EMERGENCY SUPPORT FOR MSMEs PROJECT IDA CREDIT N0.6758-KG IDA GRANT NO.D706-KG AIIB LOAN NO.L0423A COORDINATED BY CREDIT LINE MANAGEMENT UNIT UNDER MINISTRY OF FINANCE OF THE KYRGYZ REPUBLIC (“CLMU”) SPECIAL PURPOSE FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR’S REPORT For the year ended 31 December 2022 BISHKEK June 2023 EM ERGENCY SUPPORT FOR M SM ES PROJECT IDA CREDIT N0.6758-KG IDA GRANT NO.D706-KG AIIB LOAN NO.L0423A TABLE OF CONTENTS Page STATEMENT OF M ANAG EM ENT’S RESPONSIBILITIES FOR THE PREPARATION OF THE SPECIAL PURPOSE FINANCIAL STATEMENTS 3 INDEPENDENT AU DITO R’S REPORT 4 SPECIAL PURPOSE FINANCIAL STATEMENTS For the year ended 31 December 2022: Statement of cash receipts and payments 6 Statement of expenditures per com ponents 7 Notes to the special purpose financial statements 8 ANNEX 1. RECONCILIATION BETWEEN THE AMOUNTS SUBMITTED BY THE CLMU AND DISBURSED BY THE W ORLD BANK 18 2 STATEMENT OF M ANAG EM ENT’S RESPONSIBILITIES FOR THE PREPARATION OF THE SPESCIAL PURPOSE FINANCIAL STATEMENTS The management of Credit Line Managem ent Unit Under Ministry Of Finance of the Kyrgyz Republic (“C LM U ”) is responsible for the preparation of the special purpose financial statements for the year ended 31 December 2022 of “Emergency Support for MSMEs Project” (“the Project”) financed by Financing Agreement IDA Credit No.6758-KG and IDA Grant No.D706-KG, and Loan Agreement AIIB Loan No.L0423A, in com pliance with the International Public Sector Accounting Standard “Financial Reporting under the Cash Basis of Accounting” (IPSAS-Cash Basis) issued by the International Public Sector Accounting Standards Board (IPSASB) and the Financial Managem ent Manual for World Bank Financed Investment Operations (WB Guidelines). In preparing the special purpose financial statements, CLM U ’s m anagement is responsible for: • Properly selecting and applying accounting policies; • Presenting information, including accounting policies, in a manner that provides relevant, reliable, com parable and understandable information; • Providing additional required disclosures for the year ended 31 December 2022. CLM U ’s Managem ent is also responsible for: • Designing, implementing and maintaining an effective and sound system of internal controls, throughout the Project; • Maintaining adequate accounting records that are sufficient to show and explain the Project’s transactions, and which enable them to ensure that the special purpose financial statements of the Project com ply with IPSAS - Cash Basis and the WB Guidelines ; • Taking such steps that are reasonably available to them to safeguard the assets of the Project and to affirm that funds received have been used in accordance with the Financing Agreem ent IDA Credit No.6758-KG and IDA Grant NO.D706-KG, and AIIB Loan No.L0423A both dated 2 September 2020, and World Bank related guidelines, with due attention to econom y and efficiency, and only for the purposes for which the financing was provided; and • Preventing and detecting fraud and other errors. The special purpose financial statements for the year ended 31 Decem ber 2022 were signed on June 16, 2023, by the C LM U ’s Management. On behalf of the CLM U’s Management: 3 JBDO Tel: +374 60 528899 E-mail: bdo@bdoarmenia.am www.bdoarmenia.am 23/6, Davit Anhaght Str., 5th Floor, office 7 Yerevan, Armenia INDEPENDENT AUDITOR’S REPORT To the M inistry of Finance of the Kyrgyz Republic Opinion W e have audited the special purpose financial statements of “Emergency Support for MSMEs Project” (“Project”) financed by Financing Agreement IDA Credit N0.6758-KG and IDA Grant NO.D706-KG, and Loan Agreement AIIB Loan No.LQ423A both dated 2 Septem ber 2020 (“Financing Agreement), and coordinated by the Credit Line Managem ent Unit Under Ministry Of Finance of the Kyrgyz Republic (“CLM U” ), which com prise the statement of cash receipts and payments, and the statem ent of expenditures per com ponents for the year ended 31 December 2022, and notes to the special purpose financial statements, including a summ ary of significant accounting policies. In our opinion, the accompanying financial statem ents for the year ended 31 Decem ber 2022 are prepared, in all material respects, in accordance with International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting, (IPSAS-Cash Basis). Basis for Opinion W e conducted our audit in accordance with International Standards on Auditing (ISAs) as issued by International Auditing and Assurance Standards Board (IAASB). Our responsibilities under those standards are further described in the A ud itor’s Responsibilities for the Audit o f the Financial Statements section of our report. W e are independent of the Project and of the CLMU in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled out other ethical requirements in accordance with IESBA Code. We believe that the audit evidence w e have obtained is sufficient and appropriate to provide a basis for our opinion. Emphasis o f M atter- Cash Basis of Accounting W ithout m odifying our opinion, we draw attention to Note 2 to the financial statements, which describes that financial statements are prepared in accordance with cash basis fram ew ork, as a result, they may not be suitable for another purposes. Responsibilities of the M anagem ent for the Financial Statements Managem ent of the CLMU is responsible for the preparation and presentation of the special purpose financial statements in accordance with IPSAS-Cash Basis issued by the International Public Sector Accounting Standards Board (IPSASB) and Financial Management Manual for World Bank Financed Investm ent Operations (“W B G uidelines”), and for such internal control as managem ent determines is necessary to enable the preparation of special purpose financial statements that are free from material misstatement, whether due to fraud or error. |BDO Auditor’s Responsibility for the Audit of the Special Purpose Financial Statements Our objectives are to obtain reasonable assurance about w hether the special purpose financial statements as a w hole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is high level of assurance but is not a guaranty that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements arise from fraud and error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these special purpose financial statements. As part of an audit in accordance with ISAs, we exercise professional judgem ent and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the special purpose financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material m isstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. W e communicate with management regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Report on Other Legal Requirements To comply with the terms of the Financing Agreement, the CLMU management shall insure that: 1. funds have been used in accordance with the conditions of the Financing Agreement concluded between the International Development Association (IDA) and the Kyrgyz Republic, and Loan Agreement concluded between the Asian Infrastructure Investment Bank (AIIB) and the Kyrgyz Republic, and World Bank related guidelines, with due attention to economy and efficiency, and only for the purposes for which the financing w as provided. 2. supporting documents, records and accounts have been maintained to support claims for reimbursement of expenditures incurred. Expenditures included in the withdrawal applications and reimbursed against are eligible for financing under the Financing Agreement. Interim Unaudited Financial Statements (IFSs) issued by CLMU during the reporting period agree with the underlying books of account. 3. The Designated account used has been maintained in accordance with the provision of the Financing Agreement, and World Bank related guidelines. 4. Goods and Services financed have been procured in accordance w ith the Financing Agreem ent and World Bank related guidelines. In our opinion, the CLMU man ' ' " ' " ibove requirements for the year ended 31 Decem ber 2022. “BDO Arm enia” CJSC June 16, 2023 ■'BDO Armenia-" p3fi ,-iui Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Statement of cash receipts and payments For the year ended 31 Decem ber 2022 (Am ounts are show n in U S dollars) Note Actual Actual Budget Variance Year ended Cum ulative as Year ended Cum ulative as of Cum ulative as Cum ulative as 31 Dec 2022 of 31 Dec 2022 31 Dec 2021 31 Dec 2021 of 31 Dec 2022 o f 31 Dec 2022 Total Opening Cash and Cash Equivalents 10,005,201 - - . SOU RCES OF FUNDS - IDA Credit No.6758-KG 6,000,000 9,000,000 3,000,000 3,000,000 IDA Grant NO.D706-KG 15,770,000 19,923,570 4,153,570 4,153,570 AIIB Loan No.L0423A 7,138,572 10,138,572 3,000,000 3,000,000 T O T A L FUNDS 8 28,908,571 39,062,141 10,153,570 10,153,570 PRO JECT EXPENDITURES IDA Credit and Grant 24,650,093 24,798,467 148,374 148,374 12,171,774 (12,626,693) (1) Reimbursable Financial Assistance concessional payments under Part 1 18,578,708 18,666,488 87,780 87,780 3,787,780 (14,878,708) (2) Capitalization of PRSF under Part 2.1 5,304,603 5,304,603 - - 7,847,400 2,542,797 (3) Goods, Non-consulting Services, Consulting Services, Training and Operating Costs, under Parts 2.2 and 3, and commission fee for SDAs under Part 3 766,782 827,376 60,594 60,594 536,594 (290,782) AIIB Loan 4,065,247 4,065,247 - - 16,166,700 12,101,453 (1) RFA payments under Component 1 1,885,594 1,885,594 - - 11,238,851 9,353,257 (2) Capitalization of PRSF under Component 2 2,041,051 2,041,051 - - 4,166,600 2,125,549 (3) Commission Fee for SDAs under Component 3 30 30 - - 636,249 636,219 (4) Front-end Fee 125,000 125,000 - - 125,000 - (5) Interest under the Loan 13,572 13,572 - - - (13,572) T O TAL PROJECT EXPENDITURES 7 28,715,339 28,863,713 148,374 148,374 28,338,474 (525,239) Foreign currency gain/(loss) (3,237) (3,232) 5 5 Total Closing Ca§h apd-Gash Equivalents 6 10,195,197 10,195,196 10,005,201 10,005,201 Musakozh Davlesova Mehriban Director of CLMU Financial Manager of C L 16 June 2023 T he notes on pages 8-19 form an integral part of these special purpose financial statements. 6 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Statement of expenditures per components For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars)__________ Actual Planned Variance Year ended Cum ulative as Year ended Cum ulative as Cum ulative as Cum ulative as Com ponents 31 Dec 2022 of 31 Dec 2022 31 Dec 2021 of 31 Dec 2021 of 31 Dec 2022 of 31 Dec 2022 Part 1. Reimbursable Financial Assistance (RFA) for MSMEs 20,464,302 20,552,082 87,780 87,780 31,666,504 11,114,422 Part 2. Portfolio Risk Sharing Facility (PRSF) 7,345,654 7,345,654 - - 18,188,111 10,842,457 Part 3. Project implementation, coordination and management 766,812 827,406 60,594 60,594 1,228,792 401,387 Front-end fee 125,000 125,000 - - - (125,000) Interest under the Loan 13,572 13,572 - - - (13,572) TOTAL 28,715,339 28,863,713 148,374 148,374 51,083,408 22,219,695 Musakozhoeva Bermet Davlesova Mehriban / / Director of CLMU Financial Manager of'CLMU 16 June 2023 The notes on pages 8-19 form an integral part of these special purpose financial statements. 7 Emergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars)_______________________ 1. Generalinform ation 1.1. The Project The Financing Agreement was concluded on 2 September 2020 between the Kyrgyz Republic and the International Development Association (“IDA” or “W B”), according to which IDA provided the Kyrgyz Republic the Grant IDA Credit No.6758-KG in the amount of 18,300,000 Special Drawing Rights (SDR) and IDA Grant No.D706-KG in the amount of 18,300,000 SDR. The payment currency of the financing is United States dollars (USD). The financing was provided for the implementation of «Emergency Support for MSMEs Project» (the Project). The Project became effective on 31 March 2021. The Closing date of financing under IDA Credit No.6758-KG and IDA Grant No.D706-KG is 31 July 2024. The Grace Period for subm itting withdrawal application for expenditures incurred before the Closing date is four months following the Closing dates: 30 November 2024. The Loan Agreement was concluded on 2 September 2020 between the Kyrgyz Republic and the Asian Infrastructure Investm ent Bank (“A IIB”), according to which AIIB provided the Kyrgyz Republic the Loan No.L0423A in the amount of 50,000,000 USD, as co-financing to the Project. The Closing date of financing under AIIB Loan No.L0423A is 31 July 2024. 1.2. The Project objectives The objective of the Project is to support micro, small and medium enterprises (MSMEs) in response to and during the recovery from COVID-19 crisis. The Project consists of the following parts: Part 1: Reimbursem ent Financial Assistance for MSMEs Provision of Reimbursable Financial Assistance (RFA) through Selected Disbursement Administrators (SDAs) for sub-projects to cover operational expenses for MSMEs in order to: (a) prevent closures and the disruption of firms, (b) preserve private sector employment and (c) accelerate economic recovery. Part 2. Portfolio Risk Sharing Facility (PRSF) Provision of support to reduce the risk of financial sector withdrawal from lending to MSMEs during COVID-19 crisis and to ensure credit provision during to MSMEs during the recovery, through: 2.1. Capitalization of the PRSF to provide Portfolio Partial Credit Guaranties (PPCG) to Participating Financial Institutions (PFIs) for credits to MSMEs on a portfolio basis or on a individual loan basis; 2.2. Provision of technical assistance to support the operationalization of the PRSF. Part 3. Project implementation, coordination and Managem ent 1.3. Project Implementation The Credit Line Managem ent Unit under the Ministry of Finance of the Kyrgyz Republic (“CLM U”) is responsible for the Project’s implementation. The CLMU address is office N302, Erkindik Blvd. 58A, Bishkek, Kyrgyz Republic, 720040. 8 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2 022 (Amounts are show n in U S dollars) 1.4. The Project Budget and Financing The Project is w holly financed, inclusive of taxes, by IDA Credit No.6758-KG, IDA Grant No.D706-KG, and AIIB Loan No.L0423A. Category IDA Credit No.6758-KG IDA Grant NO.D706-KG AIIB Loan NO.L0423A Total SDR USD SDR USD USD USD equivalent equivalent (a) equivalent (a) (1) Reimbursable Financial Assistance concessional payments under Part 1 9,882,000 13,195,215 15,738,000 21,017,172 36,700,000 70,912,387 (2) Capitalization of PRSF under Part 2.1 8,418,000 11,240,369 12,200,000 23,440,369 (3) Goods, Non-consulting Services, Consulting Services, Training and Operating Costs, under Parts 2.2 and 3, and com mission fee for SDAs under Part 3 2,562,000 3,421,400 500,000 3,921,400 (4) Front-end fee 125,000 125,000 (5) Interest under the Loan 475,000 475,000 Total 18,300,000 24,435,584 18,300,000 24,438,572 50,000,000 98,874,156 (a) The budget USD equivalents for IDA Credit No.6758-KG and IDA Grant No.D706-KG with underling currency of SDR, is calculated based on cumulative funds received in USD plus, if any, USD equivalent of undisbursed funds in SDR as at reporting date. (b) SDR/USD rate as at 31.12.2022 is set at 1.33084. 9 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars)_____________ 2. Summ ary of significant accounting policies 2.1. Preparation and presentation o f financial statem ents The special purpose financial statements are prepared in accordance with the International Public Sector Accounting Standard: Financial Reporting Under the Cash Basis of Accounting (IPSAS-Cash Basis), issued by the International Public Sector Accounting Standards Board (IPSASB), and presented in accordance with Financial Management Manual for World Bank Financed Investment Operations (March 2010): RM 3 - Financial Reporting and Auditing. The principal accounting policies applied in the preparation of these special purpose financial statements are set out below. These policies have been consistently applied to all the periods presented. 2.2. Cash basis of accounting Project financing is recognized as a source of project funds when the cash is received. Project expenditures are recognized as a use of project funds when the payments are made. 2.3. Reporting currency The reporting currency of these special purpose financial statements is United States dollars (USD). The expenditures made in local currency, Kyrgyz Som (KGS), are translated into USD based at the exchange rate prevailing at the date of the transaction. The exchange rate defined by the operating bank is as follows: 31 December 2021: USD 1 = 82.50 KGS. 31 December 2022: USD 1 = 84.80 KGS. 2.4. Taxes The taxes are paid in accordance with the tax regulation of the Kyrgyz Republic. 2.5. Budget Expenditure budget is created based on actual accumulated expenditures for the last period plus the updated procurement plans for the Reporting year. 10 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars)_______ 3. Summ ary of SOEs 3.1. IDA Credit No.6758-KG There was no SOE approved as at reporting date on IDA Credit No.6758-KG. 3.2. IDA Grant No.D706-KG Payment categories Withdrawal (3) Goods, Non-consulting Services, W ithdrawal application value Consulting Services, Training and Operating Total application No date Costs, under Parts 2.2 and 3, and com m ission fee for SDAs under Part 3 G-2 14-Jul-2022 246,787.38 246,787.38 G-3 26-Sep-2022 214,237.29 214,237.29 G-4 25-Oct-2022 210,907.94 210,907.94 G-5 20-Dec-2022 90,000.00 90,000.00 Total 761,932.61 761,932.61 3.3. AIIB Loan No.L0423A There was no SOE approved as at reporting date on AIIB No.L0423A. 11 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars) 4. Statement of Designated Accounts 4.1. IDA CreditNo.6758-KG Designated account numbers 1350108039770662 Bank CJSC “Aiyl Bank” Bank location Bishkek, Kyrgyz Republic Account currency USD FY 2022 FY 2021 Designated Designated Designated Designated Total Total Account- RFA Account - PRSF Account- RFA Account - PRSF 1. Opening balance - 403,211 403,211 - - - 2. Add: opening discrepancy - 2,596,789 2,596,789 - - - 3. Advance/replenishm ent/direct payment - 6,000,000 6,000,000 - 3,000,000 3,000,000 4. Less: Refund to IDA from DA - - - - - - 5. Present outstanding amount advanced to DA - 9,000,000 9,000,000 - 3,000,000 3,000,000 6. DA closing balance - 2,999,970 2,999,970 - 403,211 403,211 7. Add: Amount of eligible expenditures paid - 5,304,603 5,304,603 - - - 8. Less: interest earned (if credited to DA) - - - - - - 9. Total advance accounted for - 8,304,573 8,304,573 - 403,211 403,211 10. Closing discrepancy (5)-(9)* - 695,427 695,427 - 2,596,789 2,596,789 (*) The discrepancy is due to: Designated Designated Designated Designated Total Total Account-RFA Account - PRSF Account-RFA Account - PRSF Amounts paid to PFIs but not yet claimed (Note 6) - 695,367 695,367 - 2,596,789 2,596,789 Bank fee** - 60 60 - - - - 695,427 695,427 - 2,596,789 2,596,789 ** Bank fee corresponds to the amount withheld by the correspondent bank upon W A transfer from WB and w ill be returned by CLMU from IDA Grant funds in the next reporting period. 12 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the y e a r en ded 31 D ecem ber 2022 (Amounts are show n in U S dollars)_____________________________________ 4.2. IDA Grant No.D706-KG Designated account numbers 1350108031283364 1350108036421031 Bank CJSC “Aiyl Bank” Bank location Bishkek, Kyrgyz Republic Account currency USD FY 2022 FY 2021 Designated Designated Designated Designated Account Account - RFA Total Account Account - RFA Total 1. Opening balance 189,406 1,835,003 2024409 - . - 2. Add: opening discrepancy - 1,980,787 1980787 - - . 3. Advance/replenishm ent/direct payment 761,933 15,008,067 15,770,000 250,000 3,903,570 4,153,570 4. Less: Refund to IDA from DA - - 0 - - - 5. Present outstanding amount advanced to DA 951,339 18,823,857 19,775,196 250,000 3,903,570 4,153,570 6. DA closing balance 184,767 9,815 194,582 189,406 1,835,003 2,024,409 7. Add: Am ount of eligible expenditures paid 766,572 18,578,708 19,345,280 60,594 87,780 148,374 8. Less: interest earned (if credited to DA) - - - - . _ 9. Total advance accounted for 951,539 18,588,523 19,539,862 250,000 1,922,783 2,172,783 10. Closing discrepancy (5)-(9)* - 235,334 235,334 - 1,980,787 1,980,787 (*) The discrepancy is due to: Designated Designated Designated Designated Account Account - RFA Total Account Account - RFA Total RFA Transit account (Note 6) - 314,555 314,555 - 1,980,792 1,980,792 Payable to SDA (RFA)** - (83,010) (83,010) - - - FX (gain)/loss - 3,789 3,789 - (5) (5) - 235,334 235,334 - 1,980,787 1,980,787 ** Due to transfer from SDA to IDA Grant RFA Transit account 13 Em ergency Support for MSMEs Project IDA Credit IMo.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars) 4.3. AIIB Loan No.L0423A Designated account numbers 1350108035009174 Bank CJSC “Aiyl Bank” Bank location Bishkek, Kyrgyz Republic Account currency USD__________ FY 2022 FY 2021 Designated Designated Designated Designated Total Total Account- RFA Account - PRSF Account- RFA Account - PRSF 1. Opening balance - 403,211 403,211 - . - 2. Add: opening discrepancy - 2,596,789 2,596,789 - - - 3. Advance/replenishm ent/direct payment 4,000,000 3,000,000 7,000,000 - 3,000,000 3,000,000 4. Less: Refund to IDA from DA - - - - - - 5. Present outstanding amount advanced to DA 4 ,0 0 0 ,0 0 0 6 ,0 0 0 ,0 0 0 10 ,0 0 0 ,0 0 0 - 3 ,0 0 0 ,0 0 0 3 ,0 0 0 ,0 0 0 6. DA closing balance 1,800,259 1,358,158 3,158,418 - 403,211 403,211 7. Add: Am ount of eligible expenditures paid 1,885,594 2,041,051 3,926,645 - - . 8. Less: interest earned (if credited to DA) - - - - - . 9. Total advance accounted for 3 ,68 5,8 5 3 3 ,3 9 9 ,2 1 0 7 ,0 8 5 ,0 6 3 - 403 ,2 11 403,211 10. Closing discrepancy (5)-(9)* 3 1 4 ,1 4 7 2 ,6 0 0 ,7 9 0 2,914,937 2,596,789 2,596,789 (*) The discrepancy is due to: Designated Designated Designated Designated Total Total Account- RFA Account - PRSF Account- RFA Account - PRSF Amounts paid to GF but not yet claimed (Note 6) - 2,600,760 2,600,760 - 2,596,789 2,596,789 RFA Transit account (Note 6) 231,545 - 231,545 - - - Receivable from SDA (RFA)** 83,010 - 83,010 - - - FX (gain)/loss (408) - (408) - - - Bank fees - 30 30 - - - 3 1 4 ,1 4 7 2 ,6 0 0 ,7 9 0 2 ,9 1 4 ,9 3 7 - 2,5 9 6 ,7 8 9 2 ,5 9 6 ,7 8 9 ** Due to transfer from SDA to IDA Grant RFA Transit account 14 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars)________________________ 5. Statem ent of Financial Position The Statement of Financial Position discloses assets, liabilities and net assets of the Projects as at reporting date. It is prepared on an accrual basis that is transactions are recognized when they occur (and not only when cash is received or paid). 31 Dec 2021 31 Dec 2021 Note USD USD ASSETS Cash and cash equivalents 6 10,195,197 10,005,201 Prepayments Total assets 10,195,197 10,005,201 LIABILITIES Payables Total liabilities - - NET ASSETS Cum ulative income IDA Credit N0.6758-KG 9,000,000 3.000.000 IDA Grant No.D706-KG 19,923,570 4,153,570 AIIB Loan No.L0423A 10,138,572 3.000.000 8 39,062,141 10,153,570 Cum ulative expenses Project expenses 7 28,863,713 148,374 28,863,713 148,374 Foreign exchange gain/(loss) (3,232) 5 Total net assets 10,195,196 10,005,201 15 Emergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars) 6. Cash and cash equivalents Underlying 31 Dec 2022 31 Dec 2021 Currency USD USD IDA Credit No.6758-KG Designated Account USD - - Designated Account - PRSF USD 2,999,970 403,211 Amounts paid to PFIs but not yet claimed (a) KGS 695,367 2,596,789 3,695,337 3,000,000 IDA Grant No.D706-KG Designated Account USD 184,767 189,406 Designated Account - RFA USD 9,815 1,835,003 Transit Account -RFA (b) KGS 314,555 1,980,792 509,137 4,005,201 AIIB Loan NO.L0423A Designated Account USD - - Designated Account -RFA USD 1,800,259 - Designated Account -PRSF USD 1,358,158 403,211 Transit Account -RFA (b) KGS 231,545 - Am ounts paid to PFIs but not yet claimed (a) KGS 2,600,760 2,596,789 5,990,723 3,000,000 Total cash and equivalent 10,195,197 10,005,201 (a) The amounts are provided to PFI banks through the Guarantee Fund. The disbursements are made in KGS and are translated into USD at the exchange rate prevailing at the date of transaction and are not revaluated at the year end, because the KGS is economic substance of such balances as the contractual relationships with PFIs are in KGS. The total receivable from Guarantee Fund at 31.12.2022 is 280,294,072.42 KGS, including 57,663,787.91 KGS from IDA Credit and 222,630,284.51 KGS from AIIB Loan. (b) Transit accounts of IDA Grant No.D706-KG and AIIB Loan No.L0423A are opened to make payments on RFAs, to transfer money to SDAs, to pay local suppliers and consultants, and to execute the Project’s other expenditures in the local currency. Transit accounts’ balances are not revalued at year end, but expenditures made through it are translated applying rate of conversion applied. KGS provides the contractual relationships with SDAs and economic substance of such balances. 16 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars)___________________ 7. Project Expenditures Budget Execution Cum ulative Expenditures Total budget, Progress Category as at 31 Dec 2022 updated USD USD % (1) Reimbursable Financial Assistance concessional payments under Part 1 20,552,082 70,912,387 29% (2) Capitalization of PRSF under Part 2.1 7,345,654 23,440,369 31% (3) Goods, Non-consulting Services, Consulting Services, Training and Operating Costs, under Parts 2.2 and 3, and commission fee for SDAs under Part 3 827,406 3,921,400 21% (4) Front-end fee 125,000 125,000 100% (5) Interest under the Loan 13,572 475,000 3% Total 28,863,713 98,874,156 29% Project became effective 31 March 2021. As of 31 Dec 2022, 29% of the total expenditures are implemented. 8. Financing 8.1. IDA Credit No.6758-KG Cum ulative as at 2022 2021 31 Dec 2022 USD USD USD Direct Payment (PRSF) 6,000,000 3,000,000 9,000,000 Total 6,000,000 3,000,000 9,000,000 Total financing budget (Note 1.4) 24,435,584 Percentage of finance provided as at 31 Dec 8.2. IDA Grant No.D706-KG Cum ulative as at 2022 2021 31 Dec 2022 USD USD USD Advance (RFA) 4,153,570 4,153,570 Reimbursem ent - IFR 15,008,067 - 15,008,067 Reimbursem ent - SOE 761,933 - 761,933 Total 15,770,000 4,153,570 19,923,570 Total financing budget (Note 1.4) 24,438,572 Percentage of finance provided as at 31 Dec 2022 82% 17 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A Notes to the special purpose financial statements For the year ended 31 Decem ber 2022 (Amounts are show n in U S dollars)__________________ 8.3. AIIB Loan No.L0423A Cum ulative as at 2022 2021 31 Dec 2022 USD USD USD Advance (RFA) 4,000,000 - 4,000,000 Direct Payment (PRSF) 3,000,000 3,000,000 6,000,000 Front-end fee, Interest under the Loan (AIIB) 138,572 - 138,572 Total 7,138,572 3,000,000 10,138,572 Total financing budget (Note 1.4) 50,000,000 Percentage of finance provided as at 31 Dec 2022 20% 9. Events after reporting date M ilitary conflict between Russian Federation and Republic of Ukraine On February 24, 2022, Russia launched a large-scale military operation against Ukraine. In order to resist Russia, the EU and the United States, and other countries around the world, have imposed economic and political sanctions, as a result of which the Russian econom y is facing significant issues. At present, the course of the war, the impact of sanctions, and the extent of the consequences are unpredictable. Taking into consideration of Russia's political and economic influence on the Kyrgyz Republic, as well as the fact that country is a member of the Russia lead Eurasian Economic Union (EEU), the current situation may indirectly affect the stability of Kyrgyz Republic's financial and economic systems. At the moment, given the unpredictability of these circumstances, the Project m anagement finds it difficult to assess the potential impact on the Project implementation. 10. Litigations There are no pending litigations related to the Project as at reporting date and as at approval date of these special purpose financial statements. 18 Em ergency Support for MSMEs Project IDA Credit No.6758-KG, IDA Grant No.D706-KG, AIIB Loan No.L0423A ANNEX 1. RECO N CILIA TIO N BETW EEN THE AMOUNTS SUBMITTED BY THE CLMU AND DISBURSED BY THE W ORLD BANK For the y ear en d ed 31 D ecem ber 2022 (Amounts are show n in U S dollars)________ IDA Credit No.6758-KG Application CLMU WB Difference Expenditure Category N USD USD USD CR-PRSF-2 3,000,000 3,000,000 - (2) Capitalization of PRSF under Part 2.1 CR-PRSF-3 3,000,000 3,000,000 _ Total 6,000,000 6,000,000 - IDA Grant NO.D706-KG Application CLMU WB Difference Expenditure Category N USD USD USD Advance/(recovery) G-RFA-2-1 -1 1,050,962.86 1,050,962.86 - Advance/(recovery) G-RFA-3 1,653,878.77 1,653,878.77 - Advance/ (recovery) G-RFA-5 (3,204,535.13) (3,204,535.13) - Advance/ (recovery) G-RFA-6 1,793,162.60 1,793,162.60 - Sub-Total 1,293,469.10 1,293,469.10 - G -RFA-2-1-1 1,417,037.14 1,417,037.14 - G-RFA-3 3,145,423.52 3,145,423.52 - G-RFA-4 2,062,730.62 2,062,730.62 - G-RFA-5 4,972,569.58 4,972,569.58 - (1) Reimbursable Financial Assistance concessional payments under Part 1 G-RFA-6 2,116,837.40 2,116,837.40 - Sub-Total 13,714,598.26 13,714,598.26 - (3) Goods, Non-consulting Services, G-2 246,787.38 246,787.38 Consulting Services, Training and G-3 214,237.29 214,237.29 - O perating Costs, under Parts 2.2 and G-4 210,907.94 210,907.94 - 3, and commission fee for SDAs under Part 3 G-5 90,000.00 90,000.00 - Sub-Total 761,932.61 761,932.61 - Total 15,769,999.97 15,769,999.97 - AIIB Loan NO.L0423A Application CLMU WB Difference Expenditure Category N USD USD USD Advance AIIB-RFA-1 4,000,000.00 4,000,000.00 - Sub-Total 4,000,000.00 4,000,000.00 - (2) Capitalization of PRSF under Component 2 AIIB-PRSF-2 3,000,000.00 3,000,000.00 в Sub-Total 3,000,000.00 3,000,000.00 - (4) Front-end Fee N/A 125,000.00 125,000.00 - (5) Interest under the Loan N/A 13,571.51 13,571.51 - Sub-Total 138,571.51 138,571.51 - Total 7,138,571.51 7,138,571.51 - 19