Kyrgyz Ask World Bank to Manage Funds

While a plan to place some of Kyrgyzstan’s international reserves under World Bank management may be politically unpopular, NBCentralAsia economists say there is nothing unusual about the idea – and it might earn the country a higher income.



The idea, announced on September 20, is that the National Bank of Kyrgyzstan, NBK, will hand over a proportion of its foreign-currency and gold reserves to be held and managed at the World Bank. NBK officials say their aim is to learn how to place their international reserves effectively.



International Monetary Fund figures show that Kyrgyzstan’s international reserves rose to reach 680 million US dollars as of the end of July.



Politicians interviewed by NBCentralAsia are worried about the scheme, and say they lack confidence in the central bank’s policy as it is unwise to hand over one’s external assets to an international financial institution, IFI. A sovereign state should manage all its assets by itself, they say, and this decision confirms that Kyrgyzstan is incapable of looking after its funds effectively. They recommend that - if the aim is to study how to manage of reserves - NBK experts should instead be sent on internships with the World Bank or other IFIs.



However, NBCentralAsia’s economic experts say it is perfectly normal practice for a central bank to seek IFI assistance, especially in a transitional country which lacks experience in managing reserves.



These economists say the effective placement of reserve assets should prove profitable for Kyrgyzstan. The World Bank has the financial capacity to do this so that income is maximised, whereas Kyrgyzstan does not. The World Bank should be able to provide an acceptable level of transparency in looking after Kyrgyz assets. The NBK will also acquire valuable know-how along the way.



The one risk that NBCentralAsia’s economists highlight is that income from the fund allocation falls short of expectations, but they say this can be mitigated if Kyrgyzstan draws up a watertight contract with the World Bank that makes provision for such a scenario.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)