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CIS: Weakest States Show Strong Growth But Experts Urge Expanded Reforms

  • Robert McMahon

http://gdb.rferl.org/B6734781-AD29-4267-A2DE-EFBF92A4772E_w203.jpg --> http://gdb.rferl.org/B6734781-AD29-4267-A2DE-EFBF92A4772E_mw800_mh600.jpg CIS leaders at the Astana summit in September 2004 Reports issued by the World Bank and International Monetary Fund (IMF) ahead of their spring meetings on 16-17 April show continued strong growth in some of the poorest states of the former Soviet Union. These economies were bolstered in part by high prices for oil, metals, and other commodities they possess. But experts at the World Bank and IMF stress that countries in the region must enact institutional reforms in order to sustain this growth.

Washington, 15 April 2005 (RFE/RL) -- Many of the world’s finance ministers and central bankers have converged on Washington to discuss ways to achieve a set of targets known as the Millennium Development Goals.

One of the chief goals, halving world poverty by the year 2015, has been helped by the dramatic economic growth of India and China. But lesser known contributors to this trend are states of the former Soviet Union, in particular the poorest countries of Central Asia and the Caucasus.

The World Bank and IMF say nearly seven years of impressive gains in gross domestic product (GDP) have lifted tens of millions of people out of poverty in the region. The poverty line is defined as people subsisting on less than $2 per day.

Gains in GDP have been especially strong in a group of low-income countries the IMF calls the “CIS-7.” They are: Georgia, Armenia, Azerbaijan, Moldova, Tajikistan, Uzbekistan, and Kyrgyzstan.

Julian Berengaut, deputy director of the IMF’s Middle East and Central Asia department, told RFE/RL the CIS-7 are gradually returning to their Soviet-era output levels.
Weak institutions, poor infrastructure, and the lingering effects of internal conflicts are undermining efforts at achieving millennium goals, such as improving maternal health, reducing child mortality, and curbing the spread of HIV/AIDS.


“Macroeconomic stability has been now in place there since broadly 1998. And this is something that was difficult to achieve, and it’s an important advantage," Berengaut said. "It’s a condition, a precondition for continuing growth, and this is something that needs to be safeguarded and especially in the face of spending pressures, which are very significant."

But most states in the region continue to rank poorly in surveys of corruption, rule of law, and political reforms.

Berengaut said they will only be able to sustain their growth through building quality institutions.

“These are predominantly institutions that are important to basic economic transactions, if you will -- collecting revenues for the state, the contracts, the ability to carry out business,” Berengaut said.

Weak institutions, poor infrastructure, and the lingering effects of internal conflicts are undermining efforts at achieving other millennium goals, such as improving maternal health, reducing child mortality, and curbing the spread of HIV/AIDS.

The UN’s children’s agency in late 2004 warned that gains in child welfare in the region could be reversed.

Pradeep Mitra, the chief economist of the World Bank’s Europe and Central Asia region, told RFE/RL that it is not clear whether continued economic growth can prompt growth in key human development areas.

“There are questions about whether the health goals are going to be met," Mitra said. "We’re talking here about maternal and child mortality, talking about access to safe and assured drinking water, talking about a region where HIV/AIDS incidence is growing the most rapidly out of all the regions the Bank works in.”

Mitra called development a “slow and grinding business.” But he said the high growth figures for the region remain promising.

The IMF shows the Commonwealth of Independent States registering a rise of more than 8 percent in GDP in 2004. The World Bank, which measures a larger region covering Eastern Europe, Turkey, and the CIS, showed growth of nearly 7 percent. Those figures were exceeded only by East Asia.

Mitra expressed concern about the impact of unresolved conflicts over Nagorno-Karabakh, Abkhazia, and South Ossetia and Transdniester. He urged continued international engagement to ensure peace and a stronger footing for economic gains.

“It’s a very strategically important region but there are -- despite the quite clear economic successes -- some real fault lines which need to be watched quite carefully," Mitra said. "And that’s the reason we continue to say that it’s something that the international community must not forget about.”

The IMF’s World Economic Outlook report released this week also stresses the importance of sustained support from the international community for the region. It also calls for greater harmonization of trade rules, liberalization of transit policies within the CIS-7 and with neighboring countries, and the removal of non-tariff barriers.

(For more information on the economic performance of the CIS-7 and other states in the region see http://www.imf.org/external/pubs/ft/weo/2005/01/pdf/chapter1.pdf)
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