Identifier
Created
Classification
Origin
07BISHKEK143
2007-02-08 14:13:00
CONFIDENTIAL
Embassy Bishkek
Cable title:  

IMF/WB "NOT OPTIMISTIC" AS KYRGYZ HIPC DECISION

Tags:  ECON EFIN EINV PREL KG 
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C O N F I D E N T I A L SECTION 01 OF 03 BISHKEK 000143 

SIPDIS

SIPDIS

DEPT FOR SCA/CEN (GEHRENBECK)

E.O. 12958: DECL: 02/08/2017
TAGS: ECON EFIN EINV PREL KG
SUBJECT: IMF/WB "NOT OPTIMISTIC" AS KYRGYZ HIPC DECISION
NEARS

REF: A. 06 BISHKEK 1692


B. 06 BISHKEK 1750

C. BISHKEK 080

D. BISHKEK 098

BISHKEK 00000143 001.2 OF 003


Classified By: Charge d'Affaires Lee Litzenberger for Reasons 1.4 (b) a
nd (d)


C O N F I D E N T I A L SECTION 01 OF 03 BISHKEK 000143

SIPDIS

SIPDIS

DEPT FOR SCA/CEN (GEHRENBECK)

E.O. 12958: DECL: 02/08/2017
TAGS: ECON EFIN EINV PREL KG
SUBJECT: IMF/WB "NOT OPTIMISTIC" AS KYRGYZ HIPC DECISION
NEARS

REF: A. 06 BISHKEK 1692


B. 06 BISHKEK 1750

C. BISHKEK 080

D. BISHKEK 098

BISHKEK 00000143 001.2 OF 003


Classified By: Charge d'Affaires Lee Litzenberger for Reasons 1.4 (b) a
nd (d)



1. (C) Summary: World Bank and IMF representatives in
Kyrgyzstan have requested that Kyrgyz authorities recommit,
in writing, to the December HIPC agreement by late February
or risk the loss of all debt relief envisioned under HIPC.
PM Isabekov's "step by step" parliamentary strategy on HIPC,
designed to "protect" Kyrgyzstan's national interests ran
into trouble when First Deputy Prime Minister Daniyar Usenov
used a parliamentary hearing to denounce the HIPC initiative.
Although President Bakiyev supposedly understands and favors
HIPC, Bakiyev's unwillingness to control Usenov's public
opposition questions his commitment to HIPC. The local World
Bank and IMF representatives are not optimistic about HIPC's
prospects, and are now preparing for a future without HIPC.
End summary.

Put it in Writing
--------------


2. (C) Within a week of taking office, PM Azim Isabekov met
World Bank chief Roger Robinson and International Monetary
Fund (IMF) chief James McHugh separately to discuss the
Heavily Indebted Poor Countries (HIPC) initiative and other
international assistance projects. During their January 31
meeting, Robinson requested a new, written confirmation of
Kyrgyzstan's commitment to the HIPC triggers agreed in
negotiations which concluded December 9. (Note: Prior to his
late January departure from office, PM Kulov removed his name
from the December letter committing Kyrgyzstan to the HIPC
initiative. End note.) However, Robinson asked that
President Bakiyev's name be added to those of PM Isabekov,
Minister of Finance Japarov and National Bank Chairman
Alapayev on the requested letter.


3. (C) The World Bank and the IMF publicly revealed their
request in a joint February 7 statement calling for the new

cabinet to reaffirm "its commitment to the government's
reform program and its desire to seek debt relief through the
HIPC and MDRI initiatives." The letter, Robinson told emboff
February 8, is not a "legal" requirement, but, given the
Kyrgyz political environment, is needed to confirm what had
been agreed in the negotiations. Japarov announced February
8 that the government would make a decision next week.

Step by Step ) and Out the Door?
--------------


4. (C) According to Robinson, PM Isabekov in the January 31
meeting said he wanted the "government's endorsement and
support of parliament" before moving forward on HIPC.
Isabekov, McHugh told emboff, outlined a "step by step"
approach towards parliament that would allow Kyrgyzstan to
judge each stage of HIPC's implementation in accordance with
Kyrgyzstan's national interests.


5. (C) Parliament's Budget Committee Chairman Akmatbek
Keldibekov chaired a February 2 hearing on HIPC that did not
conform to Isabekov's plans. According to Robinson, who

BISHKEK 00000143 002.2 OF 003


observed from the gallery, Keldibekov initially refused to
give pro-HIPC Japarov an opportunity to speak but then only
granted him "a minute," before permitted First Deputy Prime
Minister Daniyar Usenov "hours" to condemn the HIPC program.
(Note: The hearing took place while Keldibekov had been
rumored to be a replacement for Japarov. Japarov has since
been appointed to a slimmed down financial portfolio.
Japarov previously spoke at a HIPC parliamentary hearing.
End note.) McHugh characterized the event not only as a
"disaster," but also a "watershed" moment which confirmed to
him HIPC's demise. Robinson and McHugh walked out of the
hearing "in protest."

Crunch Time
--------------


6. (C) Following the parliamentary hearing, Robinson and
McHugh advised Kyrgyz government officials of the limited
timeframe for Kyrgyzstan to restate its commitment to the
agreed HIPC program. As Washington-based World Bank and IMF
officials are due to review Kyrgyzstan's HIPC package using
2005 data in late March, Robinson explained to emboff that
Kyrgyzstan must provide its final commitment by February
20-25. Robinson added that Washington officials require
approximately one month to process the package. Kyrgyz
officials had previously proclaimed that the government would
decide only in March if it should participate in the HIPC
program. Robinson and McHugh explained the urgency by
pointing to improved 2006 fiscal and currency data that would
disqualify Kyrgyzstan from receiving any debt relief under
HIPC.

Usenov's Alternative Paths
--------------


7. (C) Prominent HIPC critic First Deputy PM Usenov has
focused his disagreement on proposed reforms to energy and
mining sectors. Earlier this month, Usenov identified the
following alternative funding sources to replace
HIPC-proposed measures: 1) increasing revenue from the U.S.
base at Manas; 2) liquidating government-owned Centerra stock
(Centerra is the Canadian parent company of the operator of
the Kumtor gold mine); 3) reducing losses in the electricity
sector; and 4) borrowing money from Kyrgyz nationals and
institutions.


8. (C) Usenov has repeatedly claimed that the World Bank and
IMF have never managed a "successful" program in Kyrgyzstan.
Robinson told emboff he and his colleagues found numerous
positive statements Usenov has previously made regarding
World Bank activities. Despite Usenov's "unclear motives,"
Robinson does not plan to release these messages.

Where is President Bakiyev?
--------------


9. (C) Robinson said he expected to meet President Bakiyev
within the next day, but will not "push" HIPC. Bakiyev, who
largely stayed quiet when PM Kulov was attacked for his
pro-HIPC stance, joined the fray January 31 by calling on
"young people to stop worsening the situation over (HIPC)."
"In this connection," he added, "I would call on you to stop
meetings and demonstrations. People are tired of politics."
Although this appeal followed a prediction former Bakiyev
Foreign Policy Advisor Ermek Ibraimov made to the Ambassador
that Bakiyev "would push HIPC through" in the end, Robinson

BISHKEK 00000143 003.2 OF 003


asked why would Bakiyev permit Usenov to continue his vocal
campaign against HIPC.

Amidst the Curses, Taking it All in Stride
--------------


10. (C) McHugh and Robinson separately predicted to emboff
February 8 that the new commitment letter would not be
forthcoming. McHugh said the World Bank and IMF would not
raise HIPC again, and would instead focus on their other
activities in Kyrgyzstan. Robinson added that he informed
Minister of Finance Japarov "the window is now," but confided
in emboff that Kyrgyzstan's non-participation in HIPC "would
not be a catastrophe." "There's no need," he continued, to
provide "knee-jerk reactions" to this anticipated political
outcome. McHugh, paraphrasing a Harry Potter character, said
once the deadline for Kyrgyzstan's commitment decision
passed, "no curse can make HIPC come alive again." Robinson
expressed concern, however, that Usenov may act on a threat
to expel the IMF by the end of 2007.

Comment
--------------


11. (C) HIPC was a strong force in PM Kulov's ouster, and it
remains a controversial issue for PM Isabekov's government.
Plans by officials to disclose Kyrgyzstan's position in March
have been upset by the strongly anti-HIPC parliamentary
hearings on February 2, which led the World Bank and IMF to
request a recommitment by the Kyrgyz government within the
next two weeks. Bakiyev, who's shown no leadership on this
issue, will have to intervene personally to save HIPC at this
point.

LITZENBERGER