of October 6, 2016 No. 532
About approval of Strategy of national debt management of the Kyrgyz Republic for 2016-2018
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 2016-2018 according to appendix.
2. Declare invalid the order of the Government of the Kyrgyz Republic "About approval of Strategy of national debt management of the Kyrgyz Republic for 2015-2017" of June 29, 2015 No. 424.
3. To impose control of execution of this resolution on department of finance and credit policy of Government office of the Kyrgyz Republic.
The strategy of national debt management of the Kyrgyz Republic for 2016-2018 (further - Strategy) represents the mid-term plan of the Government of the Kyrgyz Republic determining the purposes, tasks and the directions of increase in effective management of public debt of the Kyrgyz Republic.
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 perhaps smallest costs and reasonable risk level;
- market development of government securities of the Kyrgyz Republic;
- maintenance of stability of public debt.
This Strategy regulates questions of debt management of the Government of the Kyrgyz Republic, and also the debt guaranteed by the Government of the Kyrgyz Republic. Financial liabilities of National Bank of the Kyrgyz Republic and municipal authorities of the Kyrgyz Republic do not fall within the scope of scope of this Strategy.
Measures and target indicators of this Strategy extend to the period of 2016-2018. If necessary, 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.
New external borrowings will be attracted only on 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.
When implementing external borrowings from several sources on financing of one project, calculation of level of lgotnost taking into account all raised grant and borrowed funds (the integrated grant element) is allowed. Value united grant element shall make at least 50 percent.
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 the public external debt.
In view of the current sizes of the public external debt, 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 government securities in foreign currency.
Servicing of the public external debt of the Kyrgyz Republic will be carried out timely and in full.
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 actions 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 treasury bonds with circulation periods over 2 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 also will exert important impact on development of the financial sector, will lead to more effective distribution of available 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 (annually, quarterly and monthly);
- ensuring regular consultations of participants of the market with the issuer and agent on questions of market development of government securities;
- ensuring knowledge of the population of government securities.
Considering the nature of the state guarantee as financial instrument with high risk level and uncertainty, and also the fact that the state guarantee can act as means of indirect and selective patronage of this or that company, organization, person that in turn does not promote competition development, the Government of the Kyrgyz Republic will not provide the state guarantees, except as specified, provided by the Budget code of the Kyrgyz Republic which is becoming effective since January 1, 2017.
For the purpose of ensuring stability of public debt of the Kyrgyz Republic the Government of the Kyrgyz Republic will strictly respect the rules and requirements of the legislation of the Kyrgyz Republic.
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