What goes around, comes around …
Over the weekend I came across a news item which I found interesting and reminded me of a controversy which at the time seemed to threaten revolution … little did we know then, how things were going to develop.
It seems that, according to the press report, Kyrgyzstan may be able to write off debts in exchange for assistance to Afghanistan.
This, at least, was the substance of an announcement made by the Finance Minister, Akylbek Japarov, at a public hearing on the implementation of anti-corruption policies in the environment.
In Kyrgyzstan, an alternative initiative HIPC (Heavily Indebted Poor Countries, a group of the poorest and most heavily indebted) can be a program of support to Afghanistan. If we get into this program we will be able to write off their debts in exchange for assistance to Afghanistan. Help will be in the form of the export of various domestic goods”, he is reported to have said.
What was really interesting, was that the Finance Minister “expressed his regret” at the earlier missed opportunity of entering HIPC.
For the record, and for those unaware of the scheme, I wrote a postcard about The Heavily Indebted Poor Countries Initiative, (HIPC), operated by the World Bank and the International Monetary Fund, (IMF), back in 2010.
In a way, of course, this isn’t at all surprising. As a Finance Minister of long standing, he has been a vociferous proponent of Kyrgyzstan joining the scheme. Indeed, one news agency pointed out that he had been one of the most active supporters of joining the HIPC programme when this was discussed before, (in 2006/7). Indeed having persuaded the government under Prime Minister Keliks Kulov to apply for the scheme in 2006, when a new it came to a vote under a new government in Feburary 2007, his was the only vote in favour.
At that time, according to the same press report that caught my attention, the proposal caused “mixed reactions” in society and “under pressure” from the public, the government refused from the programme.
That struck me as a wonderful example of understatement!
I well remember the vociferous protests and having to be smuggled into the Hyatt in order to attend the Open Meeting of the International Business Council where representatives of the World Bank and IMF explained how the scheme worked, because of a protest meeting on the pavement outside the hotel. For several weeks we saw stories in the Press about Kyrgyzstan surrendering its sovereignty and unfavourable comparisons with African nations.
To this day, I am not sure if Kyrgyzstan made the right choice in rejecting participation in the scheme. I do think, however, that it made the decision on the worst of all possible grounds: pure emotion and popularism.
Kyrgyzstan was quite happy earlier to accept a write off of part of its external debt by the Paris Club, (it was termed a re-structuring – but balked at the comparisons with African nations and assuming the doubtful title of a “Highly Indebted Country”, although it clearly was, and is, one.
Back in 2006, when the negotiations began, Kyrgyzstan had an external debt of something approaching USD2 billion, (70% of the country’s GDP), and was making something like USD40 million a year in repayments. It is hard to see how the country is going to be able to continue to meet servicing this level of debt. Indeed, if Kyrgyzstan had been a private company it would no doubt have declared bankruptcy and closed … but, of course, it is not so simple in the case of a country. Or is it? … perhaps we should ask Greece.
This short report made me think in particular of two underlying trends in the Kyrgyz economy:
The dependency on debt: Ever since the Akaev government started to accept foreign aid, (in the form of grants and more significantly loans), the debt has increased and, more worryingly, there doesn’t seem to be and to this tendency in sight. Kyrgyzstan is still looking for support, aid, grants, loans … and, of course, inward investment.
The growth of national pride: The Kyrgyz are a proud people, claiming to be one of the oldest, if not the oldest, peoples in the region. It is important for things to be expressed in Kyrgyz; for people to stand to attention, remove their hats (unless it is a traditional Kyrgyz Kalpak) and place their hand on their hearts during the playing of the National Anthem; there is a move to make diplomats meet foreign dignitaries in traditional costume; there are claims that, like Delphi, Kyrgyzstan is the center of the earth; the Kyrgyz trace ancient lineage to the Japanese, the American Indians and I have seen a link to Adam and Eve.
It is said that this rising national pride was one of the contributing factors to the downfall of the Akiev regime, (which faced protests over agreements to cede land to China to Kazakhstan in order to settle long running border disputes). It probably contributed to the demise of the Kulov government and the original rejection of HIPC.
Could it do the same again?, I wonder.
Bishkek