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European Union Gives €10 million To The Kyrgyz Republic

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Open Eyes Opinion {source: EC}

Kyrgyz Republic

European Commission disburses €10 million in financial assistance to the Kyrgyz Republic

Brussels, 11 June 2015

The European Commission disbursed today €10 million in grants to the Kyrgyz Republic as part of the EU Macro-Financial Assistance (MFA) for the country.

This amount is part of the first tranche of the €30 million MFA programme, which the EU approved in October 2013. This MFA takes the form of a €15 million grant and a €15 million medium-term loan.

On 22 May 2015, the European Commission approved the disbursement of the loan element of €5 million of the first tranche, which will also be released shortly.

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxations and Customs, said: “The EU remains committed to support the Kyrgyz Republic’s efforts to stabilise its young parliamentary democracy and to help the role of civil society organisations in the reform process. With Macro-Financial Assistance, we help the Kyrgyz Republic to maintain macroeconomic stability and create more sustainable growth. At the same time, the EU will continue its political dialogue with the Kyrgyz authorities at all levels, including on the need to respect human rights and fundamental freedoms.”

The objective of this assistance is to support the restoration of a sustainable external financial situation for the Kyrgyz Republic, to alleviate its balance of payments needs and thereby support its economic and social development. It complements the assistance that the International Monetary Fund (IMF) provides in the context of the Stand-By Arrangement approved by the IMF on 8 April 2014.

Background 

The Kyrgyz economy was affected by the international financial crisis in 2009 and by ethnic violence in June 2010. These events disrupted economic activity. That created substantial public need to spend on reconstruction and social assistance, and resulted in external and budgetary financial gaps. At the donors’ conference held in Bishkek on 27 July 2010, the EU pledged to provide to the country Macro-Financial Assistance (MFA), which is a form of financial aid extended by the EU to partner countries experiencing a balance of payments crisis.

The MFA supports the comprehensive economic adjustment and reform programme agreed between the Kyrgyz Republic and the International Monetary Fund (IMF) in the context of the three-year arrangement under the Extended Credit Facility (ECF) approved by the IMF on 8 April 2014. The disbursement of the second instalment of the MFA will be linked to progress made with respect to the agreed reforms set out in the Memorandum of Understanding signed by the EU and the Kyrgyz Republic as well as the IMF programme being on track.

MFA is an exceptional EU crisis response instrument available to the EU partner countries experiencing severe balance-of-payment problems. Funds used for MFA loans are borrowed by the EU in capital markets and then on-lent to partner countries under the same financial terms. This allows recipient countries to benefit from the attractive borrowing conditions granted to the EU.

The European Commission proposed the assistance package for the Kyrgyz Republic on 20 December 2011 and the European Parliament and the Council adopted it on 22 October 2013 (Decision 1025/2013/EU). Formal approval of the European Commission’s proposal was delayed by a procedural disagreement between the Council and European Parliament.

More information on past MFA operations:

http://ec.europa.eu/economy_finance/eu_borrower/macro-financial_assistance/index_en.htm

Detailed information on MFA for the Kyrgyz Republic:

http://ec.europa.eu/economy_finance/international/neighbourhood_policy/kyrgyzstan_en.htm

More information on EU relations with the Kyrgyz Republic:

http://www.eeas.europa.eu/kyrgyz_republic/index_en.htm

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