26 March 2006

Debt

Kyrgyzstan has formally requested major debt relief from the IMF and World Bank under their Heavily Indebted Poor Countries Initiative. According to IWPR, Kyrgyzstan's foreign debt is 2 billion dollars, or 80 percent of the country's GNP. The point of the initiative is obviously to keep poor countries from drowning in debt when nothing else will work.

It will be several years before any relief starts happening if Kyrgyzstan is accepted. There are also a number of requirements like privatizing energy and mining, improving business conditions, and reducing corruption. Novel ideas.

There are many people in Kyrgyzstan who are concerned about the country's reputation if they join the HIPC, partly since most of the countries participating are in Africa (the other four are in South and Central America). But really, Kyrgyzstan has no economic reputation at this point. Foreign investment in this country is extremely risky. I wouldn't even trust someone to build a reliable house here, much less invest millions of dollars in anything.

I'm no economist (thank heavens), but this looks like it could be a good option, even if it's only for the reforms the HIPC would require.

No comments:

Post a Comment