have never been fully explained, either to opponents of the plan or to the public in general.
A combination of factors work together to create mistrust and caution about the new plan: the government's lack of tangible success in fighting corruption, the ineffective use of past loans, concern about being placed under an even greater obligation to international donors, and fear of losing national sovereignty.
According to NBCentralAsia's analysts, the solution is for the government to give clear answers to every question raised by opponents of HIPC membership before it makes any decision about joining.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
Kyrgyzstan is intending to join the Heavily Indebted Poor Countries Initiative, HIPC, a programme established jointly by the World Bank and International Monetary Fund to reduce the debt burden of the poorest countries.
Finance Minister Akylbek Japarov said on September 26 that if the country implements the programme's requirements successfully, its external indebtedness would be reduced by 800 million US dollars, or 40 per cent of its two billion dollar total foreign debt.
Entry to HIPC was first considered back in 2000, but the government of the day rejected the idea. In October 2005, President Kurmanbek Bakiev revived the scheme, and in March 2006 the government officially expressed an interest in joining the programme.
The announcement immediately drew hostile criticism: non-government organisations, public figures, political parties and members of parliament all spoke out against it. Even the foreign ministry said taking such a step would harm the country's image abroad and reduce investor confidence.
Opponents of HIPC argue that the government can do perfectly well without it if it runs a strong tax policy and at the same time wages war on corruption and the shadow economy. They cite cases where certain Latin American and African countries have failed to make substantial economic progress after taking part in HIPC.
Despite strong public opposition to the idea, NBCentralAsia analysts believe President Bakiev and his government will base their final judgement on economic considerations rather than anything else.
Should Kyrgyzstan decide not to go into the HIPC programme, the government will have to set aside a significant proportion of its budget revenues to service the foreign debt. That would mean drastic cuts in government spending on social welfare and development, and a freeze on public-sector spending in the next few years.
NBCentralAsia political commentators say the reason why public opinion is so negative on this issue is that the reasons for joining HIPC and its potential benefits have never been fully explained, either to opponents of the plan or to the public in general.
A combination of factors work together to create mistrust and caution about the new plan: the government's lack of tangible success in fighting corruption, the ineffective use of past loans, concern about being placed under an even greater obligation to international donors, and fear of losing national sovereignty.
According to NBCentralAsia's analysts, the solution is for the government to give clear answers to every question raised by opponents of HIPC membership before it makes any decision about joining.
(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)
