Press Release No. 15/338

Press Release: Statement at the Conclusion of an IMF Staff Mission to the Kyrgyz Republic

July 15, 2015

An International Monetary Fund (IMF) mission led by Edward Gemayel visited Bishkek from July 9-15, 2015, following approval on April 8 by the IMF Executive Board of a new three-year arrangement under the Extended Credit Facility (ECF).

At the end of the visit, Mr. Gemayel issued the following statement:

“The economy has been resilient in spite of the economic slowdown in Russia and the region, although the risks to the outlook remain on the down side. According to the National Statistics Committee preliminary June data, non-gold growth reached 4.4 percent and 12-month inflation slowed to 4.5 percent, notwithstanding the exchange rate depreciation of 5.8 percent since the beginning of the year. However, worker remittances fell by 25 percent in the first 5 months of the year; trade continues to slow down, and nonperforming loans (NPLs) and deposit dollarization increased further.

“The pursuit of a sustainable fiscal policy is essential to preserve macroeconomic stability. Signs of fiscal slippages in the second half of this year in the run-up to the fall parliamentary elections are worrisome. In particular, the mission urges the government to avoid new recurrent spending commitments unless these are financed by new permanent measures to increase revenue. Following the appropriate pause in fiscal consolidation this year to accommodate the external shocks the economy is facing, it is critical that fiscal consolidation resumes in 2016. The mission encourages the government to prepare next year’s budget in this spirit in order to maintain public debt at sustainable levels.

“The timely completion of the first review will hinge on the completion of key reforms. While the passage of the Banking Code through the first parliamentary reading is welcome, its downgrade to a law despite the efforts of the government, is a source of concern. It is critical that the final version of the Code preserves the key features of the legislation, which aims at modernizing the banking resolution framework in line with international standards and enhancing the independence of the central bank. The mission calls for the speedy initiation of the audit of the Debt Resolution Agency (DEBRA). Delays in making a decision regarding the signatory authority to select an auditor may result in missing the October deadline for finalizing the audit.

“The IMF remains fully committed to supporting the Kyrgyz Republic through financing, policy advice, and technical assistance. An IMF mission in connection with the 2015 Article IV consultation and the first review under the ECF arrangement is planned for September 2015.

“The mission met with Prime Minister Temir Sariev, Minister of Finance Adylbek Kasymaliev, Minister of Economy Oleg Pankratov, Chairman of the National Bank of the Kyrgyz Republic Tolkunbek Abdygulov, as well as other senior government officials, members of parliament, and representatives of the diplomatic and development partner community.

“The mission would like to thank the authorities and all whom it met for their warm welcome, and frank and productive discussions.”