The coronavirus COVID-19 pandemic has led to a decline in the global economy. A rapidly spreading infection that claimed thousands of lives has stalled all economic processes. The most countries of the world experience the crisis, fighting the coronavirus at the same time. Kyrgyzstan was no exception. Almost all entrepreneurial activity was suspended in the country, the national currency depreciated. To balance the economy and combat the epidemic in the country, the republic’s authorities asked the IMF for financial support.
The International Monetary Fund, having considered the request of Kyrgyzstan, decided to provide quick assistance and allocated USD 120.9 million.
The head of the IMF’s Representative Office in Kyrgyzstan, Tigran Poghosyan, told in an interview to Kabar News Agency about conditions of the assistance and whether additional funds should be expected, if necessary.
- IMF provided to the Kyrgyz Republic $120.9 million to fight against coronavirus. What are the terms of this financial support?
There are two loans: one of $81 million with a grace period of 3 years and a quarter, a maturity of 5 years, and an interest rate of 1 percent; and another one of $40 million with a grace period of 5 years and a half, a maturity of 10 years, and an interest rate of 0 percent.
- Why the Kyrgyz Republic became the first country to receive such financial support?
Because it was among the first countries to request it and the IMF in Bishkek and Washington was quick to answer to it.
- Is this a one-off financial support or there may be additional payments as part of this program?
It is a one-off payment.
- Is IMF planning to monitor how the financial support is being used?
There loan is provided with no ex-post conditionality. It will be used for budget support. In their Letter of Intent, the authorities have outlined procedures to ensure that the financial support will be well-used. Procurement of urgently needed medical supplies will undergo an ex-post audit, the results of which will be posted on the website of the Ministry of Finance.
- Are there considerations to write-off the existing debt?
No, there are no such considerations that we are aware of. Our joint assessment of public debt sustainability with the World Bank is that the likelihood of debt distress is moderate.
- Earlier Kyrgyz government stated that it needs three months to stabilize the economic situation. If this forecast doesn’t realize and recovery takes longer, can IMF provide additional financial support?
Yes, the IMF has other instruments geared toward addressing more protracted shocks. These instruments support implementation of structural reforms and include conditionality. If the authorities request additional support under these instruments, we will respond to their request as fast as possible too.
- Will other countries also receive IMF financial support as quickly?
Yes. About 80 countries so far have requested emergency financial support to the IMF.
- I also would like to ask you about exchange rate. In your opinion, should KGS follow the Russian ruble exchange rate?
We recommend maintaining a flexible exchange rate against all currencies. It helps to absorb this external shock and restore external balance.
- Would KGS depreciate further relative to USD? In your opinion, how effective is NBKR in containing the depreciation of the national currency?
We think that depreciation of the national currency in response to the COVID-19 shock was appropriate. Over the past years, the NBKR has been doing an excellent job in maintaining price and financial stability and allowing exchange rate flexibility.
Comments
Post Comment