Donors, lenders pledge $1.7 bln in aid for Kyrgyzstan

Wed Jul 10, 2013 4:58pm BST

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* International aid to help finance $13 bln national growth plan

* Hard-up Kyrgyzstan heavily hinges on Centerra Gold venture

* Powerful clans defy central government

By Olga Dzyubenko

BISHKEK, July 10 (Reuters) - International donors and lenders promised over $1.7 billion in grants and loans on Wednesday to support reforms in Central Asian state Kyrgyzstan over the next five years as it struggles to alleviate poverty after a period of political upheaval.

The mainly Muslim nation of 5.5 million, which hosts both U.S. and Russian military air bases, has seen two presidents deposed by popular revolts since 2005, and has also been hit by cuts and conflict at a gold mine that previously accounted for as much as 12 percent of gross domestic product.

Attending a conference in the capital Bishkek, delegations from the International Monetary Fund, the World Bank, the Asian Development Bank, the Islamic Development Bank, the European Union and the United Nations promised the cash in an unspecified mixture of loans and grants.

"It is estimated that International Development Partners have resources of over $2 billion available for new projects to support the Kyrgyz Republic over the period of the National Sustainable Development Strategy 2013-2017, which would contribute to disbursements of over $1.7 billion over the same period," the donor states and lenders said in a statement.

"However, turning these potential resources into successful projects and real improvements for ordinary people will require strong policies and efficient institutions."

President Kurmanbek Bakiyev fled a popular uprising and hundreds were killed in ethnic clashes in Kyrgyzstan's south in 2010. International donors pledged at the time to disburse $1.1 billion until 2013 to help rebuild the strategic nation.

Government data show the country has received around $940 million of this amount, and the further investment will go into a areas ranging from energy and agriculture to health, education, transport and water supplies.

With per capita GDP just a tenth of that in oil-rich neighbour Kazakhstan, Kyrgyzstan unveiled its five-year $13 billion growth plan in January, aiming to double the size of the economy largely from foreign investment and aid.

In the short-term it has faced problems with the operation of its flagship Kumtor gold mine, where Canada's Centerra Gold cut output last year and is now embroiled in a row with the government, which is seeking to redraw financial agreements signed with the investor under former President Bakiyev.

The mine's operations have also been briefly suspended recently amid demands and protests from local residents' groups over jobs and benefits.

President Almazbek Atambayev blamed local clans for wrecking a benchmark auction of Jerooy, the country's second-largest gold deposit, whose sale had been officially designed to give a positive signal to hesitant investors.

Still, the economy, having shrunk by 0.9 percent in 2012 after Centerra sharply cut output due to ice movement in the open-pit mine, is forecast to rebound to 7-percent growth this year. (Writing by Dmitry Solovyov; editing by Patrick Graham)

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