This report examined the current state, challenges, and opportunities in infrastructure financing in Kyrgyzstan. Within infrastructure sector, the focus is on power, transport, ICT and water supply.
Kyrgyzstan’s infrastructure investment needs are massive. In addition to being essential to the country’s ability to alleviate poverty, these investments can have a significant transformational effect on the economy by providing additional export revenues and improving cross-border trade and mobility. The focus of the Government is currently on financing (a) large hydropower projects given the country’s commitment to regional electricity trade; and (b) public transport given the Soviet legacy of underdeveloped road and rail networks. Historically, infrastructure projects have been financed by sovereign loans from international development institutions. Private investment is yet to gain momentum, while PPP is relatively new.
Going forward, Kyrgyzstan’s main financing modality would remain in the realm of concessional sovereign loans from international financial institutions. However, new modalities should also be explored, such as diaspora bonds or issuances of sovereign bonds in the neighboring countries. When exploring these options, careful consideration should be given to their impact on the foreign currency risk and external debt stock.
Among others, policy priorities include reducing pricing distortions in the infrastructure sector, careful selection of projects, and wise structuring of project financing using concessional loans and grants. More broadly, infrastructure financing in Kyrgyzstan will benefit from increased capacity of both public and private entities on project selection and implementation. infrastructure projects.