Publication: Eurasia Daily Monitor Volume: 4 Issue: 38

On February 20 the Kyrgyz government unanimously rejected participation in the Heavily Indebted Poor Countries (HIPC) Initiative, founded by the World Bank and the International Monetary Fund in 1996. This decision followed almost a year of negotiations between the Kyrgyz government and the international community. While President Kurmanbek Bakiyev and Prime Minister Azim Isabekov scored public support for rejecting the HIPC, to date the government has no alternative debt-relief program. Under the HIPC, almost half of Kyrgyzstan’s $2 billion external debt would have been written off, and the international community would become more involved in the Kyrgyz government’s affairs (see EDM, January 26).

Instead of joining HIPC, Bakiyev has ordered the government to come up with a national debt-relief plan by mid-March. After the government’s protracted adoption of the state budget for 2007, designing an economic program for $2 billion seems unrealistic, if not ridiculous. To make things look even more absurd, Bakiyev invited Kyrgyzstan’s World Bank country director, Roger Robinson, to participate in designing the plan. The president rushed to attribute the government’s stand against HIPC as an evidence of maturing democracy in Kyrgyzstan.

By rejecting the HIPC Bakiyev killed two birds with one stone. First, he accepted the civic outcry against the initiative. Various civic activists, along with a parliamentary majority, have been speaking strictly against the initiative. If Bakiyev had allowed the initiative, he would have triggered anti-HIPC arguments against himself. Second, the president satisfied the energy sector’s key leaders and a number of prominent businessmen who were disinterested in reforms guided by external actors. The current system of large-scale corruption bridging the state and the business sector would be jeopardized if Kyrgyzstan allowed international involvement in the domestic economy.

On an international level, Bakiyev has shown that his government does not intend to carry out any substantial reforms in the administrative and economic sectors in a transparent way. The president also confirmed his distrust with the international, mainly Western, community. The Kyrgyz public’s anti-HIPC moods have been closely related to the attitudes towards the U.S. military base in Bishkek, the Kyrgyz capital. Both the HIPC and the base are associated with perceived Western exploitation.

Kyrgyz Minister of Finance Akylbek Japarov was the only minister to vote in favor of the HIPC, calling the initiative Kyrgyzstan’s last chance to pay off its debts. In the last two years Kyrgyzstan’s economy has slowed significantly. Following the March 24, 2005, Tulip Revolution, foreign investment rapidly decreased. Exports fell by almost half. In 2005 economic growth was 1.4% — the decade’s lowest. In 2006 it slowly recovered to 3.2%.

Political developments in the last two months in Kyrgyzstan make the country extremely unattractive for the international community. One expert on the subject, who asked to remain anonymous, explained to Jamestown that the World Bank today prefers to work with Tajikistan, which is more open to cooperation with the international community, rather then with Kyrgyzstan. In several years, Tajikistan’s electricity production and exports will likely surpass Kyrgyzstan’s, thanks to extensive Russian and Iranian investments into the Sangtuda-1 and Sangtuda-2 hydropower plants. One Washington-based World Bank expert told Jamestown that Kyrgyzstan’s energy sector today urgently needs external intervention for substantial reform, greater transparency, and foreign investment based on open competition.

From the outset, the World Bank failed to convince the Kyrgyz public of the program’s desirability. The Bank’s public information campaign on HIPC lacked clear explanations of what the initiative entails and how local political, business, and civil-society actors could participate in its successful implementation. The Kyrgyz public developed a deeply negative attitude towards the HIPC because the first information campaign on the initiative originated with the government, which portrayed it as the usurpation of the national economy by international financial institutions. The perception of the HIPC, along with the World Bank and IMF’s presence in Kyrgyzstan, remains negative to the extent that the population would rather trust the corrupt government than the international community.

Meanwhile, former prime minister Felix Kulov, who was in favor of HIPC, has organized a new opposition bloc “United Front.” The bloc brings together other key leaders of the opposition, among them parliamentarians and former government members Melis Eshimkanov, Kabai Karabekov, Omurbek Suvanaliyev, Omurbek Abdrakhmanov, Emil Aliyev, Omurbek Tekebayev, and Kubatbek Baibolov. As part of its agenda, the United Front will insist on early presidential elections. The bloc represents a conglomerate of talented political leaders in comparison to Bakiyev’s government, which is full of unprofessional but loyal members. Such an imbalance may result in a considerable push against Bakiyev’s policies or foster the state’s even greater involvement in corruption.

(Akipress, 24.kg, February 19-21; Bely parohod, January 24, February 21)