This summer, the government of Kyrgyzstan accepted another loan from Turkey in the amount of $ 100 million. What are the aims of these funds? Is there no greater need for these funds?




This summer, the government of Kyrgyzstan accepted another loan from Turkey in the amount of $ 100 million.  What are the aims of these funds? Of this total, $790,000 will be spent on the creation of campgrounds (rest points for drivers with service stations, hotels, etc.). Is there no greater need for these funds?




Let’s imagine the state as a kind of organism. He has the institutions that perform different functions. The country’s economy should be considered as the muscles of the organism, a necessary system without which no man can survive. So, what is the physical condition of our patient called “Kyrgyzstan”?


His condition was extremely critical. During the first half of 2012, the gross domestic product  (GDP) of Kyrgyzstan fell by 5.6 percent. No other country in the Commonwealth of the Independent States (CIS) have seen such a large decline in their economies. For comparison, the economy of neighboring Tajikistan during the same period increased by 7.4 percent. The level of production in Kyrgyzstan fell by 31.6 percent. 


Also, according to the latest data from the Kyrgyz finance ministry, the state debt amounted to more than $3 billion (about 146 billion soms). This represents 45.6 percent of total GDP, and almost two times more of the state budget of Kyrgyzstan in 2012. 


Each year, the national debt is growing as the government takes more and more international loan. In the period from 2005 to 2010, 24 new loan agreements with a total value of $824.7 million was signed.  


Learn how to prioritize


In this difficult time for the country it is logical to set the right priorities in public spending. It is extremely dangerous to throw finances left and right.


For comparison, take two families: rich and poor. A rich family can afford to buy not only healthy food, but the summer vacation and travel abroad, expensive cars for each family member, expensive clothes, etc. Can such a poor family afford these things? No. It first tries to feed themselves, get dressed, and only then think about other things, if it still has funds left over. So imagine a poor family, which, instead of feeding their children, goes to relax on a foreign vacation on an empty stomach?Is it not absurd?


Given the above the critical state of the country, it is normal to wonder whether the $790,000 in costs to construct campgrounds are reasonable. To understand the need of these costs, we need to answer two simple questions.


We must save the boat
The boat named “Kyrgyzstan” has very many holes through which water gushes. There are economic , social, infrastructure problems and others. Can we survive without building the campgrounds? Yes. There are more holes, and if we do not patch them up, our boat will sink.


Let us estimate the utility of the $790,000 that will be spent. These funds can be repair about 17 schools, given that the annual cost of repair of one school is 2.2 million soms ($47,000).


To repair all the roads in the capital city of Bishkek for a year costs


Which of the following is still important? The question we must ask is:


Does that patch the hole? 


If a person’s heart ached, he should go to a cardiologist. When the problems started with the nerves, a neurologist, eye problems – to the eye doctor, and so on. Everyone knows that the optometrist cannot professionally diagnose your heart like a cardiologist and can only professionally diagnose vision problems. The essence of the logic is clear.


By the way, there are consequences to the loan that Kyrgyzstan accepted from Turkey. The loan of $ 100 million was taken from Turkey for a period of 20 years at 0.01 percent. Given the large number of other loans today that must be paid off soon, it is worth a more cautious approach before incurring these costs.


We must be clear about what the role of the state is, and what the role of the private sector is. The role of the state has always been determined more as an independent arbitrator, to create conditions for tracking compliance with all rules in the market. Its role as a player in the market can only happen in extreme cases, which does not include the construction of three small camping grounds.


Moreover, in practice, you should pay attention to which party produces the better and more competitive product: the state or a private manufacturer? It’s no secret that the quality of service in a private boarding house on Lake Issyk-Kul is much higher than it is by the public boarding house for almost the same price. Such examples are many.


The role of the state is not a business in its territory. The role of the state is to create the conditions for business development. If these conditions are created, then all possible barriers will be removed for building all the campgrounds in the country. 


This article is originally written by CAFMI, translated and republished by Universal


CAFMI, February 11, 2013

Bishkek, Kyrgyz Republic


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