The Ministry of Finance of the Kyrgyz Republic and the World Bank on January 31 signed an agreement for an $8 million grant funding provided by the Swiss Government as a contribution to the Electricity Sector Modernization and Sustainability Project led by the World Bank.
The Grant Agreement was signed by Mr. Almaz Baketaev, Minister of Finance of the Kyrgyz Republic, on behalf of the Cabinet of Ministers of the Kyrgyz Republic, and Mr. Naveed Hassan Naqvi, World Bank’s Country Manager for the Kyrgyz Republic, in the presence of the Ambassador of Switzerland to the Kyrgyz Republic Mr. Olivier Bangerter.
The electricity sector in the Kyrgyz Republic faces challenges that have become more acute in recent years, driven by energy deficit due to insufficient generation, especially in winters. The total losses in the sector are about 20% of net generation, more than twice as high as commercial and technical losses in high- and some middle-income countries. About half of generation capacity and up to 70% of distribution assets are beyond their useful lives, leading to equipment failures and overloading across the country. Moreover, the Kyrgyz Republic has one of the lowest electricity tariff rates in the world. The sector is heavily indebted, with cumulative debt of above KGS 137 billion (equivalent to over $1.5 billion) or around 20 percent of the GDP, placing a heavy fiscal burden on the country.
“Together we can implement anti-crisis measures to stabilize the economy and minimize economic risks for Kyrgyzstan,” said Minister of Finance of the Kyrgyz Republic Almaz Baketaev. The project, with combined investments of $58 million, will finance urgently needed investments in four main areas: 1) rehabilitation and upgrade of distribution networks; 2) digitalization of distribution networks; 3) strengthening of social protection systems; and 4) institutional development to help design and implement priority energy sector reforms.
“Due to the cold weather, the Kyrgyz Republic has reached a historical peak of electricity consumption, and the energy sector professionals are working hard to pass through this winter season. There is an urgent need for the energy sector to modernize, grow sustainably and become an engine for the country’s green growth,” said Naveed Hassan Naqvi, World Bank’s Country Manager for the Kyrgyz Republic. “The World Bank fully supports the comprehensive vision for the energy sector and reform roadmap over the next decade that have been developed by the Cabinet of Ministers of the Kyrgyz Republic.”
Ambassador of Switzerland to the Kyrgyz Republic Olivier Bangerter said that the new project will help to improve the financial performance, ensure a reliable electricity supply for the people and businesses, and create a supportive social protection mechanism to the vulnerable groups. “The project’s aim is to strengthen energy security of the Kyrgyz Republic; it will also lead to better use of water resources, something essential because of the consequences of climate change for the country. We hope that with investments in people, procedures and infrastructure, this project will contribute to a more reliable energy supply.”
The Electricity Sector Modernization and Sustainability Project will be implemented through 2028 and will comply with strict international standards including procurement and financial management regulations and anti-corruption guidelines.