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Debts of Kyrgyzstan: Why country could lose its facilities

To date, the Export-Import Bank of China is the largest creditor of Kyrgyzstan. The republic owes $ 1.7 billion to China. If we don’t pay off the debt on time, we could lose state facilities.

The Ministry of Finance assures that there is no such threat so far, because Kyrgyzstan is consistently fulfilling its obligations.

But the fact remains. China is not going to write off debts due to the difficult epidemiological situation. They only agreed to a deferral, but it is also in question.

Why did we take money from the PRC

In total, nine projects for $ 2,087.6 billion have been or are being implemented in Kyrgyzstan at the expense of the Export-Import Bank of China. All the money allocated by China is loan. They were granted for a period of 20 years with a grace period from 5 to 11 years. Loan interest is 1.5-2 percent per annum.

This is one third of the total state debt of the country and more than 40 percent of the external one. Most of the loans were taken in 2012-2013. Then we borrowed from the Export-Import Bank of China $ 519.6 and $ 785.9 million.

The most expensive project is rehabilitation of an alternative North — South road. Initially, it was allocated $ 399.9 million for it. Concessionary and preferential loan agreements were signed later on the project. As a result, the total amount of loans for this project alone amounted to $ 698.6 million.

There are two more projects that cost a pretty penny. These are the construction of Datka — Kemin power transmission line and modernization of the Bishkek Heating and Power Plant. They cost $ 775.8 million.

Future, current and recent criminal cases

Ex-president Almazbek Atambayev liked to say that thanks to him it was possible to attract resources to Kyrgyzstan for implementation of large investment projects. More than 90 percent of loans from China were taken precisely during his presidency.

Almazbek Atambayev was especially proud of the projects on the alternative North — South road, Datka-Kemin power transmission line and modernization of the Bishkek HPP.

However, after change of government, pride in projects was replaced by criminal cases. The most high-profile case was investigation into modernization of the HPP. According to the investigators, due to corruption in the preparation, signing and implementation of the project, the state suffered damage in the amount of 5,439 billion soms. The heads of the energy sector and two prime ministers ended up in the dock.

As a result, ex-head of the National Energy Holding Aibek Kaliev, former Prime Minister Jantoro Satybaldiev and the head of Electric Stations OJSC Salaydin Avazov were sentenced to different prison terms within the criminal case on modernization of the capital’s HPP. Former head of the HPP modernization group Temirlan Brimkulov and commercial director of Electric Stations Zholdoshbek Nazarov were released in the courtroom. Former finance and energy ministers Olga Lavrova and Osmonbek Artykbaev must pay fines. Former Prime Minister Sapar Isakov was sentenced to 15 years in prison.

This is just the beginning. Prosecutor General Kurmankul Zulushev is sure that it is worth studying implementation of Datka Kemin and construction of the alternative North — South road projects more closely.

«Since my days in Parliament (Kurmankul Zulushev was a deputy of the Parliament. — Note of 24.kg news agency), I have been thinking that it is necessary to give a legal assessment of the projects for the construction of North — South road, reconstruction of the hippodrome in Cholpon-Ata, construction of Datka — Kemin power transmission line, in general, of about ten high-profile facts,» he said.

How will we pay off ?

The initiated criminal cases and the arrests of the high-ranking officials do not mean that Kyrgyzstan will be able to renounce its obligations. Even the coronavirus pandemic has not made the neighbors to ease conditions. Kyrgyzstan has not yet been able to agree even on debt payment deferral.

Earlier it was reported that the PRC agreed to temporarily suspend receipt of payments from Kyrgyzstan on account of debt servicing using an interest rate in the amount of 2 percent for the period.

This deferral of suspended payments until the end of the year makes up about $ 35 million (2.8 billion soms).

«Negotiations with China continue, the final decision has not been made. According to preliminary data, if an agreement is signed, the amount of the deferral is to be repaid in equal installments over three years — from 2022 to 2024. At the same time, 2021 will be preferential. The deferral will be paid twice a year. As a result, the returned funds, including interest, will amount to $ 36.7 million (2.9 billion soms), that is, the overpayment will reach about $ 1.7 million,» the Ministry of Economy and Finance said.

The loans will still have to be repaid, otherwise we risk to lose state property. President Sadyr Japarov confirmed this in a recent interview.

«Our external debt is about $ 5 billion. If we do not pay some of it on time, we will lose many of our objects. Agreements with such conditions were signed by Atambayev. But, God willing, we will get rid of all debts in time. We have plans,» Sadyr Japarov said.

However, he did not specify what exactly Kyrgyzstan could lose.

The Ministry of Finance admitted that there is indeed a norm in the agreements signed with the PRC stipulating that the Exim Bank of China, in case of late repayment of the loan by the Kyrgyz side, has the right to demand reimbursement of the entire amount of the loan.

«It should be noted that the Government of Kyrgyzstan is fulfilling all its obligations in a timely manner and in full,» the ministry said, assuring that there are no reasons for concern so far.