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Commission proposes € 30 million macro-financial assistance to the Kyrgyz Republic

20.12.2011 - The European Commission proposes to provide macro-financial assistance (MFA) of up to € 30 million to the Kyrgyz Republic, with half of the assistance to be disbursed in the form of loans and half in the form of grants.

This assistance is part of the EU's and other international donors' efforts to help the Kyrgyz authorities to resolve severe economic and social problems brought about by the global financial crisis and seriously aggravated by the economic disruption and financing needs caused by the tragic political events of June 2010. MFA should support the continuation of macroeconomic stabilisation efforts, agreed in the donors conference in July 2010 in Bishkek. It is directly linked to a three-year comprehensive economic adjustment and reform programme agreed between the Kyrgyz Republic and the IMF and supported by the Extended Credit Facility approved by the IMF in June 2011.

On 20 December 2011, the Commission adopted a proposal for a Decision by the European Parliament and the Council to provide MFA of up to € 30 million to the Kyrgyz Republic. The assistance supports the macroeconomic adjustment programme agreed between the Kyrgyz Republic and the International Monetary Fund (IMF) and the implementation of a number of reform measures to be agreed between the EU and the Kyrgyz Republic. The assistance would be provided in two instalments, tentatively in the second and the fourth quarters of 2012.

The political events experienced by the Kyrgyz Republic last year, and in particular the inter-ethnic violence of June 2010, disrupted the Kyrgyz economy by affecting trade, tourism flows and agricultural production. The EU macro-financial assistance will contribute to covering the Kyrgyz Republic's external financing needs in 2012, which are partly due to the economic disruptions and the social and reconstruction expenditure for alleviating the consequences of the 2010 political events. MFA will reduce the short-term financial vulnerability still faced by the economy, while supporting reform measures aimed at achieving a more sustainable balance of payments and budgetary situation over the medium-term. While the Kyrgyz Republic is out of the normal geographical scope of the EU's MFA instrument, in the view of the Commission and in coordination with the EU High Representative, the exceptional circumstances, including EU political support to the Kyrgyz Republic’s incipient parliamentary democracy, justify such an operation. The proposed MFA would complement the funds pledged by the international community at the donors conference organised in Bishkek in June 2010 in support of Kyrgyzstan's democratisation, reconstruction and social assistance policies, to which the EU was a major contributor.

Background on MFA

Macro-financial assistance is an exceptional EU crisis response instrument available to EU neighbours. It is conditional on satisfactory progress under an economic programme supported by IMF financing. Since 1990, fifty five MFA operations have been approved, with total commitments amounting to EUR 7.4 billion.

MFA operations are approved by the European Parliament and the Council. MFA loans are financed through EU borrowings on the market and the funds are on-lent with similar financial terms to the beneficiary countries. MFA grants are financed under the EU's budget.

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