Turkey is the first country to write off Kyrgyzstan's state debt for green projects

During his visit to Kyrgyzstan from 4-6 November, Turkish President Recep Tayyip Erdogan decided to write off Kyrgyzstan's foreign debt to Turkey for $58.9 million.

It is assumed that instead of debt repayment Kyrgyzstan will allocate the amount equivalent to debt to green economy projects. These projects could include renewable energy development, infrastructure modernisation to reduce emissions and the country's environmental sustainability improvement.

It should be noted, that Turkey is the first country to cancel Kyrgyz state debt for green projects. The proposal to forgive the loan for eco-projects from Kyrgyzstan was presented in July 2023.

The Kyrgyz President ordered to work out the issue of exchanging the country's external debt for green initiatives back in early 2023.

"It would be good if the funds envisaged for the external debt repayment were channelled to support green initiatives. We are not saying these projects should be funded only by donors and partners. We are also ready to invest from our side and implement these projects,’ the head of state said in a statement on social networks.

After work on this issue began, Germany decided to redirect the republic's debt of €14 million 900 thousand euros, however not exactly for green projects, but for providing Kyrgyz citizens with affordable mortgages.

Later, the Korean Export-Import Bank rejected Kyrgyzstan's request to restructure its $10.26 million debt for environmental projects, as the Bank did not have any such programmes. Instead, the Bank offered Kyrgyzstan to discuss the possibility of debt cancellation with the Paris Club.

Kyrgyzstan, which initiated the external debt swap for green projects, sent similar requests to creditors also, including Germany, France and Turkey, for $394.92 million. However, there were no concrete agreements with creditors by the end of this summer, although a preliminary agreement on debt restructuring for $120 million was reached with two countries, probably including Turkey.

It is worth noting that Kyrgyzstan has reduced its external debt by more than $60 million since the beginning of 2024, which became possible due to payments to 14 international creditors, including the IMF and China's Eximbank.