Countercyclical Support Loan
sector: Public Sector Management | country: Kazakhstan
ADB’s business procedures for processing crisis response programs should be streamlined and abbreviated, as in the case of the Countercyclical Support Facility (CSF). This allows for crisis responses to be timely and prevent further deterioration of the economy.
By not having any policy conditions other than the government’s countercyclical expenditure programs, the Kazakhstan Countercyclical Support Loan (KCSL) was an effective and efficient instrument to respond to the financial crisis. While reforms to correct policy inconsistencies during crisis situations might be desirable, countries that are in the middle of financial crises would find it difficult to simultaneously undertake both crisis mitigation and reforms. What these countries need most urgently in times of financial crisis is quick and timely fiscal support to address the economic and social impact of the crisis. However, as crises open opportunities for reforms, policy dialogue should be initiated for follow-up operations. But such dialogue should not at any time delay the timely provision of financial crisis support.
The success of a financial crisis response is highly contingent on the government’s ability to quickly put together its own anti-crisis plan. ADB intervention can be in the form of financing for the anti-crisis plan. In the case of the KCSL, the government already had its employment-generation program (EGP) in place, and was able to use the KCSL funds immediately to finance the EGP. However, since the KCSL is a budget support instrument, it is difficult to track and link the financing with specific development results (e.g., which public works project it funded).
Crisis response operations can be more successful if the government has well- defined implementation arrangements and monitoring mechanisms to be successful, as was the case with the KCSL.