Kyrgyzstan : Second Sustainable and Inclusive Growth Development Policy Operation under the Energy, Food Security, and Economic Resilience Facility

OBJECTIVE

To support the Kyrgyzstan in mitigating the economic and social impacts arising from the recent developments in the Middle East, while preserving fiscal space for priority expenditures and strengthening resilience.

DESCRIPTION

The Program is proposed as a USD50 million equivalent Policy-Based Co-financing (PBCF) operation under AIIB’s Energy, Food Security and Economic Resilience Facility, to provide fast-disbursing budget support to the Kyrgyzstan. 

The Program will co-finance the Second Sustainable and Inclusive Growth Development Policy Operation (DPO-2) series of the World Bank (WB) for the Kyrgyzstan. DPO-2 supports 11 prior actions under three pillars: (a) ensuring sustainable and equitable energy supply, through reforms to strengthen the financial viability, governance, transparency, and private sector participation in the energy sector; (b) enhancing social service delivery and climate resilience, through improvements in social protection, regional development financing, climate governance, and green finance; and (c) strengthening fiscal sustainability and the business environment, through fiscal rule implementation, public procurement reforms, and measures to promote competition. These prior actions are aligned with the Kyrgyzstan’s national development priorities and sector strategies, reflect strong government ownership, and build on reforms supported under the WB’s first DPO operation.

ENVIRONMENTAL AND SOCIAL INFORMATION

Applicable Policy and Categorization. AIIB’s Environmental and Social Policy (ESP), including the Environmental and Social Exclusion List (ESEL), applies to this Program. The provisions on environmental and social (E&S) categorization in the ESP do not apply to PBCF operations. AIIB has conducted a streamlined Environmental and Social Due Diligence (ESDD) based on the analytical work undertaken by the Government of the Kyrgyzstan and the WB, a review of the supported prior actions, and a review of government systems relevant to managing potential E&S impacts. No prior action is proposed to be excluded from AIIB financing under the ESEL.

Environmental and Social Aspects. The proposed operation is expected to have largely positive environmental impacts and neutral social impacts. Environmental benefits are expected from renewable energy, tariffs, climate finance, green taxonomy, and climate policy reforms, which should reduce emissions, improve resource efficiency, strengthen energy security, and support the clean energy transition. While electricity and water tariff reforms may have limited effects on vulnerable groups, these risks are expected to be mitigated through gradual implementation and strengthened social assistance programs, including UBK reforms, the Universal Child Benefit, and expanded Guaranteed Minimum Income coverage.

Program Grievance Redress Mechanism (GRM). Individuals and communities who believe that they are adversely affected by the Program may submit complaints to the responsible Government authorities and the appropriate local and national grievance mechanisms. Information about the availability of these mechanisms and AIIB’s Project-Affected People’s Mechanism (PPM) will be disclosed in a timely and appropriate manner.

Monitoring and Reporting Arrangement. The main implementing agency, the Ministry of Finance (MOF), is tasked by the Chairman of the Cabinet of Ministers to coordinate with other government agencies and to oversee the overall implementation of the Program. The MOF has demonstrated adequate capacity to coordinate, monitor, and evaluate program-related indicators to date. Given that all prior actions have been completed and verified prior to AIIB loan approval and effectiveness, AIIB will coordinate periodically with the WB to monitor reform progress, the achievement of results indicators, and developments that may affect the Program’s objectives or outcomes. For internal reporting purposes, AIIB will reflect results and attribution through the Project Implementation and Monitoring Report (PIMR) and at the Program’s closure.