In November, the Toronto-based Centerra Gold said it has increased the gold mines reserves by 58% to 9.7 million and has increased the life of the mine by 5 years to 2023."Using a gold price of US$1,350 per ounce and a discount rate of 8%, the new Kumtor open-pit life-of-mine (LOM) has an net present value of approximately US$1.9-billion. The new LOM plan is expected to result in the payment of approximately US$1.5 billion in revenue-based taxes, based on US$1,350 per ounce gold, along with significant other benefits to the Kyrgyz Republic such as continued local employment, extended procurement of local goods and services and continued support for community sustainable development."
The IMF notes that the new revenue-smoothing arrangement with the company and better-than-expected customs revenues related to higher oil imports and improved customs administration have offset the shortfall in revenues from lower gold production and half of the remaining shortfall of some USD2.5 billion related to lower program grants.MOVING AWAY FROM GOLDStill, there is a dire need to diversify and shed the doom and uncertainty surrounding one of the poorest Central Asian countries.Hence, the USD13-billion plan to revive the economy.The government is hoping that apart from foreign direct investment, the funds will also come from aids and grants.On December 3, 2012, the IMF executive board completed the third review under the three-year, USD102.3 million extended credit facility that was approved on June 20, 2011. Approval of the review makes US$14.6 million available to the Kyrgyz Republic, bringing total disbursements under the arrangement to US$ 58.5 million.The republic will need a lot more to bring much needed revenues and unemployment rate down from 8.6%.Another key area of concern in poverty, which is estimated to have risen in the past three years.The government's key economic objectives for 2012-14 include: raising average annual real economic growth to 7.5 percent; (ii) containing inflation to single digits;(iii) halving the overall budget deficit by 2014; and (iv) maintaining foreign reserves at about four months of imports.But it's a long road ahead before it can attract Kyrgyz to attract foreign direct investment twice its gross domestic product.In fact, in the short-term the government has been cutting spending."Shortfalls in revenues and external financing required expenditure cuts in 2012 but critical social expenditures are being safeguarded," said Zhantoro Satybaldyev, Prime Minister of the Kyrgyz Republic told the IMF in a December letter, adding that fiscal deficit excluding energy infrastructure projects is now forecast at 3.8% of GDP compared to 4.6% expected earlier.The USD13-billion is in addition to the medium term development program, which is projected to cost USD6.5-billion and feature as many as 40 national infrastructure projects.The IMF note that while some of these projects could indeed be implemented with private sector participation, the majority will require public sector financing. "However, mobilizing such large funding will neither be feasible nor consistent with fiscal and debt sustainability."Another key issue is the banking vulnerabilities, which needs to be strengthened and could lead to private savings and more credit growth.Finally, the IMF worries that Kyrgyz's GDP targets are ahead of historic levels, which depend on the assumption that foreign investors would rush through the doors. And that is the USD13 billion question, few can answer just yet.
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