Kyrgyz+Republic

. Average GDP has grown at about 5 percent a year since 2003 and the high rates of poverty have started to decline since 2000. Despite pro-poor growth in the past few years, the country remains poor with about 35 percent of the population below the poverty line, making the Kyrgyz Republic eligible for funds from the International Development Agency (IDA), the World Bank's concessional lending facility. Despite steady growth in agriculture, almost three-quarters of the poor live in the rural and mountainous regions. Moreover, access to basic public services such as running water, public sewerage, health, and education has deteriorated over the past 17 years. || Developments since independence After the collapse of the Soviet Union in 1991, the country dealt with the loss of Soviet subsidies through external borrowing, depletion of assets, a reduction in private consumption, and increased government expenditures. The average inflation rate remained low at 5 percent in 2005-2006, but went up to 20.1 in 2007, reflecting food and energy price increases worldwide. CLOSING THE US AIRBASE The Kyrgyz Republic, having been promised $2.3bn in Russian aid, says it will force the US to close its airbase in the Central Asian republic, which supports US forces in Afghanistan. For the Kyrgyz side, the motivation is primarily financial—although closure of the base will have some popular appeal. Kurmanbek Bakiyev, the president of the Kyrgyz Republic, was in Moscow on February 3rd to sign an agreement with his Russian counterpart, Dmitry Medvedev, which provides for substantial Russian aid and loans. At the conclusion, Mr Bakiyev announced that he would seek to close the Manas airbase, which plays an important role in supporting the military operations of the US and its allies in Afghanistan—especially since the US was forced to quit an airbase in neighbouring Uzbekistan in December 2005. Mr Bakiyev subsequently confirmed the decision and his aides indicated that parliament would vote on the measure immediately, after which the foreign ministry could formally issue the US with notice to quit in 180 days. However, the vote did not happen immediately and on February 6th it was reported that a parliamentary vote would be delayed for at least one week. This has stoked speculation that Mr Bakiyev is open to the possibility of a fresh deal with the US concerning Manas.
 * Kyrgyz Republic- (Kyrgyzstan) **
 * The Kyrgyz Republic is a low-income country with a gross national income (GNI) per capita of $600 in 2007 (Atlas method). A country of 5.24 million people, the Kyrgyz Republic is landlocked and mostly mountainous. Gold, agricultural products and hydropower make up the bulk of the country's exports. The industrial production base is relatively small. Some 70 percent of farm land is privately owned as a result of generally equitable land reforms; and the economy is relatively open with a liberalized foreign trade regime and full convertibility of the Som – the Kyrgyz currency.

The Kyrgyz authorities find themselves in an especially difficult situation at present. In the last year, the country has suffered from droughts and power shortages, as a result of unusually large volumes of water being discharged from the country’s reservoirs in the winter of 2007/08 in order to generate electricity in the face of very harsh winter conditions. The slowdown in the Russian economy is hitting the country hard, as remittances from thousands of Kyrgyz workers are reduced or dry up entirely. The Kyrgyz government receives an annual rent of about $55m for leasing Manas to the US armed forces. This is dwarfed by the aid package promised by Russia: $180m of debt cancellation, $150m in aid and a loan of $2bn, comprising $300m in budget support and $1.7bn to complete the construction of the Kambarata-1 hydro-electric power station. The loan, which reportedly is to be made at 300 basis points above LIBOR over 20 years, will be made to a 50-50 Kyrgyz-Russian joint venture that will operate the plant; Russia will have three of the five board seats. Kambarata-1’s completion is a long-term priority for the Kyrgyz authorities, as it will boost annual power output by 40% in normal years and provide vital additional capacity in lean periods (such as the winter of 2007/08), as well as boosting the country’s power export potential.

The US had indicated a willingness to pay $100m annual rent on Manas, but this is dwarfed by the non-Kambarata-1 parts of the Russian package. The $300m in budgetary aid is equal to around 6% of Kyrgyz GDP—if delivered, this would eradicate fears over the sustainability of the budget this year under current spending plans. If closure of Manas and forfeiting rent of $50m-100m was the price demanded by Moscow, Mr Bakiyev probably concluded that it was worth paying. Two other considerations are also likely to have influenced Mr Bakiyev to accept Russian aid and evict the US. First, the Manas base is unpopular in the Kyrgyz Republic; a local was killed by a US serviceman in December 2006 and since then there have been periodic protests calling for the base’s closure. Second, the geopolitical context has changed since August. The brief war between Russia and Georgia over South Ossetia served as a reminder to the rest of the Soviet Union that Russia remained the regional hegemon, and gave notice that the US would not extend meaningful support to pro-US governments that found themselves in confrontation with Russia Info from the economist and UN