| Project Detail |
Subprogram 3 is the final subprogram in a programmatic series that was approved in 2019 with the financing of $50 million for subprogram 1. The program was originally designed with two subprograms. However, in 2021, it was restructured resulting in an additional subprogram and a new reform area. The proposed subprogram 3 remains fully aligned with the original program outcome and outputs, which supports the implementation of the long-term National Development Strategy of the Kyrgyz Republic for 2018-2040 (NDS 2040) and, more recently, the medium-term National Development Program of the Kyrgyz Republic until 2026.
Project Name Promoting Economic Diversification Program - Subprogram 3
Project Number 52225-004
Country / Economy Kyrgyz Republic
Project Status Approved
Project Type / Modality of Assistance Grant
Loan
Source of Funding / Amount
Grant 0853-KGZ: Promoting Economic Diversification Program - Subprogram 3
Asian Development Fund US$ 25.00 million
Loan 4221-KGZ: Promoting Economic Diversification Program - Subprogram 3
Concessional ordinary capital resources lending US$ 25.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Partnerships
Private sector development
Sector / Subsector
Agriculture, natural resources and rural development / Agricultural policy, institutional and capacity development
Education / Technical and vocational education and training
Public sector management / Economic affairs management - Public expenditure and fiscal management - Social protection initiatives
Gender Equity and Mainstreaming Effective gender mainstreaming
Description
Subprogram 3 is the final subprogram in a programmatic series that was approved in 2019 with the financing of $50 million for subprogram 1. The program was originally designed with two subprograms. However, in 2021, it was restructured resulting in an additional subprogram and a new reform area. The proposed subprogram 3 remains fully aligned with the original program outcome and outputs, which supports the implementation of the long-term National Development Strategy of the Kyrgyz Republic for 2018-2040 (NDS 2040) and, more recently, the medium-term National Development Program of the Kyrgyz Republic until 2026.
The government plans to accelerate its economic diversification efforts and has prioritized the implementation of structural reforms to improve (i) trade and investment competitiveness, (ii) small and medium-sized enterprises (SMEs) development, (iii) infrastructure development (including through public-private partnerships [PPPs]), (iv) industry-based skills development, and (v) fiscal management and social protection. These efforts will enable the economy and the population to be more resilient to exogenous shocks in the future and will help improve the economys medium-to long-term trajectory. This subprogram will continue to support the government in implementing complex reforms against the backdrop of significant macroeconomic challenges and constitutional changes by ensuring that planned reform efforts are supported. The governments overarching objective is to diversify the Kyrgyz economy away from over-reliance on gold production and remittance-led consumption. The scope and coverage of the program are even more important given the continuum of shocks to the economy that began in March 2020 with the onset of the coronavirus disease (COVID-19) pandemic, continued with post-pandemic disruptions in global supply chains in late 2021, and the Russian invasion of Ukraine in February 2022, which is adversely impacting the economy through increased food and fuel prices, lower remittances, fewer job opportunities, trade disruptions, and low investor confidence.
Project Rationale and Linkage to Country/Regional Strategy
The Kyrgyz Republic has experienced periods of economic stability and growth interrupted by frequent economic recessions that have conflated hardship inducing external shocks, serious social and political instability, and disruptions to medium-term reform and institutional development plans. This boom-bust pattern helps explain the lack of income per capita convergence of the country with upper-middle countries in the last few decades. By the end of the third quarter of 2021 GDP entered a positive growth territory following the COVID-19 pandemic. However, economic recovery is again at risk in 2022 because of the continuum of shocks to the economy which has driven up prices for food and fuel and reduced migrant labor remittances and exports. It is expected that the pace of the global economic recovery will slow down and weigh in on the Kyrgyz Republics economic growth, which will lead to increasing hardships among the poor population.
The program will continue to support the governments implementation of structural reforms for ensuring economic diversification, resilience, and economic recovery |
