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 WASHINGTON, May 12 /PRNewswire/ -- The International Monetary Fund has approved credits totaling special drawing rights (SDR) 43.21 million (about US$62 million) for Kyrgyzstan to support the government's 1993 economic and financial program, including the introduction of the national currency, the som. Of this, SDR 16.125 million will be provided under the IMF's new Systemic Transformation Facility (STF)(A). Kyrgyzstan is the first member of the IMF to use the STF, which was established on April 23, 1993 (see press release 93/17). A second, equal sized disbursement under this facility is potentially available to Kyrgyzstan after the completion of the first review under the stand-by arrangement, scheduled for September 1993. A futher SDR 27.09 million (about US$39 million) is available over the next 11 months under a stand-by credit. This is the first use of IMF financing by Kyrgyzstan, which joined the IMF on May 8, 1992. Its quota(B) in the IMF is SDR 64.5 million (about US$92 million).
 In approving these credits, all executive directors strongly supported the far-reaching adjustment efforts of Kyrgyzstan and the introduction of the national currency.
 Decades of central planning had left Kyrgyzstan with a distorted economy, an excessively specialized pattern of production, and growing macroeconomic imbalances. In 1991, efforts to maintain trade with the other states of the former Soviet Union largely failed, and severe disruptions in the interrepublican supply network contributed to a decline in real GDP of about 5 percent. These disruptions were exacerbated in 1992 by a sharp increase in the cost of petroleum imports, the further loss or shrinkage of traditional export markets, and an increasingly inefficient payments system within the former Soviet Union. As a result, real GDP is estimated to have declined by a further 25 percent in 1992, led by a sharp drop in industrial production.
 During 1992, Kyrgyzstan initiated a number of important structural reforms aimed at reducing and redefining the role of government in the economy by relying increasingly on market forces and integrating Kyrgyzstan more fully into the global trade and payments system. By the end of 1992, most retail trade had been privatized, price controls on most goods had been removed, and the number of government ministries and agencies had been significantly reduced. The authorities recognize, however, that, because of an adverse external environment and the loss of large budgetary transfers and investments from the former Soviet Union, further measures will be needed to ensure that the transformation is successfully completed and the stage set for sustainable growth.
 The program for 1993 aims to limit the decline in real GDP to less than 17 percent, sharply reduce the monthly rate of inflation to low single digits by December 1993, and improve Kyrgyzstan's international reserve position. The introduction of the national currency, the som, which began on May 10, will allow Kyrgyzstan to pursue independent macroeconomic policies consistent with the objective of early stabilization. To this end, budgetary discipline will be reimposed following slippages that occurred in the second half of 1992; the existing tax base will be broadened and new revenue sources mobilized; and monetary and credit policies will be tightened to be consistent with the targeted reduction in inflation and to safeguard the internal and external value of the new national currency.
 In the structural area, a legal framework for commercial activity will be implemented; privatization will be accelerated and state orders eliminated; price liberalization will be completed; and reform of the banking sector will be pursued. In the external sector, the exchange and trade system was liberalized with the introduction of the som, and a freely floating unified exchange rate regime was introduced.
 Under the program, the authorities will rely on a streamlined social safety net to protect the most vulnerable groups, including through targeted transfers to low-income groups to compensate for price increases.
 In addition to the credits from the IMF that were approved today, Kyrgyzstan's reform and stabilization program has received indications of strong financial support from the international community.
 (A) The Systemic Transformation Facility (STF) is a temporary IMF lending window that provides financial assistance to member countries facing balance of payments difficulties arising from severe disruptions of their trade and payments arrangements due to a shift from significant reliance on trading at non-market prices -- such as prevailed among members of the Council on Mutual Economic Assistance (CMEA) and among states of the former Soviet Union -- to multilateral, market-based trade.
 (B) A member's quota in the IMF determines, in particular, its subscription, its voting power, its access to IMF financing, and its allocation of SDRs.
 -0- 5/12/93
 /CONTACT: International Monetary Fund, External Relations Department, 202-623-7100/

CO: International Monetary Fund ST: District of Columbia IN: FIN SU:

TW-KD -- DC029 -- 7820 05/12/93 18:15 EDT
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Date:May 12, 1993

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