Transcript Presentation of Mr. Ch. Imashov, Minister of Finance

Financing economic recovery
and ensuring fiscal sustainability
in the Kyrgyz Republic
Ch. Imashev,
Minister of Finance of the Kyrgyz Republic
1
Presentation outline
I.
Current situation
II.
Tasks related to economic
recovery and ensuring
fiscal sustainability
III. Overall financing needs
2
I. Current situation
3
Consequences of this year’s events
• Civil conflict in the southern regions:
• Thousands of casualties
• Tens of thousands left homeless
• Hundreds of thousands of refugees, and internally displaced
• Natural disasters affect parts of Osh, Jalal-Abad regions
• Withdrawal from Kyrgyzstan’s largest private bank bring losses to
Social Fund, and others
• Trade constraints create serious losses for:
• Farmers
• Textile and trading companies
• Falling GDP, loss of development progress
4
Economic projections for 2010
GDP growth
-5.4%
Inflation (December 2010 on
December 2009)
Budget revenues
11%
USD 1.14 billion
Budget expenditures
USD 1.76 billion
Budget deficit
USD 619 million
5
GDP: actual and forecasts for 2010
160.0
145.9
149.3
141.8
134.6
140.0
120.6
120.0
120.3
124.0
112.7
105.3
105.3
105.4
105.3
100.0
2000
2001
2002
100.0
80.0
60.0
107.0
107.0
99.8
103.1
108.5
2005
2006
2007
108.4
102.3
95.0
40.0
20.0
0.0
2003
2004
в процентах к предыдущему году
2008
2000=100
2009
2010
прогноз
6
Budget in the first half of 2010
• National budget is in critical state, due to:
• Drastic increase in expenditures after conflict
• Falling revenues
• Past quasi-fiscal arrears
Budget deficit for 2010:
• Will exceed USD 619 million (13.5 % of GDP)
• USD 345 million unsecured—financing gap
7
Fiscal trends, 2003-2010 (cash flow basis)
41.0
39.2
36.0
31.0
Revenues
Expenditures
29.8
25.7
26.0
24.3
22.4
20.3
21.0
20.0
20.0
16.0
25.8
11.0
19.4
19.5
20.2
22.2
25.2
28.3
25.8
6.0
1.0
2003
-4.0
-0.9
2004
-0.5
2005
0.2
2006
-0.2
-9.0
2007
0.1
2008
0.8
2009
-1.5
2010 прогноз
Deficit
-13.5
-14.0
Доходы (всего)
Расходы (всего)
Дефицит (-) / Профицит (+)
8
Tasks expected in 2011
• Economic reconstruction will have started
• Completion expected by end-2012
• Budget revenues to grow, but by less than
social commitments (time frame is too short)
• 2011 budget deficit could exceed USD 433
million (8.6% of GDP)
9
Why timely donors’
assistance is crucial:
• If financing for this deficit (USD 433 million) is inadequate (will not
be received), budget expenditures will be dramatically reduced on:
– Public investment programme (energy infrastructure, roads,
bridges, schools, hospitals, etc.): USD 211 million
– Operational expenses (maintenance, procurement of goods and
services, utilities, etc.): USD 222 million
• The state would be able to pay only salaries
– This would substantially restrict the country’s future
development
10
Public debt scenarios
2010
2011
2012
Optimistic scenario
loan 30/70 grant
58.1%
57.8%
56.4%
Intermediate scenario
loan 50/50 grant
61.0%
63.8%
62.3%
Pessimistic scenario
loan 70/30 grant
70.3%
78.1%
71.8%
Public debt as share of GDP. Sources: Kyrgyz authorities,
11
Emergency measures
already adopted
• 2010 state budget spending already reduced:
• 3.4% in nominal terms, almost 10% in real terms
• Most discretionary expenditures have been cut
• International commitments, entitlements not touched
• USD 27 million in additional budget revenues found
• Emergency measures reflect needs for long-term fiscal
sustainability
12
Nevertheless…
• The scope of damage and consequences of tragic
events is enormous
• Domestic resources are limited
• Economic recovery, reconstruction, and ensuring
fiscal sustainability—only possible with support
from our development partners
13
II. Economic recovery,
reconstruction, and fiscal
sustainability tasks
14
1. Challenges to fiscal sustainability
• Current situation:
• Budget revenues are falling, expenditures are growing
• 2010 deficit expected to be USD 350 million higher
than forecast at the start of the year
• Within two years we have to pay USD 145 million
of principal and interest on external debt
15
2. Ensuring energy security
Total amount required
USD 170 million
Of which :
Procurement of coal, gas and
fuel oil
Repair and reconstruction of
equipment and electricity
transmission lines
Repair of heating stations in
Bishkek and Osh
USD 50 million
USD 70 million
USD 50 million
16
3. Ensuring food security
USD 35 million to create
state reserve
USD 50 million
needed
USD 15 million for the
mechanization of agriculture
to improve sector’s
productivity
17
4. Support to the most
vulnerable social groups-USD 50mln
•
Social support to internally displaced persons
will require USD 20 million
•
Social support to persons living in difficult
climatic conditions will additionally require USD
30 million
18
5. Ensuring public order and security
Total
USD 50 million
Of which :
Salary increases
USD 17 million
Uniforms and
equipment
USD 25 million
Procurement of
technical facilities
USD 8 million
19
6. Infrastructure construction, reconstruction
Total :
USD 230 million
of which :
Repair of public and commercial
buildings and objects
Construction of ring road in Osh and
intra-urban highways in Osh and JalalAbad
Modernization of Manas, Osh airports,
improvement of runway in Osh airport
USD 61 million
USD 120 million
USD 20 million
20
7. Support for economic growth
• Confidence building and stabilization of commercial banking system
(AUB) will require USD 76 million
• Creation and capitalization of the Development Bank will require USD
200 million
• Small-scale strategic investment projects
• Access clean development mechanism (CDM) funding, other
sources of carbon finance
• Small hydro, solar, wind power
• Energy efficiency
21
8. Capitalization of economy for
“catch-up growth”
$100
million
External
assistance
Transition
economy has high
potential to grow
State
budget
$100
million
National
economy
Agricultural
Bank
State
Savings
Bank 22
9. Reconstruction of Osh and
Jalal-Abad regions – 285 mln
Humanitarian aid
USD 80 million
Housing construction
USD 100 million
Restoration of engineering
infrastructure
USD 30 million
Procurement and installation of
temporary mobile shelters
USD 20 million
Procurement of medical equipment,
medicines and special machinery
USD 10 million
Support for damaged businesses
USD 45 million
23
10. Recovery from natural disasters in
Osh and Jalal-Abad regions
• The repair of infrastructure and housing
damaged by natural disasters in Osh and JalalAbad regions requires USD 30 million
24
III. Overall financing needs:
USD 1.24 billion,
Except Kambar-Ata and Kemin – Datka
projects
25
Aggregate table of financial needs—
USD 1.24 billion
Current budget
Elections
Development
8.7 Fuel procurement
Humanitarian
50 Food, seed purchases
35
Lost budget revenues
62 Repair of electricity transmission lines
Agricultural equipment
70 purchases
15
Social protection
Public order and security
30 Heating plant repairs
12 Road construction, repair
50 Procurement of mobile shelters
120 Humitarian assistance
20
80
Reconstruction of public buildings
21 Airport modernization (Osh, Manas)
Support for internally displaced
20 persons
20
Response to natural disasters
30 Creation of Development Bank
200
Cover losses of Pension Fund, and
others
76 Infrastructure reconstruction
40
Financing of Southern Directorate
Reconstruction of privately owned
100 buildings
40
Procurement of equipment
TOTAL
10 Capitalization of economy
350 TOTAL
100
690 TOTAL
Note: All figures are
in million USD
200
To finance only urgent measures in 2010
and some of the measures planned for
2011-2012, the Government of the Kyrgyz
Republic needs external financial support in
the amount of USD 1.24 billion
27
Types of financial assistance expected
Grants and concessional
budget financing
Humanitarian
assistance
Kyrgyz Republic
Debt restructuring,
debt swaps
Wide access to credit
for business
Ensuring of effectiveness of assistance
•
•
•
•
Transparency in distribution
Accountability to the public
Participatory of local community
Monitoring of implementation (audit,
surveillance, financing mechanisms of control)
• Evaluation of results
Our medium term Goals
• to move to the trajectory of sustainable
economic growth,
• to improve the standard of living of our
citizens
• to build faire state
Thank you for your
attention!
31