At their meeting today in Washington, ministers lent their support to an initiative to help the seven low-income countries of the Commonwealth of Independent States (CIS-7)—Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova, Tajikistan, and Uzbekistan—accelerate poverty reduction and economic growth, while ensuring sustainable fiscal and external debt positions. The initiative, sponsored jointly by the World Bank, the IMF, the ADB, and the EBRD, rests on the CIS-7 countries intensifying—and assuming more ownership over—their development and reform efforts. At the same time, the international community is prepared to provide support to countries following strong reform policies.
Economic advancement is critical for reducing poverty and for fostering peace and security in the region.
—World Bank, ADB, EBRD, and IMF
The initiative was first proposed at a two-day seminar held in London on February 21–22, hosted by the U.K. government and sponsored jointly by the World Bank, the IMF, the ADB, and the EBRD. Participants at the London seminar included representatives of the CIS-7 governments, creditor countries, and international agencies.
Following the breakup of the Soviet Union, the CIS-7 countries faced a triple challenge: to build new states, democratic institutions, and market economies. During the past 10 years, most of these countries have made considerable progress toward meeting these goals, but the unfinished agenda remains substantial, and living standards have fallen sharply.
In hindsight, the CIS-7 countries and the international community underestimated the impact of the breakup of the Soviet Union and the complexity of the transition challenges facing these countries. Moreover, these countries’ reform strategies were not always appropriate or effectively implemented. As a result of the ensuing economic collapse, nearly 20 million people in the CIS-7 countries continue to live in extreme poverty. Economic advancement is critical for reducing poverty and for fostering peace and security in the region.
Primary responsibility for addressing these problems lies with the CIS-7 countries themselves. But the initiative calls for representatives of the international community to provide strong complementary support in helping these countries strengthen the conditions for growth, poverty reduction, and debt sustainability—both through international and regional institutions and through governments acting bilaterally.
While each country faces its own set of problems, they all face common challenges. Under the initiative, the CIS-7 countries would undertake reforms to
- promote policy and institutional reform more consistently and resolutely, within the framework of fully participatory poverty reduction strategies;
- strengthen the capacity of their governments, build greater public accountability, and strive to reduce corruption;
- ensure macroeconomic stability, promote the transparency of public finances, strengthen tax collection, and adopt appropriate policies (including debt management policies) to ensure that debt levels are sustainable;
- implement growth-promoting structural reforms, including energy sector reform (through unbundling, setting tariffs that reflect costs, and eliminating arrears and noncash settlements), maintaining open trade regimes, and creating a favorable investment climate to encourage the growth of small and medium-sized enterprises;
- target scarce resources to priority social services and safety nets, including by ensuring the adequate provision of health and education services and by acting now to counter the problems of HIV/AIDS, tuberculosis, malaria, and drug trafficking and abuse; and
- work with their neighbors, with the support of the international community, to resolve conflicts and foster regional cooperation, especially in trade and transit, water, and energy.
The role of trade and development partners and creditors under the initiative would be to extend support to those CIS-7 countries implementing strong reforms. Such assistance would take the form of
- more concessional financial support, as well as debt restructuring or debt relief where needed, in conjunction with strong reform programs, so that resources are well used;
- increased access for CIS-7 countries to industrial countries’ markets and promotion of direct investment;
- improved coordination between development agencies, anchored in country-led poverty reduction programs; and
- added support from international and regional institutions through technical assistance, policy advice, and concessional financial assistance (including grants) in support of the reform efforts of the CIS-7 countries.
The next steps under the initiative will involve stronger reforms by the CIS-7 countries in an environment of greater international visibility, improved regional cooperation through partnership events, and international support for reform by countries pursuing appropriate policies. This press release, and the statement endorsed by the ministers during the meeting, will be posted on the websites of the four cosponsoring institutions. (See the IMF’s website (www.imf.org) for the full text of the statement; the World Bank’s website (www.worldbank.org/cis7) also contains background documentation, as well as a Russian translation of the press release and statement.)