Kyrgyzstan to mitigate pandemic-caused economic shocks for businesses, vulnerable people and communities with World Bank support

AKIPRESS.COM - The World Bank's Board of Executive Directors approved financing for three projects in the Kyrgyz Republic aimed at helping mitigate the unprecedented health, economic, and social challenges caused by the COVID-19 pandemic.
The financing to Emergency Support for Micro, Small and Medium Enterprises ($50 million); Social Protection Emergency Response and Delivery Systems ($50 million); and CASA-1000 Community Support Project (COVID-19) Additional Financing ($21 million) will be provided on highly concessional terms through the International Development Association (IDA). Half of the funding in each project will be allocated in the form of a grant, which requires no repayment, while the other half is a credit with a 0.75% administrative fee, with repayments spread out over 38 years, and a six-year grace period, the World Bank said.
The COVID-19 pandemic is expected to have a significant negative effect on the Kyrgyz Republic's economy that is reliant on services, remittances and natural resources, and to reverse much of the development progress achieved in recent years. "Preliminary analysis shows that the severity of the economic shock in this country may generate an increase in poverty headcount, reaching up to 600,000 people," says Bolormaa Amgaabazar, World Bank Country Manager for the Kyrgyz Republic. "The Government of the Kyrgyz Republic has introduced measures to combat the crisis, but additional support is needed. The three new projects are aimed to help mitigate the devastating effect of COVID-19 pandemic and provide support to various target groups."
The Emergency Support for Micro, Small and Medium Enterprises (MSMEs) project will provide emergency financial relief and recovery support to up to 65,000 micro, small and medium businesses that were impacted by business closures, loss of revenues and missed trading opportunities. About two thirds of the project resources (US$35 million) will provide financial support to a large cohort of micro entrepreneurs, known as patent-holders, and other eligible small and medium businesses. Depending on the size of the enterprise and the number of formal employees, beneficiaries will receive a lump-sum contribution ranging from $500 to $10,000 to cover operational expenses such as employee salaries, suppliers, rent, and utilities. Surviving MSMEs will be required to repay the principal amount of the financial assistance. At the same time, the Project will finance ($13 million) a Portfolio Risk Sharing Facility (PRSF), which will provide portfolio partial credit guarantee for MSME loans extended by participating financial institutions. The PRSF will ensure continued credit provision to MSMEs during the crisis and the post-crisis recovery. The Asian Infrastructure Investment Bank (AIIB) is expected to provide additional $50 million to co-finance the project.
The Social Protection Emergency Response and Delivery Systems project will focus on the relief for the poor and vulnerable layers of the population during the next six months of the emergency period. A large proportion of the population relies on monthly pensions to maintain their welfare, while the Social Fund is facing fiscal pressure due to a significant reduction of contributions from formal workers. Therefore, nearly half of the project amount ($24 million) will be used to ensure that pensions and other social insurance benefits under the responsibility of the Social Fund are paid in a timely manner for a period of six months.
Moreover, the project will provide assistance through cash benefits and unemployment support. Up to 200,000 households with approximately 230,000 beneficiary children will receive a monthly child grant for poor families, uy-bulogo komok (UBK). These new beneficiaries are in addition to the 305,000 existing ones. For a period of six months, the UBK benefit will be topped-up for both existing and new beneficiaries by KGS 300 per month, making it a KGS 1,110 cash allowance per child.
The project will also support up to an estimated 38,000 individuals who have been making regular contributions to the Social Fund but have been laid-off due to the economic crisis precipitated by COVID-19, through financing a monthly unemployment allowance of KGS900 for up to six months.
Following the short-term relief, the Project will contribute to support about 20,000 families through the implementation of the productive inclusion program. Eligible participants will receive a package of benefits and services to set up an income-generating activity.
Finally, the Project will help to strengthen the country's social protection system by improving and streamlining targeting and selection mechanisms of beneficiaries, simplifying registration in social assistance programs, and promoting graduation from and reducing dependence on social assistance programs.
The CASA-1000 Community Support Project (COVID-19) Additional Financing will supplement the original CASA-1000 Community Support Project, which has become effective in February 2020. The combined investments of $32 million will allow the country to achieve greater impact in the development of social and economic infrastructure in Batken, Jalal-Abad and Osh oblasts through which the CASA-100 transmission line passes.
Out of the total financing $25 million will be used for small grants in all the 187 Aiyl Aimaks (sub-districts) in the southern regions of the Kyrgyz Republic. Communities will join together to participate actively in deciding how the grants will be used in their villages. Communities will prioritize their needs, make decisions on the grants, help implement the projects, and monitor their construction.
To address the severe lack of economic opportunity and loss of livelihoods caused by the COVID-19 crisis and economic downturn, the Project will support the development of at least one productive livelihood facility in each of the Aiyl Aimaks, such as building refrigerated storage facilities, fruit and vegetable greenhouses and warehouses, small-scale manufacturing or fruit processing plants, machinery workshops, craft workshops, and multi-purpose work centers. Special activities will be provided for women and youth to help them develop skills to run their own micro-businesses, or to work in these facilities. Investments in social facilities will also be possible to help address COVID-19 needs for villages, such as first aid points or solid waste machinery.
The Emergency Support for Micro, Small and Medium Enterprises, Social Protection Emergency Response and Delivery Systems, and CASA-1000 Community Support Project (COVID-19) Additional Financing projects will be implemented during the 2020-2024 period by the Ministry of Finance, Ministry of Labor and Social Development, Social Fund, and the Community Development and Investment Agency (ARIS), in compliance with relevant World Bank procedures and standards including procurement and financial management regulations and anti-corruption guidelines.