Publication: Monitor Volume: 3 Issue: 88

The conclusion of an IMF mission to Kazakstan on April 29 and the start of a visit to Uzbekistan by IMF deputy managing director Stanley Fischer on May 2 underscores the international financial community’s interest in Central Asia. While neither mission seems likely ultimately to be crowned with success, the visits also showed that Almaty is at present enjoying much better relations with the Fund than is Tashkent. (Interfax, May 2, 3; Interfax-Kazakstan, April 29; Reuter, April 21, 28)

The IMF team was in Almaty to review Kazakstan’s progress in satisfying the conditions set for the release of the three-year $446 million extended funding facility (EFF), the first disbursement of which was approved in January. Kazakstan’s finance minister, Aleksandr Pavlov, told the press on April 29 that Kazakstan "is in compliance with all the conditions" of the EFF, and is therefore "hoping for a positive assessment from the IMF". (Interfax-Kazakstan, April 29) However, the mission apparently refused to sanction the government’s plan to increase the 1997 budget deficit to 3.7 percent of GDP — up from the 3.16 percent previously agreed upon with the Fund — in order to reduce Kazakstan’s growing wage and pension arrears (the latter of which amount to some $400 million). In the absence of IMF approval, Kazakstan’s finances may be sufficiently shaky to force Almaty to put its second Eurobond issue on hold. (A December 1996 flotation had yielded $200 million).

While relations between the IMF and Kazakstan remain more or less on track, the same can not be said for Uzbekistan, for whom payments from an $185 million standby loan were suspended in December. The suspension was precipitated by the government’s introduction of foreign-exchange controls that month, due to fears of a possible foreign-exchange crisis in the wake of exceptionally bad cotton and wheat harvests. (Cotton exports generally supply about 60 percent of Uzbekistan’s foreign-exchange earnings.) While these controls have created a thriving black market for hard currency (the dollar is currently trading on the street at a 150 percent premium over the official exchange rate), they have, if anything, exacerbated shortages of foreign exchange. Some stores are now being forced to close, and access by Uzbek households and businesses to imports has by all accounts been significantly reduced.

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