Environment in emerging and transition economies

Demonstration Project: Pre-Feasibility Analysis and Institutional Support for Debt-for-Environment Swap in the Kyrgyz Republic


The Kyrgyz Republic is one of the poorest countries in the EECCA region and is facing difficulties servicing its large external debt (132% of GDP). In March 2002, and then in March 2005, the Paris Club creditors agreed with the Government of the Kyrgyz Republic to restructure its external debt. The agreements incorporated a clause which enables additional bilateral debt swaps, including also a debt-for-environment swap. At the initiative of the Ministry of Ecology and Emergencies, the Government of the Kyrgyz Republic has established an inter-ministerial working group to develop modalities for utilising the opportunity of debt-for-environment swap. In August 2002, the Ministry of Ecology and Emergencies requested the EAP Task Force Secretariat to assist in establishing a framework for further bilateral negotiations on debt-for-environment swap with creditors, similar to the assistance that the EAP Task Force has earlier offered to Georgia. The project was officially launched in November 2004 and implemented with support by EU Tacis.

The EAP Task Force has now completed the report from the project. The main conclusion of this analysis is that a debt-for-environment swap (DFES) between the Kyrgyz Republic and Paris Club creditors is feasible and could generate benefits for both the Kyrgyz Republic and the international community, including creditors. International experience with debt-for-environment swaps has shown that implementing a DFES is a complex, difficult, and lengthy process that requires thorough and careful preparations for the negotiations with creditor countries. The concerted efforts of the whole government are a crucial factor for the success of the debt-for-environment swap implementation.

The study undertaken in the course of this project has focused on three major issues: debt profile and sustainability, identification of project pipelines for the expenditure programme to be financed from potential DFES resources and governance issues related to the management of these resources. The results of this analysis and specific recommendations can be found in the report attached below.

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