Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

KYRGYZ REPUBLIC

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: March 29, 1995.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)The authorities notified the IMF of certain exchange restrictions that have been imposed in accordance with the relevant UN Security Council resolutions.
Other security restrictionsMeasures have been taken to restrict financial transactions and to freeze accounts of certain individuals or organizations associated with terrorism pursuant to (1) relevant UN Security Council resolutions and (2) the list of current terrorist organizations designated by the U.S. Secretary of State.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of the Kyrgyz Republic is the Kyrgyz som.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe official exchange rate of the som against the dollar is defined as the average-weighted exchange rate of interbank foreign exchange market transactions for the week. The National Bank of the Kyrgyz Republic (NBKR) participates and intervenes in the interbank foreign exchange market to smooth temporary market fluctuations as necessary.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirements
Controls on the use of domestic currency
For capital transactions
Transactions in capital and money market instrumentsLocally issued securities must be denominated in local currency.
Payments arrangements
Bilateral payments arrangementsThere are agreements on settlement procedures with China, Malaysia, and countries of the CIS.
OperativeYes.
Regional arrangementsThere are agreements with the Interstate Bank of the CIS to participate in the national gross settlement system.
Administration of controlThe NBKR has responsibility for managing international reserves and for issuing foreign exchange licenses to commercial banks and to foreign exchange bureaus.
Payments arrears
OfficialTechnical indebtedness to bilateral official creditors is allowed as a result of discussions with Paris Club creditors in March 2005 on restructuring the Kyrgyz Republic’s external debt. Debt consolidation and restructuring agreements have been signed with all creditor countries that are Paris Club members: Denmark, France, Germany, Japan, and the Russian Federation. A debt-restructuring agreement was signed with Turkey in the first quarter of 2006.
Controls on trade in gold (coins and/or bullion)All gold produced is sold at market prices. The government and the NBKR have priority in purchasing and also the right to participate as sellers in the market. If the government and the NBKR do not exercise that right, the gold is sold either in the domestic market or abroad. Transactions in precious metals (standard and uniform ingots) performed by commercial banks are governed by Regulation No. 30/5, as amended. The purchase and sale of uniform ingots of precious metals domestically by natural and juridical persons are governed under Resolution No. 834.
Controls on exports and imports of banknotesImports and exports of foreign currency are not subject to restrictions, provided they are declared to customs for statistical purposes.
References to legal instruments and hyperlinksn.a.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadThese accounts are permitted and must be registered with the NBKR for statistical purposes. Balances of funds on accounts opened by resident banks are subject to statistical reporting.
Accounts in domestic currency held abroadBalances of funds in som accounts opened by resident banks at foreign banks are subject to statistical reporting.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedBalances of foreign currency accounts opened by nonresident banks are subject to statistical reporting.
Domestic currency accountsBalances of som accounts opened in Kyrgyz banks are subject to statistical reporting.
Convertible into foreign currencyYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for importsNo.
Import licenses and other nontariff measuresLicenses are required for imports of alcohol and alcohol products, raw materials and components for the production of commercial petroleum products, and tobacco.
Negative listThis list includes weapons; ammunition; explosives; poisons; psychotropic narcotics; publications, photographs, photographic plates, negatives, exposed film, video recordings, and graphic works containing information that may harm the political and economic interests of the Republic, state security, or public order; ozone-depleting substances and products; and other articles prohibited and regulated by law. Imports of nuclear materials, technologies, and equipment; special nonnuclear materials; and radioactive sources of ionizing radiation are regulated by the government.
Open general licensesOpen general and single-use licenses are issued. OGLs are issued for a period of up to one calendar year. Imports under OGLs may be carried out under one or several contracts, and the nature of the transactions must be specified. The following products are subject to licensing: encryption equipment; weapons and military hardware and special equipment for their production; military uniforms, clothing, and accessories; specifications and technical documentation for products intended for military use; gunpowder and explosives; nuclear materials, technologies, equipment, and devices; special nonnuclear materials; sources of radioactive radiation; materials, equipment, technologies, and scientific and technical information that are intended for peaceful purposes but could be used in the creation of weapons of mass destruction; precious metals, from ores to scrap and waste; natural precious stones, from powders to recovered materials; precursor chemicals; high-potency poisons; hazardous waste; narcotics and psychotropic substances; tobacco; alcohol and alcohol products; ozone-depleting substances and products; and works of art and antiquities that are of significant artistic, historical, scientific, or other value.
Licenses with quotasQuotas are applied on imports of alcohol and alcohol products.
Other nontariff measuresExcise taxes apply to ethyl alcohol (wood and grain), alcohol products, tobacco products, jewelry made of precious stones and metals, crystal products, clothing made from fur and skins, gas-operated arms and firearms, petroleum products, coffee, cocoa, and rugs.
Import taxes and/or tariffsFive tariff bands apply (zero, 5%, 10%, 12%, and 15%); the average tariff rate is 5.1%.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsExport contracts for the following are subject to mandatory registration: fish and fish products; grains; soybeans; ethyl alcohol; raw materials for the production of ferrous and nonferrous metals; crude oil; petroleum products; natural gas; electricity; mineral and chemical fertilizers; casein; wood, sawed timber, and lumber materials; raw hides; cotton; tobacco; wool; flax fiber; cobalt and products thereof; rare metals; aluminum oxide; and ferrous and nonferrous metal waste and scrap.
Export licensesExports and reexports of controlled products are subject to mandatory licensing.
The list of controlled products includes raw materials and supplies, equipment and technologies, scientific and technical information, work and services, dual-use products, and intellectual property that are included in the National Control List of the Kyrgyz Republic and that could be used in the creation of weapons of mass destruction or means for their delivery, as well as other types of weapons and military hardware. Exports of nonferrous metal waste and scrap are subject to licensing. Other exports that require a permit from the government include wild animals and wild plants.
Without quotasYes.
With quotasQuotas, set annually, apply to alcohol exports.
Export taxesNo.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersNo.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securitiesControls on securities market instruments are enforced by the State Agency for Financial Supervision and Regulation (SAFSR) under the government of the Kyrgyz Republic, except with respect to the following: (1) debt securities issued by state and local governments; (2) securities issued or guaranteed by the government of the Kyrgyz Republic, by the NBKR, or by local government authorities, with the exception of certificates that are subject to requirements under Article 2 of the Securities Market Law; (3) bills of exchange; and (4) documented payment obligations arising in the course of usual business activities that are valid for a period not exceeding one year.
Shares or other securities of a participating natureAcquisition exceeding 5% of an issuer’s statutory capital or 5% of its stock shares must be reported to the SAFSR. Acquisition of a bank’s shares exceeding 20% is subject to approval by the NBKR. Legal entities may not own more than 20% of a bank’s voting shares.
Purchase locally by nonresidentsNonresidents may purchase shares in accordance with regulations. An issuer is required to inform the SAFSR of an acquisition by any person exceeding 5% of its statutory capital or exceeding 5% of its stock shares, as well as all increases of a multiple of 5%. Acquisition of a bank’s shares exceeding 20% is subject to approval by the NBKR.
Sale or issue locally by nonresidentsNonresidents may sell shares in accordance with general regulations provided for by legislation of the Kyrgyz Republic. The holder is required to inform the SAFSR of the sale of shares if the shareholder reduces his or her stake to a level that is a multiple of 5% of the stock shares.
Sale or issue abroad by residentsShares to be offered by a resident for sale and/or circulation abroad must be registered in advance in accordance with legislation.
Bonds or other debt securitiesThe issuance and circulation of corporate bonds are regulated by the SAFSR. The regulations governing shares or other securities of a participating nature also apply.
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Sale or issue abroad by residentsYes.
On money market instruments
Purchase locally by nonresidentsThese transactions are subject to prior reporting to the SAFSR.
Sale or issue locally by nonresidentsThese transactions are subject to prior registration with the SAFSR.
Sale or issue abroad by residentsThese transactions are subject to prior registration with the SAFSR.
On collective investment securitiesSecurities invested in joint-stock investment funds and mutual funds are regulated by the Law on Investment Funds. The operations of other funds are not currently regulated by legislation.
Purchase locally by nonresidentsThe regulations governing shares or other securities of a participating nature apply.
Sale or issue locally by nonresidentsThe regulations governing shares or other securities of a participating nature apply.
Sale or issue abroad by residentsPrior to their sale or issue abroad, these instruments must be registered with the SAFSR.
Controls on derivatives and other instrumentsIn the absence of a market in these instruments, they are not currently regulated.
Controls on credit operations
Commercial creditsThere are no controls on these transactions; however, all economic entities must report commercial (trade) credits received and issued to statistical agencies. The NBKR licenses and carries out prudential regulation of the lending activities of financial institutions.
Financial creditsThe MOF is responsible for the management of official external debt. Private loans with a maturity of more than 180 days received by residents from nonresidents must be reported to the NBKR for statistical purposes.
To residents from nonresidentsThe MOF monitors external government debt. The NBKR maintains records on private external debt.
Guarantees, sureties, and financial backup facilities
By residents to nonresidentsGuarantees provided by the Kyrgyz Republic government must be registered with the MOF.
Controls on direct investment
Inward direct investmentAll direct investment enterprises must be registered with the Ministry of Justice, statistical agencies, the social fund, and the tax inspectorate.
Controls on liquidation of direct investmentNo.
Controls on real estate transactions
Purchase locally by nonresidentsPurchases are subject to approval by the Ministry of Justice.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksLaw No. 39, dated July 12, 1996, on State Registration of Legal Entities; Statute No. 116-03, dated December 17, 2003, on Procedures for the Registration of Legal Entities, Affiliates, and Representative Offices by Agencies of the Ministry of Justice of the Kyrgyz Republic.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadThese transactions must be reported to the NBKR.
Maintenance of accounts abroadThese transactions must be reported to the NBKR.
Lending to nonresidents (financial or commercial credits)These transactions must be reported to the NBKR.
Lending locally in foreign exchangeThese transactions must be reported to the NBKR.
Purchase of locally issued securities denominated in foreign exchangeLocally issued securities must be denominated in local currency. However, the use of foreign currency, or of payment documents in foreign currency, is permitted in certain instances and according to procedures established by legislation.
Investment regulations
Abroad by banksThese transactions must be reported to the NBKR.
In banks by nonresidentsAcquisition of a bank’s shares exceeding 10% is subject to approval by the NBKR.
Open foreign exchange position limitsLimits are established by the NBKR.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on investment portfolio held abroadInsurance companies may not invest abroad more than 20% of insurance reserves.
Limits (min.) on investment portfolio held locallyAt least 80% of insurance reserves should be invested in the Kyrgyz Republic.
Currency-matching regulations on assets/liabilities compositionInvestment in foreign exchange values may not exceed 10% of insurance reserves.
Pension fundsPension assets should be invested according to the principles of reliability, safekeeping, liquidity, and diversification.
Limits (max.) on investment portfolio held abroadThe Law on Fully Funded Pension Funds in the Kyrgyz Republic is currently being drafted, and it should establish limits in this area.
Investment firms and collective investment fundsInvestment funds are not permitted to invest, locally or abroad, more than 15% of their net assets in the securities of a single issuer, with the exception of investment in government securities or securities guaranteed by the government of the Kyrgyz Republic. Investment funds may not borrow capital if the total volume of the credit (loan) subject to repayment will exceed 10% of the value of the net assets of the investment fund on the date that the credit (loan) agreement is signed. The credit (loan) may be obtained for a period of not more than six months, without right of extension. The credit (loan) agreement may be executed by a joint-stock investment fund or the management company of a mutual fund exclusively to satisfy a short-term need for money to redeem securities issued by the investment fund.
Limits (max.) on securities issued by nonresidentsYes.
Limits (max.) on investment portfolio held abroadYes.
Limits (min.) on investment portfolio held locallyYes.
Currency-matching regulations on assets/liabilities compositionYes.
References to legal instruments and hyperlinksArticle 33 of the Law on Investment Funds; Section 3 of the Statute on Assets of Investment Funds; Resolution of the State Securities Committee No. 75, dated November 12, 2003.
Changes during 2006
No significant changes occurred in the exchange and trade system.

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