The social and economic situation in Kyrgyzstan in 2001 was characterized by mixed tendencies of macroeconomic stabilization and a growing pressure of defaulting on foreign debt (125 percent of GDP). In 2001, economy grew 4.5 percent, inflation was at an impressive 2.2 percent for the 11 months of 2001 (7.3 percent for the same period of 2000), and the exchange rate against the dollar has practically not changed. However, the government is still to take resolute measures to go on with reforms to be able to tackle its foreign debt and poverty, carry out tougher monetary policy, increase tax collection, carry on with privatisation and reform the banking sector. Moreover, the war against terrorism in the vicinity of the country contributed further to the shrinking market for tourism and an increase of defence and law enforcement spending at the expense of social programmes.

At the same time the country has confirmed its commitment to major development goals by adopting the Comprehensive Development Framework (CDF) for 2001-2010. The UNCT driven National SHD Strategy approved earlier has been pivotal to the formulation of the CDF. Ahead of the Millennium Development Goals timetable, the CDF stipulates halving poverty by 2010. The government claims the poverty level has lowered by almost 5 percent in 2001 due to more vigorous joint efforts to promote social mobilization combined with an expansion of microcrediting programmes, in which UNDP is playing a generally recognized leading role. These programmes are estimated to involve about 100,000 people. Still poverty remains at a dramatic 50-60 percent, and the target population should include at least 500,000 for the fight against poverty gain momentum and become irreversible.

The regional situation is also providing a window of opportunity for Kyrgyzstan. First, the country has been definitely put on the map. The international development community is paying a growing attention not only to Afghanistan, but to adjacent Central Asian countries as well. Kyrgyzstan, being the most forward-looking and stable nation in the region, can serve as a base not only for military purposes. The country can contribute to the new development efforts by its own example of successful experience in implementing state-of-the-art programmes of technical assistance.

Since it gained independence from the USSR in 1991, the former Central Asian Soviet-republic of Kyrgyzstan has made impressive progress in building a state, a democracy and a market-oriented economy based on private property and the rule of law. The country, which is land-locked, has limited natural resources and is difficult to penetrate though. About 93% of its surface is covered by often arid mountains, who separate its demographic and economic centers: the Chui Valley in the North, and the Ferghana Valley in the South.

Note: On October 12, 1999, the Parliament of Kyrgyzstan approved a law to separate 3 districts in remote South West Kyrgyzstan from Osh province, and turn them into a new, seventh province: Batken. Because Batken and South West Kyrgyzstan, due to their complex political geography, have special development priorities, a special chapter is devoted to the area on the UNDP in Kyrgyzstan homepage.

About one third of its population was considered poor in 1989. After the Soviet financial support came to an end, per capita GDP in Kyrgyzstan plummeted by approximately 50% and kept falling to a level of US$ 590 in 1996. Between 1990 and 1995 the decline in industrial production in the republic was very high. The biggest decline was registered in 1994, with a drop in production of 27,9%. The country's peripheral position in the USSR also left behind rigid hierarchical structures and concomitant behavioral attitudes which are not immediately conducive to democratic change - especially in remote areas. Thus unprepared for independence, Kyrgyzstan presently faces a triple challenge of transition:

• Economic Transition
• Political Reforms
• Underdevelopment

The 1995-1998 National Human Development Reports reflected the great hardships and upheavals resulting from the decay of the previous system and the transition to new social-economic relations. The main achievement of the previous years was macro-economic stabilization, but these improvements did not translate into an improvement in living standards for most people. The price of transitions has turned out to be high, and a significant part of Kyrgyzstani has become poorer. The 'shadow economy' undermines the government's tax collections, and hence its incapacity to adequately fund pro-poor programs. The present policies and procedures need to be improved to fully meet these human development challenges. As measured by the relevant Human Development Index indicators, Kyrgyzstan has moved down from 89th place in 1992 to 107th place in 1997.

Social partnership remains undeveloped, and the institutions of the emerging civil society are not sufficiently strong to demand the required freedom, security, law and order. Although the number of Non-Governmental Organizations (NGOs) is growing rapidly (various sources show up to 1,200 NGOs), the public activities they maintain involve an insignificant part of population. Besides the NGOs are driven by availability of donor funds, which alone cannot meet the demands of the growing sector. The lack of financial and human resources of the fledgling NGOs constrain their ability to realize their role as effective partners in development initiatives.

FIRST AMONG REFORMERS

Kyrgyzstan was the first CIS-country to:

• adopt its national currency (the Som, 1993);
• adopt a National Strategy for Sustainable Human Development (1997) and has a Poverty Elimination Strategy based on SHD;
• join the World Trade Organization (1998)

The referendum of 17 October, 1998:

• anchored private landownership and widened the freedom of the press;
• lifted immunities of Members of the Parliament (MPs) in cases of criminal acts;
• introduced the requirement of at least 25% of MPs being representatives of political parties.

KYRGYZSTAN IN FACTS AND FIGURES

• Kyrgyzstan (officially called the Kyrgyz Republic) became independent in 1991. It has an elected president and is a secular state;
• Capital: Bishkek (formerly Frunze), ca. 800,000 inh.;
• Area: 199,900 sq.km (about the size of Great Britain), which 53.9 % is agricultural land, 5.1% forest, 4.3% water and 36.7% is used for other purposes;
• Administrative divisions: since late 1999, the country is divided in 7 oblast or provinces (see map) plus the capital. Each province and the capital are divided into rayon or districts (39, plus 4 in the capital). On their turn, those are divided into ayil okmotu or municipalities (429 in total), cities, towns and settlements.
• Population: 4.8 million, of whom 61.6% are Kyrgyz, 14.4% Russians and 14.4% Uzbeks;
• 55 % of the population live in the Ferghana Valley (South Kyrgyzstan), 15% of the country's territory;
• GDP per capita : US$ 440 (WB Atlas) / US$ 390 (Kyrgyzstani figure);
• 40% of its GDP is agriculture;
• 66% of the population live in villages;
• 60% live below the poverty line (US$ 7 / month);
• Purchasing power is two-thirds of developing countries average;
• Literacy rate: 96 %;
• Life expectancy : 63.1 for men, 71.2 for women
• Infant mortality (% ) : 26.2;
• TB is up with 100 % since 1991;
• 52% of the state budget = social costs

Data Sources: National Human Development Report (1998), UN Common Country Assessment (September 1999).