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Middle East and Central Asia > Kyrgyz Republic

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Cover IMF Working Papers
Committing to Grow: The Full Impact of WTO Accessions
André Brotto
,
Adam Jakubik
,
Roberta Piermartini
, and
Fulvio Silvy
This paper studies the impact of the process of accession to the WTO on growth rates in a sample of 150 economies. Unlike GATT-era accessions, WTO accessions involve reforms that extend beyond conventional trade liberalization measures. Using information on the pace of negotiations and requests in the working party's meetings, we construct an index that tracks the progress of reforms in the pre-accession period. We estimate that economies that implemented reforms and made deeper commitments during their WTO accession negotiations grew on average 1.5 percentage points faster than they otherwise would have. These results are robust to instrumental variable estimation and falsification tests.
Keywords:
WTO accession; structural reforms; trade and growth; commitment index; GATT-era accession; accession mode; accession effect; accession period; General Agreement on Tariffs and Trade; Estimation techniques; Tariffs; Trade barriers; Trade policy; Global
Cover IMF Staff Country Reports
Kyrgyz Republic: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Kyrgyz Republic
International Monetary Fund. Middle East and Central Asia Dept.
The 2023 Article IV Consultation highlights that the Kyrgyz economy grew strongly in 2023, led by construction and trade, despite the challenging regional environment. Tax revenue mobilization improved, and public debt declined. Headline inflation fell from 14.7 percent in December 2022 to 7.3 percent in December 2023, supported by a marked reduction in food and fuel inflation, but demand pressures have kept core inflation elevated. The official current account deficit has remained significant due to the decline in net remittance inflows, lower gold exports, and unrecorded re-exports. Output is expected to grow at its potential rate of 4 percent in the medium term, inflation decline to mid-single digits, and public debt remain contained. Current favorable macroeconomic conditions present a window of opportunity to strengthen the policy framework and raise growth prospects through structural reforms. The priorities are strengthening governance, including management and privatization of state-owned enterprises, enhancing competition, reforming the electricity sector, and strengthening social safety nets.
Keywords:
staff appraisal; Kyrgyz authorities; policy recommendation; January monetary policy meeting; headline inflation; Debt sustainability analysis; Government finance statistics; Global
Cover Departmental Papers
Strengthening Monetary Policy Frameworks in the Caucasus and Central Asia
Mr. Tigran Poghosyan
,
Klakow Akepanidtaworn
,
Maria Atamanchuk
,
Ezequiel Cabezon
,
Mr. Selim Cakir
,
Mr. Vahid Khatami
,
Ms. Filiz D Unsal
,
Mariarosaria Comunale
,
Mrs. Marina Conesa Martinez
, and
Omer Faruk Akbal
Amidst a global backdrop of persistent post-COVID inflation and spillovers from Russia’s war in Ukraine, the countries of the Caucasus and Central Asia (CCA) region have faced strong price pressures in recent years. Inflation is estimated to have peaked in early 2023, but still exceeds central bank targets. In particular, core inflation remains stubbornly high reflecting a combination of second-round effects, surges in global energy and food prices, and domestic demand pressures. More broadly, uncertainty and downside risks also weigh on the economic outlook, including due to regional tensions, financial turmoil related to international monetary policy normalization, and a growth slowdown in key trading partners. In this context, CCA countries’ ability to contain inflationary pressures and anchor inflation expectations hinges on the credibility and effectiveness of their monetary policy frameworks. Since gaining independence in the 1990s, countries in the CCA region have made considerable progress in modernizing their monetary policy frameworks. CCA central banks have strengthened their legal frameworks and established broad de-jure independence. Armenia, Georgia, Kazakhstan, the Kyrgyz Republic, and Uzbekistan are transitioning to inflation targeting regimes, while the central banks of Azerbaijan, Tajikistan, and Turkmenistan rely on the exchange rate as an operational target. However, the post-COVID surge in inflation has highlighted the limitations of current frameworks and triggered a fresh policy debate on the need to strengthen monetary policy effectiveness in the CCA. This paper reviews the CCA region’s monetary policy landscape, highlights challenges in monetary policy design and implementation, and identifies areas that warrant strengthening. It draws on original surveys of country authorities, IMF country teams, and the work by Unsal and others (2022). It uses novel empirical work to analyze monetary policy transmission, the link between foreign exchange interventions and exchange rate dynamics, the drivers of financial de-dollarization, and the effects of central bank communication in the CCA.
Keywords:
Caucasus and Central Asia; Monetary Policy Transmission Mechanism; Exchange Rate Management; Dollarization; Central Bank Communication and Transparency; Central Bank Credibility; CCA country; CCA central banks; monetary policy transmission; CCA economy; CCA region's monetary policy landscape; monetary policy effectiveness; Exchange rates; Monetary policy frameworks; Inflation; Inflation targeting; Exchange rate arrangements; Central Asia and the Caucasus; Middle East and Central Asia
Cover IMF Working Papers
Financial Development and Growth in the Caucasus and Central Asia
Mr. Tigran Poghosyan
This paper presents stylized facts on financial development in the CCA countries relative to their EM and LIC peers and assesses how financial development can boost growth in the CCA. Drawing on IMF’s multidimensional index of financial development, we find that CCA countries have made progress following the independence in early 1990s. However, the progress was uneven across the CCA, resulting in a divergence of financial development over time and mixed performance relative to EM and LIC peers. Financial institutions have progressed the most, while financial markets remain underdevelped in most CCA countries except Kazakhstan. In terms of sub-indicators of financial development, financial access has expanded markedly, while the depth of financial intermediation has remained largely shallow and efficiency of financial intermediation has fluctuated over time. Standard growth regressions suggest that CCA countries with relatively lower level of financial development have scope to boost annual growth rates between 0.5-2.5 percent by reaching the level of financial development of frontier CCA countries.
Keywords:
Caucasus and Central Asia; financial development; output growth; CCA country; financial markets market index; growth regression; LIC peer; growth in the Caucasus; Financial sector development; Stock markets; Financial statistics; Central Asia and the Caucasus; CCA economy; CCA LIC; CCA EM; financial institution index
Cover Policy Papers
Catastrophe Containment and Relief Trust—Fifth Tranche of Debt Service Relief in The Context of The COVID-19 Pandemic
International Monetary Fund. Finance Dept.
,
International Monetary Fund. Legal Dept.
, and
International Monetary Fund. Strategy, Policy, & Review Department
The Executive Board approved a two-step approach consisting of (i) an immediate approval of the disbursement of a fourth tranche of debt service relief to all qualified beneficiary countries covering the period from October 16, 2021 through January 10, 2022, and (ii) consideration by January 2022 of a final tranche of CCRT debt service relief through April 13, 2022 based on a brief Board paper with an assessment of resources at that time. In accordance with the two-step approach, this paper provides a brief overview on recent developments in CCRT-eligible countries followed by an update on the CCRT’s funding status and resources assessment.
Keywords:
CCRT; debt service relief; CCRT instrument; CCRT debt service relief; CCRT resource; COVID cash buffer; Debt relief; Debt service; COVID-19; Global
Cover Policy Papers
Catastrophe Containment and Relief Trust—Fourth Tranche of Debt Service Relief in The Context of The Covid-19 Pandemic and Approval of Additional Beneficiary Member Countries
International Monetary Fund
The paper provides brief updates for each CCRT-eligible country on its policy responses to the pandemic and on staff’s assessments of these policies, the use of resources freed up by debt service relief, and the implementation of governance safeguards commitments. The paper also provides an update on the financial situation of the CCRT. The generous support from 17 donor countries and the EU has mobilized SDR 609 million in new pledges since the onset of the pandemic.
Keywords:
debt service relief; CCRT country; fund engagement; CCRT debt relief; CCRT resource; Debt relief; Debt service; COVID-19; Balance of payments need; Global
Cover IMF Staff Country Reports
Kyrgyz Republic: 2021 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. Middle East and Central Asia Dept.
The Kyrgyz economy is highly dependent on remittances and foreign aid and does not have access to international capital markets. Inequality is relatively low, but poverty is widespread. The COVID crisis led to a sharp recession with output contracting by 8.6 percent in 2020, public debt rising by 16.5 percent of GDP to 68 percent, and the som depreciating by 19 percent against the US$. Under the assumption that the global pandemic begins to decisively recede this year, a rebound in growth is expected in 2021–22. However, significant uncertainty surrounds the baseline outlook and the recovery could be delayed if downside risks materialize. In the medium to long term, the main challenge is to create jobs for about 65,000 new jobseekers annually and to reduce labor out-migration. This will require deep structural reforms to transform the economy from a reliance on remittances to more diversified and private sector-led growth that is underpinned by higher investment and exports.
Keywords:
expenditure reallocation; investor confidence; Kyrgyz authorities; staff report projection; gold production; External sector statistics; Debt sustainability analysis; Global; Central Asia
Cover Regional Economic Outlook, October 2020, Middle East and Central Asia
Regional Economic Outlook, October 2020, Middle East and Central Asia
International Monetary Fund. Middle East and Central Asia Dept.

Abstract

Countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region and those in the Caucasus and Central Asia (CCA) responded to the COVID-19 pandemic with swift and stringent measures to mitigate its spread and impact but continue to face an uncertain and difficult environment. Oil exporters were particularly hard hit by a “double-whammy” of the economic impact of lockdowns and the resulting sharp decline in oil demand and prices. Containing the health crisis, cushioning income losses, and expanding social spending remain immediate priorities. However, governments must also begin to lay the groundwork for recovery and rebuilding stronger, including by addressing legacies from the crisis and strengthening inclusion.

Keywords:
public health; reopening; rebuilding; oil revenue; OPEC+; REO; oil exporter; MCD country; oil importer; IMF staff calculation; MCD firm; MCD region
Cover IMF Working Papers
Remittances in Russia and Caucasus and Central Asia: the Gravity Model
Mr. Tigran Poghosyan
Remitances are an important source of external financing in low- and middle-income countries. This paper uses the gravity model to analyze remittance flows in Russia and Caucasus and Central Asia (CCA) countries. Standard gravity determinants, such as GDP in sending and recieiving countries, bilateral distance, existence of common borders and common official language, fit remittance flows well. Remittances also react to inflation and exchange rate movements in recipient countries to sustain their purchasing power. In line with the altruism hypothesis, remittances flow to countries with higher age dependency ratio. Remittances are countercyclical and help stabilize outputs in recipient countries. However, global shocks resulting in sharp output losses of sending countries would lead to large volatility and decline of remittance inflows in recipient countries. The results of the analysis can be used to assess the impact of the COVID-19 shock on projected remittance flows into CCA.
Keywords:
WP; remittance; country; remittance flow; international remittances; migration; gravity model; recipient country; country j; bilateral remittance; pair level; sending country; Remittances; Gravity models; Oil prices; Exchange rates; Outward remittances; Central Asia and the Caucasus; Global
Cover IMF Staff Country Reports
Kyrgyz Republic: Request for Purchase Under the Rapid Financing Instrument and Disbursement Under the Rapid Credit Facility-Press Release; Staff Report; Informational Annex; and Debt Sustainability Analysis
International Monetary Fund. Middle East and Central Asia Dept.
This paper discusses Kyrgyz Republic’s Request for Purchase Under the Rapid Financing Instrument and Disbursement Under the Rapid Credit Facility. The COVID-19 pandemic has been hitting the Kyrgyz economy very hard and created an urgent balance of payments need. All sectors are being impacted with extreme severity as measures are being taken to stop the spread of the virus. Given the unprecedented high level of uncertainty, IMF emergency support under the Rapid Financing Instrument and the Rapid Credit Facility helps provide a backstop and increase buffers and shore up confidence. It also helps to preserve fiscal space for essential COVID- 19-related health expenditure and catalyze donor support. Banks’ capital and liquidity buffers need to be used to absorb credit losses and the liquidity squeeze. Once these buffers are exhausted, the central bank needs to show flexibility on the timing of bringing capital and liquidity above the minimum required, considering the length of the crisis. Expeditious donor support is needed to close the remaining balance of payments gap and ease the adjustment burden.
Keywords:
ISCR; CR; IMF support; balance of payments gap; Executive Board discussion; liquidity squeeze; financing gap; Debt sustainability analysis; External sector statistics; Monetary base; Global; Loans