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Donors agree $1.1 billion aid package for Kyrgyzstan
July 27, 2010 / 12:47 PM / 7 years ago

Donors agree $1.1 billion aid package for Kyrgyzstan

BISHKEK (Reuters) - Kyrgyzstan secured pledges worth $1.1 billion from international donors on Tuesday to help rebuild the strategic Central Asian country after the worst ethnic bloodshed in its modern history.

The World Bank and other international bodies agreed to supply a combination of grants and favorable loans to the interim government of Kyrgyzstan, which expects its economy to shrink in 2010 after hundreds were killed in clashes last month.

“The amount pledged today by all participating donors is $1.1 billion over the next 30 months to the end of 2012,” Theodore Ahlers, World Bank director of strategy and operations, told a news conference in the Kyrgyz capital Bishkek.

Acting President Roza Otunbayeva, who has led Kyrgyzstan since the overthrow of former President Kurmanbek Bakiyev in April, said the first $600 million would be disbursed as emergency aid during the remaining months of this year.

At least 300 people were killed, and possibly hundreds more, during several days of violence last month in Kyrgyzstan, a former Soviet republic hosting U.S. and Russian military air bases and lying on a drug trafficking route out of Afghanistan.

Thousands of homes were torched in the clashes between ethnic Kyrgyz and Uzbeks, forcing 400,000 people to flee at the height of the violence and leaving parts of the southern cities of Osh and Jalalabad in ruins.

Otunbayeva said Kyrgyzstan’s economy was likely to shrink by 5 percent this year, a sharp reversal of the 5.5 percent growth forecast before the turmoil that began with the April revolt.

She said more than $350 million was needed to rebuild settlements in Osh and Jalalabad regions, plus a further $100 million to reignite the local economy in the south, $180 million for the energy sector and $50 million for food and agriculture.

Aid would also be needed to plug a budget deficit estimated this year at 13.5 percent of gross domestic product, said Chorobek Imashev, finance minister in the interim government.

Ahlers said the aid package would be supplied by the World Bank, the Asian Development Bank, the European Commission and the Eurasian Development Bank’s Anti-Crisis Fund, as well as a number of bilateral donors.

PARLIAMENTARY APPROVAL

Kyrgyzstan is set to become the first parliamentary democracy in Central Asia, a region mainly run by presidential strongmen, after voters approved constitutional changes in a June 27 referendum. Elections are scheduled for October.

“We’ve heard a strong and clear commitment to reshaping Kyrgyz institutions to ensure they are accountable, that they can deliver the rule of law and provide prosperity for all,” said Kori Udovicki, U.N. Assistant Secretary-General and director of the U.N. Development Programme for Europe and CIS.

Otunbayeva said some of the grants and loans agreed for next year and 2012 would first need to be ratified by parliament. She said the breakdown of aid between grants and loans was still a matter of negotiation.

In a report prepared for Tuesday’s meeting, donors gave a slightly different outlook for GDP, forecasting a decline of 3.5 percent for 2010 versus estimated growth of 4.6 percent prior to the April revolution.

Per capita GDP had fallen to $826 from $943, while inflation was now forecast at 6.6 percent versus 13 percent previously.

Imashev said Kyrgyzstan’s external debt amounted to 61 percent of GDP and could rise by a further 8 to 9 percentage points after the support package was finalized.

Tensions persist in the south, where human rights groups say residents face violence, interrogation and arrest. The Organization for Security and Cooperation in Europe will send an unarmed police force in August.

“In terms of security, the risks are high and the capacity of the government to stabilize the situation is still not quite there,” said Udovicki.

The interim government has accused supporters of Bakiyev, the former president, of stoking the violence. Bakiyev, exiled in Belarus, has denied any involvement.

Additional reporting and writing by Robin Paxton; editing by Maria Golovnina

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