Abstract
External shocks continue to shape both the outlook and policies. A weaker-than-expected external environment is hurting growth, straining the budget, and raising public debt and banking sector vulnerabilities. The authorities' response to shocks has focused on exchange rate flexibility and unorthodox stimulus measures, although the budget deficit in 2015 was well within the program target. For 2016, the authorities are undertaking additional efforts to adhere to the program's fiscal commitments. Financial sector vulnerabilities and risks are high and rising. Slow progress toward passing the Banking Law that aims to introduce a modern bank resolution system and increase the independence of the National Bank of the Kyrgyz Republic remains a concern. The change in the cabinet just six months after the elections underlines the fluidity of the country's political situation.
On June 17, 2016, the Executive Board of the International Monetary Fund (IMF) completed the second review of the Kyrgyz Republic’s economic performance under the three-year Extended Credit Facility (ECF) arrangement. The Board’s approval enables the immediate disbursement of SDR 9.514 million (about US$13.4 million). This would bring total disbursements under the arrangement to SDR 28.542 million (about US$40.3 million). The ECF arrangement for SDR 66.6 million (about US$92.4 million) was approved on April 8, 2015 (see
Following the Executive Board discussion Mr. Mitsuhiro Furusawa, Deputy Managing Director and Acting Chair, made the following statement:
“The Kyrgyz authorities have been able to maintain their Fund-supported program broadly on track despite persistent external shocks, including lower commodity prices as well as weaker growth and currencies in trading partners. Growth is slowing down, external borrowing is raising debt levels, and exchange rate depreciation is increasing debt and financial sector vulnerabilities. The challenging near-term outlook and high vulnerabilities call for a decisive implementation of prudent macroeconomic policies and structural reforms.
“The authorities’ commitment to resume fiscal consolidation in 2016 is welcome. Steadfast implementation of permanent measures to boost tax revenues, reduce the wage bill, streamline nonpriority spending, preserve much-needed social spending, and improve the public investment framework is critical to rebuilding buffers and ensuring that debt returns to more sustainable levels.
“The National Bank of the Kyrgyz Republic’s (NBKR) flexible exchange rate policy has served the economy well by acting as a shock absorber. Going forward, the NBKR should continue to focus on containing inflation within the target range and maintaining a flexible exchange rate policy to preserve competitiveness.
“Swift enactment of the Banking Law, in a form substantially similar to the draft submitted to Parliament in September 2013, is crucial to preserve financial sector stability in the current weak economic environment. Once adopted, the Law will strengthen the independence of the central bank, allow better protection of depositors’ rights, and introduce a modern bank resolution mechanism. Moreover, to enhance confidence in the banking system, it is necessary to promptly liquidate bankrupt banks under the Debt Resolution Agency’s management.
“Accelerating structural reforms to enhance broad-based growth, strengthen governance, reduce corruption, and maximize benefits from the Eurasian Economic Union is also critical.”
Kyrgyz Republic: Selected Social and Economic Indicators, 2015–21
General government comprises State Government and Social Fund finances. State government comprises central and local governments.
Calculated at end-period exchange rates.
Kyrgyz Republic: Selected Social and Economic Indicators, 2015–21
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|
| Est. | Projections | ||||||
| Nominal GDP (in billions of soms) | 423.6 | 455.4 | 506.6 | 561.2 | 614.6 | 675.7 | 734.5 |
| Real GDP (growth in percent) | 3.5 | 3.0 | 3.0 | 5.2 | 4.6 | 5.7 | 4.5 |
| Nongold real GDP (growth in percent) | 4.5 | 2.9 | 3.5 | 4.1 | 4.5 | 5.0 | 5.2 |
| Consumer prices (12-month percent change, eop) | 3.4 | 5.8 | 5.7 | 5.4 | 5.3 | 5.1 | 5.0 |
| Consumer prices (12-month percent change, average) | 6.5 | 2.8 | 8.1 | 5.3 | 5.5 | 5.2 | 5.1 |
| General government finances (in percent of GDP) 1/ | |||||||
| Revenue | 38.1 | 37.9 | 37.0 | 36.2 | 36.3 | 35.9 | 36.0 |
| Of which: Tax revenue | 20.0 | 21.8 | 22.3 | 22.5 | 22.6 | 22.7 | 22.9 |
| Expense | 30.6 | 30.9 | 29.5 | 28.5 | 28.4 | 27.9 | 27.7 |
| Gross operating balance | 7.5 | 6.9 | 7.5 | 7.7 | 7.9 | 8.0 | 8.3 |
| Net acquisition of nonfinancial assets | 8.7 | 11.4 | 9.9 | 8.2 | 8.4 | 8.5 | 8.6 |
| Overall balance(net lending/borrowing) | −1.2 | −4.5 | −2.4 | −0.4 | −0.5 | −0.5 | −0.4 |
| Overall balance including onlending | −3.2 | −8.7 | −5.1 | −2.7 | −2.0 | −0.5 | −0.4 |
| Total public debt 2/ | 66.0 | 73.1 | 73.5 | 72.8 | 72.2 | 71.4 | 68.9 |
| Banking sector | |||||||
| Reserve money (percent change, eop) | 4.0 | 13.5 | 9.9 | 8.8 | 8.4 | 7.5 | 7.2 |
| Broad money (percent change, eop) | 14.9 | 14.0 | 11.6 | 10.8 | 10.3 | 10.3 | 9.5 |
| Credit to private sector (percent change, eop) | 17.2 | 10.4 | 19.1 | 13.0 | 12.2 | 12.5 | 11.3 |
| Credit to private sector (in percent of GDP) | 22.7 | 23.3 | 25.0 | 25.5 | 26.1 | 26.7 | 27.3 |
| External sector | |||||||
| Current account balance (in percent of GDP) | −10.4 | −15.2 | −15.3 | −12.6 | −12.2 | −10.1 | −9.9 |
| Export growth (percent change) | −18.5 | −4.1 | 4.2 | 10.4 | 9.6 | 11.0 | 7.2 |
| Import growth (percent change) | −28.2 | 1.7 | 7.0 | 5.1 | 3.5 | 3.8 | 6.7 |
| Gross International reserves (in millions of U.S. dollars) | 1,468 | 1,621 | 1,638 | 1,740 | 1,854 | 2,085 | 2,260 |
| Gross reserves (months of next year imports, eop) | 3.7 | 3.8 | 3.7 | 3.8 | 3.9 | 4.1 | 4.1 |
| External public debt outstanding (in percent of GDP) | 64.6 | 71.8 | 72.3 | 71.7 | 71.2 | 70.5 | 68.0 |
General government comprises State Government and Social Fund finances. State government comprises central and local governments.
Calculated at end-period exchange rates.
Kyrgyz Republic: Selected Social and Economic Indicators, 2015–21
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | |
|---|---|---|---|---|---|---|---|
| Est. | Projections | ||||||
| Nominal GDP (in billions of soms) | 423.6 | 455.4 | 506.6 | 561.2 | 614.6 | 675.7 | 734.5 |
| Real GDP (growth in percent) | 3.5 | 3.0 | 3.0 | 5.2 | 4.6 | 5.7 | 4.5 |
| Nongold real GDP (growth in percent) | 4.5 | 2.9 | 3.5 | 4.1 | 4.5 | 5.0 | 5.2 |
| Consumer prices (12-month percent change, eop) | 3.4 | 5.8 | 5.7 | 5.4 | 5.3 | 5.1 | 5.0 |
| Consumer prices (12-month percent change, average) | 6.5 | 2.8 | 8.1 | 5.3 | 5.5 | 5.2 | 5.1 |
| General government finances (in percent of GDP) 1/ | |||||||
| Revenue | 38.1 | 37.9 | 37.0 | 36.2 | 36.3 | 35.9 | 36.0 |
| Of which: Tax revenue | 20.0 | 21.8 | 22.3 | 22.5 | 22.6 | 22.7 | 22.9 |
| Expense | 30.6 | 30.9 | 29.5 | 28.5 | 28.4 | 27.9 | 27.7 |
| Gross operating balance | 7.5 | 6.9 | 7.5 | 7.7 | 7.9 | 8.0 | 8.3 |
| Net acquisition of nonfinancial assets | 8.7 | 11.4 | 9.9 | 8.2 | 8.4 | 8.5 | 8.6 |
| Overall balance(net lending/borrowing) | −1.2 | −4.5 | −2.4 | −0.4 | −0.5 | −0.5 | −0.4 |
| Overall balance including onlending | −3.2 | −8.7 | −5.1 | −2.7 | −2.0 | −0.5 | −0.4 |
| Total public debt 2/ | 66.0 | 73.1 | 73.5 | 72.8 | 72.2 | 71.4 | 68.9 |
| Banking sector | |||||||
| Reserve money (percent change, eop) | 4.0 | 13.5 | 9.9 | 8.8 | 8.4 | 7.5 | 7.2 |
| Broad money (percent change, eop) | 14.9 | 14.0 | 11.6 | 10.8 | 10.3 | 10.3 | 9.5 |
| Credit to private sector (percent change, eop) | 17.2 | 10.4 | 19.1 | 13.0 | 12.2 | 12.5 | 11.3 |
| Credit to private sector (in percent of GDP) | 22.7 | 23.3 | 25.0 | 25.5 | 26.1 | 26.7 | 27.3 |
| External sector | |||||||
| Current account balance (in percent of GDP) | −10.4 | −15.2 | −15.3 | −12.6 | −12.2 | −10.1 | −9.9 |
| Export growth (percent change) | −18.5 | −4.1 | 4.2 | 10.4 | 9.6 | 11.0 | 7.2 |
| Import growth (percent change) | −28.2 | 1.7 | 7.0 | 5.1 | 3.5 | 3.8 | 6.7 |
| Gross International reserves (in millions of U.S. dollars) | 1,468 | 1,621 | 1,638 | 1,740 | 1,854 | 2,085 | 2,260 |
| Gross reserves (months of next year imports, eop) | 3.7 | 3.8 | 3.7 | 3.8 | 3.9 | 4.1 | 4.1 |
| External public debt outstanding (in percent of GDP) | 64.6 | 71.8 | 72.3 | 71.7 | 71.2 | 70.5 | 68.0 |
General government comprises State Government and Social Fund finances. State government comprises central and local governments.
Calculated at end-period exchange rates.