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ORDER OF THE GOVERNMENT OF THE KYRGYZ REPUBLIC

of February 5, 2018 No. 79

About approval of Strategy of national debt management of the Kyrgyz Republic for 2018-2020

For the purpose of effective management of public debt of the Kyrgyz Republic, further market development of government securities of the Kyrgyz Republic, according to articles 10 and 17 of the constitutional Law of the Kyrgyz Republic "About the Government of the Kyrgyz Republic" the Government of the Kyrgyz Republic decides:

1. Approve the Strategy of national debt management of the Kyrgyz Republic for 2018-2020 according to appendix.

3. This resolution becomes effective after ten days from the date of official publication.

Prime Minister of the Kyrgyz Republic

S. Isakov

Appendix

Approved by the Order of the Government of the Kyrgyz Republic of February 5, 2018 No. 79

The strategy of national debt management of the Kyrgyz Republic for 2018-2020

1. Introduction

This Strategy of national debt management of the Kyrgyz Republic for 2018-2020 (further - Strategy) is developed for the purpose of effective management of public debt of the Kyrgyz Republic and represents the mid-term plan of the actions of the Government of the Kyrgyz Republic aimed on:

- ensuring requirements of the Government of the Kyrgyz Republic for financing by means of attraction of borrowed funds in case of perhaps smallest costs and reasonable risks;

- market development of government securities;

- maintenance of stability of debt of the Kyrgyz Republic.

Due to the change of macroeconomic indicators and parameters of budget tax policy by the Government of the Kyrgyz Republic the decision on updating of Strategy of national debt management of the Kyrgyz Republic for 2016-2018 is made.

2. Purposes and tasks of national debt management

Main objectives of national debt management of the Kyrgyz Republic are:

- ensuring requirements of the Government of the Kyrgyz Republic for financing by means of borrowing with the smallest costs and reasonable risk level;

- market development of government securities of the Kyrgyz Republic;

- maintenance of stability of public debt.

3. Strategy scope

This Strategy regulates questions of the national debt management of the Kyrgyz Republic, and also debt guaranteed by the Government of the Kyrgyz Republic. Debt obligations of National Bank of the Kyrgyz Republic and municipal authorities of the Kyrgyz Republic do not fall within coverage of this Strategy.

Measures and target indicators of this Strategy extend to the period of 2018-2020. Annual updating of Strategy taking into account change of macroeconomic indicators, parameters of budget tax policy and changes in the financial market will be led if necessary.

4. External debt

New external borrowings will go to the most priority programs and projects which will promote economic growth and reducing poverty.

Attraction of new state external borrowings will be performed in case of respect for the minimum level of lgotnost of loans (grant element) in 35 percent.

In case of projects implementation of the state external investments due to attraction of loans from several sources or combination of loans to grant means calculation of level of lgotnost taking into account all the raised borrowed and/or grant funds (the integrated grant element) is allowed. Value united grant element shall make at least 35 percent also.

For the purpose of portfolio diversification of external debt and reducing the potential risks connected with concentration of debt the Government of the Kyrgyz Republic in the course of attraction of external borrowings will be guided by quantitative restriction of formation of debt to one creditor of no more than 50 percent of total amount of external debt.

In view of the current sizes of external debt and in order to avoid potentially high costs and risks, the Government of the Kyrgyz Republic will not perform borrowing by means of release and placement in the foreign financial markets of foreign currency bonds.

Servicing of the public external debt of the Kyrgyz Republic will be carried out timely and in full.

5. Internal debt

Attraction of the state internal borrowings will be made only by means of release and placement of government securities through market mechanisms of pricing, in particular through auctions.

The government of the Kyrgyz Republic will continue to hold events for increase in aggregate term of the address of government securities in the way:

- building-ups of specific weight of the government treasury bonds in general structure of annual issues of government securities;

- offers of the government treasury bonds with circulation periods of 10 years.

Servicing of the public internal debt of the Kyrgyz Republic will be carried out timely and in full.

Market development of government securities will serve not only for the purposes of financing, but will exert important impact on development of the financial sector, will lead to more effective distribution of available financial resources for business development. For achievement of these purposes control of the public internal debt will be exercised with respect for the principles of transparency, simplicity and liquidity and to provide the following measures:

- implementation of transactions of the return redemption and repeated offer of government securities;

- consideration of possibility of carrying out transactions of the return repo with use of government securities of the Kyrgyz Republic;

- regular publication of calendar of issue (annual, quarter and monthly);

- ensuring regular consultations of participants of the market with the issuer and agent on questions of market development of government securities;

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