## 1. Real Sector and Social Indicators (Content unit: 1kgzea2025001-print-pdf) ## Source details **Canonical URL:** [1. Real Sector and Social Indicators (Content unit: 1kgzea2025001-print-pdf)](https://www.imf.org/-/media/files/publications/cr/2025/english/1kgzea2025001-print-pdf.pdf) ## Other formats - [Markdown version](/-/media/files/publications/cr/2025/english/1kgzea2025001-print-pdf.pdf.md) - [Structured JSON version](/-/media/files/publications/cr/2025/english/1kgzea2025001-print-pdf.pdf.json) --- ### Context and recent developments - Nominal per capita GDP has nearly doubled since 2021, surpassing US$2,500 in 2024. - Unemployment: 4.1 percent. - Poverty rate (US$3.65/day): 9.7 percent (2023), down from 11.3 percent (2022). - Annual GDP growth: 9 percent annually since 2022; Q1 2025 growth: 13.1 percent. - Leading sectors: trade, manufacturing, and construction; followed by communication, transport, and agriculture; gold production slowed. - Headline inflation: 3.8 percent (Aug 2024) → 6.9 percent (Mar 2025). - Core inflation: 16.1 percent (Feb 2023 peak) → 6.0 percent (Mar 2025). - Long-term challenge: absorb approximately 50,000 net new jobseekers annually; medium-term growth required to absorb entrants: over 7 percent a year. ### External sector, current account, and reserves - Official current account (CA) deficit: 45 percent of GDP (2023). - Balance of Payments errors and omissions: exceeded 42 percent of GDP (2023). - Staff estimate: unrecorded re-exports account for about 38 percent of non-oil imports; adjusting for these re-exports narrows the 2023 CA deficit to around 8 percent of GDP. - 2024 staff estimate (using available BoP data Q1–Q3): CA deficit nearly 31 percent of GDP (full year, excluding Q1–Q3 re-exports); with re-exports CA deficit would narrow to 8.3 percent of GDP. - Exchange rate movements (2024): som appreciated by 2.4 percent against the US dollar (nominal) and by 6.0 percent in real effective terms. - NBKR foreign-exchange operations in 2024: purchased about US$370 million during first three quarters; sold US$676 million in last quarter. - Reserves: 4.3 months of imports (2024); reserve adequacy benchmark for credit-constrained economies: 4.5 months; reserves projected to decline to 2.7 months by 2030. - Gold composition and options: gold represents around 70 percent of total reserves; conversion of remaining US$700 million worth of non-monetary gold to monetary gold or FX would bolster reserves by 0.7 months of imports; staff cautioned on exposure to gold price volatility. - CFM: restrictions on exports of cash US dollars introduced January 2023 (limits US$5,000 non-residents/foreign citizens; US$10,000 residents/Kyrgyz citizens; 10 percent charge above US$10,000); eased in August 2024 for licensed commercial banks, exchange offices, microfinance and microcredit companies. ### Fiscal position and public debt - Public debt: 42 percent of GDP (2023) → 36.6 percent of GDP (2024). - General government fiscal outcome: budget surplus of 1.9 percent of GDP (2024). - Revenue shifts in 2024: tax revenue increased by 0.6 percent of GDP (higher corporate income tax and taxes on international trade); VAT declined by 0.9 percent of GDP (slowdown in imports). - Expenditure shifts in 2024: total expenditure increased by 0.5 percent of GDP; wage bill declined by about 1.3 percent of GDP; Social Fund recorded a surplus of 0.8 percent of GDP. - Authorities’ 2025 budget stance: project overall surpluses in the 2025 budget; tax-to-GDP ratio envisaged at 22.4 percent; non-tax revenue expected to decline by about 3.4 percent of GDP; expect wage bill to decline by 0.9 percent of GDP and capital spending by 2.2 percent of GDP; budget does not yet include Kambarata-1 HPP, CKU railway, and Eurobond until financing is secured; capital injections to state-owned banks recorded below the line increase gross financing needs by 1.3 percent of GDP in 2025. ### Major projects and financing plans - China-Kyrgyzstan-Uzbekistan (CKU) railway: - Cost US$4.9 billion; construction expected to last about 7 years. - Planned ownership: China 51 percent; Uzbekistan 24.5 percent; Kyrgyz Republic 24.5 percent. - Staff expects Kyrgyz share financed by external non-concessional borrowing; additional assumption: US$100 million a year non-concessional borrowing for the railway for seven years starting 2025 (Annex). - Kambarata-1 HPP: - Cost US$3.9 billion; construction expected to last about 7 years. - Joint ownership/finance by Kyrgyz Republic, Kazakhstan, and Uzbekistan with equal shares; Kyrgyz Republic contributes 34 percent (Annex III). - World Bank and other partners pledged financing for Kyrgyz portion; IDA loan disbursements: US$157.5 million in 2025 rising to around US$234 million in 2030 (Annex). - Authorities plan international bond issuance totaling US$1.7 billion: - Staff projects a US$500 million Eurobond in 2025, and US$400 million per year in 2026–28. - Small/medium energy projects: projected cost US$1.7 billion spread 2025–28. - S&P sovereign credit rating upgrade: B+ with stable outlook. ### Outlook and key projections - Growth: 6.8 percent (2025); converge to about 5¼ percent in the medium term (staff’s new estimate of potential growth); staff projection table: Real GDP growth — 2023: 9.0; 2024: 9.0; 2025: 6.8; 2026: 5.3; 2027: 5.8; 2028: 5.3; 2029: 5.4; 2030: 5.3. - Nongold real GDP growth: 2023: 11.0; 2024: 10.3; 2025: 6.9; subsequent years as per projection table. - Inflation: projected to remain broadly stable under prudent monetary policy; consumer prices (eop) projections: 2023: 7.3; 2024: 6.3; 2025: 6.0; 2026: 5.5; 2027–2030: 5.0. - Current account deficit (projections): staff projects CA deficit to stabilize at about 6-7 percent of GDP over the medium term after moderation of re-export trade and large infrastructure import flows; table projections: 2023: -45.0; 2024: -30.7; 2025: -8.5; 2026: -7.5; 2027: -8.5; 2028: -7.3; 2029: -7.0; 2030: -6.4. - Reserves (gross international reserves in US$ millions): 2023: 3,044; 2024: 4,684; 2025: 4,597; 2026: 4,535; gradual decline to 4,358 by 2030. Reserves in months of next year imports (eop): 2023: 2.1; 2024: 3.2; 2025: 3.1; 2026: 2.9; 2027: 2.7; 2028: 2.6; 2029: 2.5; 2030: 2.3. - Fiscal balance: overall fiscal balance shifts from surplus 1.9 percent of GDP (2024) to deficit -3.4 percent of GDP (2025) and around -3 percent of GDP over the medium term; general government budget projections: revenue and grants (percent of GDP) 2025: 32.1; 2026: 31.8; 2027: 31.4; expenditure 2025: 26.8; overall balance 2025: -3.4. - Public debt trajectory: total state government debt (percent of GDP) 2023: 42.0; 2024: 36.6; 2025: 38.5; 2026: 39.5; 2027: 40.3; 2028: 41.2; 2029: 41.3; 2030: 41.9. ### Key risks (selected) - External risks: - Escalation of Western sanctions on Russia: could slow activity, depreciate ruble, reduce remittances, and increase poverty. - Reversal of surge in gold prices, higher global oil prices, extreme weather events, cyberthreats. - End to war in Ukraine: could strengthen the ruble and Russian growth, increase remittances and wages, but also inflationary pressures and potential unwinding of some trade flows. - Direct impact of US tariffs on Kyrgyz exports to the US expected insignificant; indirect effects possible via commodity prices, tighter global financial conditions, higher imports from China. - Conjunctural and structural risks (Annex I RAM): trade policy and investment shocks (High/Medium); sovereign debt distress (High/Medium); tighter financial conditions (Medium/Medium); regional conflicts (Medium/Medium); commodity price volatility (Medium/Medium); global growth acceleration (Low/Medium). Policy advice consistently emphasizes exchange rate flexibility, recalibrated monetary policy, targeted support, and creation of fiscal space. - Financial sector risks: NPLs over 10 percent; credit grew 34 percent in 2024; consumer loans rose to 27 percent of total loans (end-2024) with 68 percent classified as long-term; negative but rising credit gap with shift toward debt-driven consumption. ### Key statistics (selected) - Nominal per capita GDP: surpassing US$2,500 in 2024. - Population: 7.2 million (2023). - GINI Index: 0.26 (2022). - Life expectancy at birth: 72.1 years (2022). - Poverty rate (national definition): 29.7 percent (2023). - Per capita GDP (World Bank): US$1,970 (2023). - Under-five mortality: 17.3 per 1000 live births (2022). - Nominal GDP (billion soms): 2023: 1,334; 2024: 1,523; 2025: 1,763; 2026: 1,963; 2027: 2,185; 2028: 2,416; 2029: 2,675; 2030: 2,958. - Nominal GDP (million US$): 2023: 15,148; 2024: 17,722; 2025: 19,849; 2026: 21,222; 2027: 22,807; 2028: 24,427; 2029: 26,202; 2030: 28,068. - Exports of goods and services (million US$): 2023: 5,522; 2024: 9,130; 2025: 12,667; 2026: 12,990; 2027: 13,230; 2028: 14,002; 2029: 14,462; 2030: 15,085. - Imports of goods and services (million US$): 2023: 14,461; 2024: 17,244; 2025: 17,315; 2026: 17,774; 2027: 18,618; 2028: 19,578; 2029: 20,142; 2030: 21,049. - Consumer prices (12-month percent change, eop): 2023: 7.3; 2024: 6.3; 2025: 6.0; 2026: 5.5; 2027–2030: 5.0. ### Authorities’ views (summary) - Authorities broadly share staff’s assessment but project about 8 percent annual growth in the medium term. - They attribute strong activity to public administration reforms, digitalization, large public investments in infrastructure and energy, and targeted support to entrepreneurship, agriculture, and construction. - Authorities emphasize careful scheduling of external repayments and adherence to prudent fiscal and debt policies. --- ### Fiscal policy recommendations and measures to build buffers - Revenue measures (up to 4 percent of GDP potential): - Streamline VAT exemptions and special tax regimes. - Increase progressivity of the Personal Income Tax. - Improve revenue administration via digitalization, strengthening taxpayer registry, and compliance risk management. - Channel more of Kumtor’s net profits to the treasury (could provide up to 1 percent of GDP). - Expenditure measures: - Reduce energy subsidies by raising electricity tariffs to reach full cost-recovery by 2030. - Contain public wage bill: limit wage increases to below inflation; reduce headcount through attrition; optimize wage setting; review employment needs; maintain part of compensation as discretionary bonuses. - Public Financial Management reforms: - Implement IFMIS modules for budget preparation and payroll management. - Improve targeting of social spending. - Strengthen public investment management with PIMA support. - Operationalize an SOE fiscal risks management framework. - Enhance transparency and management of the Stabilization Fund. - Staff caution: excessive external commercial borrowing could undermine fiscal and debt sustainability; build fiscal buffers now given favorable macroeconomic conditions. ### Monetary, exchange rate, and financial sector recommendations - NBKR inflation target range: 5–7 percent. - Monetary policy recommendations: - Remain data-driven and focused on keeping inflation within the NBKR’s 5–7 percent target range. - Keep NBKR policy rate sufficiently positive in real terms. - Drain excess liquidity to contain excessive credit growth and demand. - Tighten interest rates and liquidity if inflation pressures persist or rise. - Enhance monetary instruments: lift interest rate caps on NBKR notes; lengthen maturities of monetary policy instruments; enhance liquidity management. - Curb subsidized lending through state-owned banks. - Support for NBKR discontinuing purchases of domestic gold and converting part of non-monetary gold to monetary gold to enhance international reserves. - NBKR governance and safeguards: - Implement remaining Safeguards Assessment recommendations: introduce a non-executive majority to NBKR’s board and the audit committee. - Discontinue routine transfers of NBKR profits to the budget until capital reaches the statutory threshold. - Strengthen NBKR autonomy and governance to safeguard price and financial stability. ### Financial sector supervision and digital assets - Financial soundness indicators (selected, Dec-20 to Dec-24): - Nonperforming loans/total loans: Dec-24: 10.8 (Dec-23: 9.2; Dec-22: 12.8). - Credit growth (12‑month): 2024: 33.9 percent (table: Credit to private sector 12-month percent change 2024: 33.9). - Consumer loans share of total loans: rose from 11 percent (2020) to 27 percent (end-2024); 68 percent of consumer loans classified as long-term. - Regulatory capital to risk weighted assets: Dec-24: 22.0. - Return on equity: Dec-24: 32.5. - Liquidity ratio: Dec-24: 73.1. - Share of foreign currency deposits in total deposits: Dec-24: 45.7. - Macroprudential and supervisory advice: - Build countercyclical capital buffers; impose loan-to-value limits; enhance liquidity requirements. - Align capital markets legislation with international standards and define roles for Central Security Depositories, custodians, registrars, and settlement agents. - Maintain supervisory vigilance given elevated NPLs and rapid credit expansion. - Digital assets: - Legislative initiatives on digital assets require further scrutiny. - Potential benefits: a digital som could enhance payment efficiency and financial inclusion. - Risks: impacts on financial stability, integrity, monetary policy, banking system; volatility, ML/TF and fraud risks; crypto banks and legal tender status for crypto assets should be avoided. - Regulatory recommendations: design a digital som as a means of payment with clear legal/regulatory framework, cybersecurity, AML/CFT controls, and alignment with FATF and Basel standards; IMF offered technical assistance on crypto assets. ### Structural reforms and governance priorities - Governance: Kyrgyz Republic scores below peers on most World Governance Indicators; ratings worsened since 2021. - Potential gains: reforms estimated to raise growth potential by about 2.5 percentage points per year. - Priority reforms: - Improve governance and SOE management; strengthen competition; reform electricity sector; bolster labor markets. - Modernize anti-corruption legislation; enhance income and asset disclosure; improve public procurement transparency and SOE management; develop digital governance; strengthen rule of law; reduce administrative barriers for businesses. - SOE strategy: comprehensive ownership and management strategy; improve corporate governance, oversight, reporting and disclosure; divest non-strategic commercial SOEs via open and transparent privatization. - Labor market: - Labor force participation: 45 percent of working-age women employed versus 70 percent for men. - Boosting female employment by 10 percent could unlock an additional 4-5 percent in GDP growth by 2050. - Recommended: increase labor market flexibility; strengthen social safety nets; expand active labor market programs; improve education to address skills gaps and reduce emigration. - Climate and green agenda: - National commitments: reduce emissions by 15.97 percent unconditionally and by 43.62 percent conditional on external financing by 2030. - National Green Economy Program for 2025-28 priorities: energy efficiency, mineral resource management, increase hydropower capacity, low carbon transportation, sustainable agriculture, tourism, water and waste management. - Financing secured: US$50 million from ADB and the Green Climate Fund; authorities seeking more development partner support. --- ### External Sector Assessment (ESA) and reserves adequacy (highlights) - ESA finding: external position in 2024 "remained substantially weaker than the level implied by medium-term fundamentals and desirable policies." - After adjusting the CA deficit for unrecorded re-exports, the som was overvalued by 9.9 percent (2024). - Recommendation: greater exchange rate flexibility would further strengthen external buffers. - Concern: repeated transfers of NBKR profits to the budget while NBKR capital remains below statutory threshold constitute fiscal dominance; staff recommends discontinuing routine transfers until capital threshold reached and discontinuing domestic gold purchases. --- ### Debt limits and debt sustainability (Annex III and DSA highlights) - MSDL (maximum sustainable debt level) estimates: - Interest payment capacity threshold approach (assumptions example: fiscal distress threshold 19 percent; maximum sustainable revenue 35 percent of GDP; interest rate 11 percent) → resulting MSDL: 60 percent of GDP. - Sensitivities: a 1 percentage point increase in revenue-to-GDP raises MSDL by about 2 percent of GDP; a 1 percentage point rise in borrowing costs reduces MSDL by 5 percent of GDP. - Endogenous interest-rate response approach (baseline calibration: initial debt 40 percent of GDP; initial interest rate 11 percent; nominal potential growth 10.3 percent; elasticity of interest rate to debt 0.015) → model indicates sustainable debt level around 50 percent of GDP; for primary surplus of 0.5 percent of GDP upper bound ≈ 50 percent of GDP; for primary surplus of 1 percent of GDP debt limit ≈ 60 percent of GDP. - Annex III conclusions: MSDL estimates for the Kyrgyz Republic range between 50 and 60 percent of GDP; current debt below 40 percent of GDP and most loans on concessional terms indicate ample fiscal space under baseline, but adverse scenarios could push debt above 50 percent of GDP. - DSA baseline and stress-test outcomes: - Public debt decreased to 36.6 percent of GDP in 2024 (from 42.1 percent in 2023). - PV of public debt-to-GDP ratio projected to reach 47.5 percent of GDP by 2045 (chapter 11). - Debt service-to-revenue projected to rise to 15.4 percent in 2030 and to almost 33.1 percent by 2045. - Under a standard shock to exports, breaches occur for all four external debt ratios for a sustained period. - Under a growth shock, PV of debt-to-GDP breaches 55 percent by 2028; PV of debt-to-revenue reaches over 130 percent by 2035. - Debt-carrying capacity composite indicator (CI): 3.06 (classification: medium; threshold for strong capacity: 3.05). - Financing assumptions and implications: - Gross financing needs average 6.2 percent of GDP annually (2025–2030); two-thirds projected funded by external borrowing; 2 percent of GDP annually from domestic borrowing. - Eurobond issuance assumed: US$500 million (2025) and US$400 million each year 2026–28. - Effect: reduction in average concessionality of external debt; share of net domestic borrowing in overall borrowing expected to rise from around 43 percent in 2030 to almost 75 percent by 2045. - Debt management recommendations: - Revise Debt Management Strategy in line with MTDS; publish Annual Borrowing Plan and Issuance Calendar. - Improve NBKR-MoF collaboration on liquidity management and forecasting. - Set medium-term targets for average Term-to-Maturity; develop and publish short-term yield curve; lift interest rate caps and yield change limits; implement benchmark bond policy; issue 3-month and 6-month T-Bills at market rate. - Strengthen technical and institutional capacity of Public Debt Management Department. - Fiscal measures to reduce vulnerabilities: - Improve revenue mobilization (streamline exemptions, strengthen administration). - Reduce wage bill and energy subsidies; improve targeting of social benefits. - Improve public investment management; seek more concessional financing; reduce state footprint; improve SOE profitability. ### DSA headline projections (selected table values) - Real GDP (growth in percent): 2023: 9.0; 2024: 9.0; 2025: 6.8; 2026: 5.3; 2027: 5.8; 2028: 5.3; 2029: 5.4; 2030: 5.3. - Current account balance (percent of GDP): 2023: -45.0; 2024: -30.7; 2025: -8.5; 2026: -7.5; 2025–30 average: -7.5. - Total state government debt (percent of GDP): 2023: 42.0; 2024: 36.6; 2025: 38.5; 2030: 41.9. - Overall balance (net lending/borrowing) (percent of GDP): 2023: 1.6; 2024: 1.9; 2025: -3.4; 2026: -2.8. - Gross international reserves (US$ million): 2023: 3,044; 2024: 4,684; 2025: 4,597. ### Data adequacy and dissemination issues - Main data shortcoming: exceptionally high errors and omissions in the balance of payments. - Staff recommendations: - Explore alternative data sources (mirror trade statistics, banking and fiscal data). - Improve national accounts to reduce revision frequency and develop and publish discrete quarterly GDP estimates (CCAMTAC support). - STA technical assistance to address public debt statistics discrepancies from cash versus accrual accounting. - Table of Common Indicators: selected latest observations and reporting timeliness noted (e.g., Exchange Rates: 4/11/2025; International Reserve Assets: Mar 2025; Consumer Price Index: Feb 2025; GDP/GNP: Jan 2025). ### Staff appraisal (summary) - Economy sustained robust growth supported by expansion of external trade, remittances and labor, and resilient domestic demand; inflation moderated to mid-single digits but demand pressures persist. - Outlook: converge to potential growth rate of 5¼ percent in the medium term; outlook highly uncertain and sensitive to regional geopolitical developments. - Medium-term priority: rebuild policy buffers, strengthen resilience to shocks, and implement structural reforms to enhance higher and more inclusive growth. - Staff recommendation: next Article IV consultation on a standard 12-month cycle. *Source: IMF staff report excerpts and annexes — "1. Real Sector and Social Indicators" and related chapters from the Kyrgyz Republic Staff Report for the 2025 Article IV Consultation (as compiled in the supplied PDF content).* ### 1. Real Sector and Social Indicators ______________________________________________________________ 16 ### 1. Real Sector and Social Indicators ### Context - Nominal per capita GDP has nearly doubled since 2021, surpassing US$2,500 in 2024. - Unemployment declined to 4.1 percent. - Poverty rate (US$3.65/day) dropped to 9.7 percent in 2023 from 11.3 percent in 2022. - Post-Covid inflation surge contained; public debt as a share of GDP fell to its lowest recent level. - Long-term challenge: accelerate income convergence with Eastern European economies and create sufficient jobs for a young and growing population with approximately 50,000 net new jobseekers added to the labor force annually. - Required medium-term growth to absorb labor force entrants: the Kyrgyz economy needs to grow by over 7 percent a year; a new growth model is needed where the private sector drives growth and job creation. ### Recent Economic Developments - Annual GDP growth: robust and broad-based growth of 9 percent annually since 2022; Q1 2025 growth accelerated to 13.1 percent. - Leading sectors: trade, manufacturing, and construction; followed by communication, transport, and agriculture; gold production slowed. - Headline inflation: bottomed at 3.8 percent in August 2024 and rose to 6.9 percent by March 2025. - Core inflation: declined from a peak of 16.1 percent in February 2023 to 6.0 percent in March (2025). ### External Sector and Current Account - Official current account (CA) deficit: 45 percent of GDP in 2023. - Balance of Payments errors and omissions: exceeded 42 percent of GDP in 2023. - Staff estimate: unrecorded re-exports (mostly consumer goods from China to Russia) account for about 38 percent of non-oil imports; adjusting for these re-exports narrows the 2023 CA deficit to around 8 percent of GDP. - 2024 dynamics: re-export trade slowed in 2024; using available BoP data for three quarters of 2024, staff estimates a CA deficit of nearly 31 percent of GDP for the full year (excluding Q1–Q3 re-exports). With re-exports, the CA deficit would narrow to 8.3 percent of GDP. ### Fiscal Position and Public Debt - Public debt: declined from 42 percent of GDP in 2023 to 36.6 percent in 2024. - General government fiscal outcome: general government budget surplus of 1.9 percent of GDP in 2024. - Revenue developments: tax revenue increased by 0.6 percent of GDP (higher corporate income tax and taxes on international trade); VAT declined by 0.9 percent of GDP, mainly due to a slowdown in imports. - Expenditure developments: total expenditure increased by 0.5 percent of GDP; wage bill declined by about 1.3 percent of GDP while goods and services spending increased; Social Fund recorded a surplus of 0.8 percent of GDP. ### Outlook and Risks - Growth projections: 6.8 percent in 2025; converge to about 5¼ percent in the medium term (staff’s new estimate of potential growth). - Infrastructure effects: commencement of construction of the China-Kyrgyzstan-Uzbekistan railway and Kambarata-1 HPP expected to provide growth boosts of about ¼ percent in 2025 and 2027, respectively. - Inflation: projected to remain broadly stable under prudent monetary policy. - CA deficit: projected to stabilize at about 6-7 percent of GDP over the medium term, accounting for moderation of re-export trade and large infrastructure-related imports. - Fiscal outlook: large-scale public investments would widen overall fiscal deficits, but public debt should remain broadly contained thanks to robust GDP growth. - Key external risks: - Escalation of Western sanctions on Russia could slow activity, depreciate the ruble, reduce remittances, and increase poverty. - Reversal of the surge in gold prices, higher global oil prices, extreme weather events, cyberthreats. - Conversely, an end to the war in Ukraine could strengthen the ruble and Russian growth, raising remittances and wages but also inflationary pressures and potentially unwinding some trade flows. - Direct impact of US tariffs expected to be insignificant for Kyrgyz exports to the US, but indirect effects could occur via global commodity prices, tighter global financial conditions, and higher imports from China. ### Authorities’ Views (summary) - Authorities broadly share staff’s assessment but expect GDP growth to remain higher for longer, projecting about 8 percent annual growth in the medium term. - They attribute strong activity to public administration reforms, digitalization, large public investments in infrastructure and energy, and targeted support to entrepreneurship, agriculture, and construction. ### Key statistics (selected) - Nominal per capita GDP: surpassing US$2,500 in 2024. - Unemployment: 4.1 percent. - Poverty rate (US$3.65/day): 9.7 percent (2023). - Annual GDP growth since 2022: 9 percent. - Q1 2025 GDP growth: 13.1 percent. - Headline inflation: 3.8 percent (Aug 2024) → 6.9 percent (Mar 2025). - Core inflation: 16.1 percent (Feb 2023 peak) → 6.0 percent (Mar 2025). - CA deficit: 45 percent of GDP (2023 official); adjusted ~8 percent of GDP (staff). - BoP errors and omissions: >42 percent of GDP (2023). - Public debt: 42 percent of GDP (2023) → 36.6 percent of GDP (2024). - General government budget surplus: 1.9 percent of GDP (2024). *Source: IMF staff report excerpt — "1. Real Sector and Social Indicators".* ### Policy discussions — Fiscal Policy - Large projects and financing: - China-Kyrgyzstan-Uzbekistan railway: cost US$4.9 billion; construction expected to last about 7 years; planned ownership: China 51 percent, Uzbekistan 24.5 percent, Kyrgyz Republic 24.5 percent. - Kambarata-1 HPP: cost US$3.9 billion; construction expected to last about 7 years; jointly owned/financed by Kyrgyz Republic, Kazakhstan, and Uzbekistan with equal shares. - Staff expects Kyrgyz share of the railway to be financed by external non-concessional borrowing. - World Bank and other partners pledged financing for Kyrgyz portion of the HPP. - Authorities plan international bond issuance totaling US$1.7 billion to finance smaller hydropower and infrastructure projects: staff projects a US$500 million Eurobond in 2025, and US$400 million per year in 2026–28. - Recent S&P sovereign credit rating upgrade to B+ with a stable outlook supports access to international capital markets. - Fiscal projections: - Overall fiscal balance: surplus of 1.9 percent of GDP in 2024 → deficit of 3.4 percent of GDP in 2025 → around 3 percent of GDP over the medium term. - Tax revenue: projected dip of about 1 percent of GDP in 2025 and another 0.7 percent by 2030 (mainly lower VAT on imports as re-export trade moderates). - Capital expenditure: projected increase by about 1.6 percent of GDP in 2025 to 8.7 percent of GDP; includes outlays for the railway, Kambarata-1 HPP, and Eurobond-related investment totaling 3.5 percent of GDP. - Interest bill: projected to rise from 1.2 percent of GDP in 2024 to 2.3 percent by 2030. - Authorities’ 2025 budget stance: - Project overall surpluses in the 2025 budget. - Tax-to-GDP ratio envisaged at 22.4 percent; non-tax revenue expected to decline by about 3.4 percent of GDP due to conservative dividend assumptions. - Expect wage bill to decline by 0.9 percent of GDP and capital spending by 2.2 percent of GDP. - Budget does not yet include Kambarata-1 HPP, the railway, and the Eurobond until financing is secured. - Capital injections to state-owned banks recorded below the line and increase gross financing needs by an additional 1.3 percent of GDP in 2025. - Staff recommendations to create fiscal space and strengthen buffers: - Revenue measures (up to 4 percent of GDP potential): streamline VAT exemptions and special tax regimes; increase progressivity of the Personal Income Tax; improve revenue administration through digitalization, strengthening taxpayer registry, and compliance risk management. - Channel more of Kumtor’s net profits to the treasury could provide up to 1 percent of GDP additional fiscal resources. - Expenditure measures: reduce energy subsidies by continuing to raise electricity tariffs to reach full cost-recovery by 2030; contain public wage bill by limiting wage increases to below inflation, reduce headcount through attrition, optimize wage setting, and review employment needs while maintaining part of compensation as discretionary bonuses. - Public Financial Management reforms: implement IFMIS modules for budget preparation and payroll management; improve targeting of social spending; strengthen public investment management with PIMA support; operationalize an SOE fiscal risks management framework; enhance transparency and management of the Stabilization Fund. - Staff caution: excessive external commercial borrowing could undermine fiscal and debt sustainability; building fiscal buffers now is opportune given favorable macroeconomic conditions. ### Policy discussions — Monetary, Exchange Rate and Financial Sector Policies - Monetary framework and objectives: - NBKR inflation target range: 5–7 percent. - Monetary policy should remain data-driven and focused on keeping inflation within the NBKR’s target range. - Key considerations and indicators: - Strong growth and demand pressures: GDP growth 9 percent, credit growth 34 percent, real wage growth 6.9 percent in 2024. - Projected fiscal stimulus and demand pressures justify timely tightening of interest rates and liquidity if inflation pressures persist or rise. - Staff recommendations for monetary and liquidity management: - Keep NBKR policy rate sufficiently positive in real terms to prevent entrenchment of inflation expectations. - Drain excess liquidity to contain excessive credit growth and demand. - Strengthen monetary policy effectiveness by lifting interest rate caps on NBKR notes, lengthening maturities of monetary policy instruments, and enhancing liquidity management. - Curb subsidized lending through state-owned banks. - Support for NBKR decision to discontinue purchases of domestic gold to prevent further liquidity injections, and to convert part of its non-monetary gold to monetary gold to enhance international reserves. ### 17. The External Sector Assessment (ESA) suggests that the external position of the Kyrgyz ### The External Sector Assessment and Policy Priorities for the Kyrgyz Republic (excerpts) ### External position and reserves - ESA finding: external position in 2024 "remained substantially weaker than the level implied by medium-term fundamentals and desirable policies." - After adjusting the current account (CA) deficit for unrecorded re-exports, the som was overvalued by 9.9 percent. - Exchange rate movements in 2024: - Som appreciated by 2.4 percent against the US dollar in nominal terms. - Som appreciated by 6.0 percent in real effective terms. - NBKR foreign-exchange operations in 2024: - Purchased about US$370 million during the first three quarters of 2024. - Sold US$676 million in the last quarter of 2024. - Reserve levels and projections: - Reserves reached 4.3 months of imports in 2024. - Reserve adequacy benchmark for credit-constrained economies: 4.5 months of prospective imports. - Reserves are projected to decline gradually to 2.7 months by 2030 due to overall BoP deficits and rising imports. - Conversion of the remaining US$700 million worth of non-monetary gold to monetary gold or to FX would bolster reserves by 0.7 months of imports. - Gold currently represents around 70 percent of total reserves; staff cautioned on exposure to gold price volatility. - Capital flow management measure (CFM): - Restrictions on exports of cash US dollars introduced in January 2023 constitute an outflow CFM under the Institutional View; staff recommended removal. - CFM details in effect (as introduced): limits of US$5,000 for non-residents/foreign citizens and US$10,000 for residents/Kyrgyz citizens; a charge of 10 percent applied to amounts above the US$10,000 limit. In August 2024 the restrictions were eased for commercial banks, exchange offices, microfinance and microcredit companies licensed by the NBRK to transact in foreign exchange cash. - Recommendation: Greater exchange rate flexibility would further strengthen external buffers. ### NBKR governance and monetary policy - Governance developments welcomed: sale of Keremet Bank, efforts to phase out NBKR ownership in the Guarantee Fund, full repayment of NBKR loan by the Russian-Kyrgyz Development Fund. - Remaining Safeguards Assessment recommendations to implement, including introduction of a non-executive majority to the NBKR’s board and the audit committee. - Concern: repeated transfers of NBKR profits to the budget while NBKR capital remains below the statutory threshold constitute fiscal dominance, weaken credibility, unduly increase liquidity, and add to inflation pressures. - Staff recommendations: - Discontinue routine transfers of NBKR profits to the budget until capital reaches the statutory threshold. - Discontinue domestic gold purchases by the NBKR. - Enhance monetary policy effectiveness by lifting interest rate caps, extending instrument maturities, phasing out subsidized lending, and enhancing exchange rate flexibility. - Strengthen NBKR autonomy and governance to safeguard price and financial stability. ### Digital assets and financial integrity - Authorities’ legislative initiatives on digital assets require further scrutiny. - Potential benefits: a digital som could enhance payment efficiency and financial inclusion. - Risks highlighted: - Impacts on financial stability, integrity, monetary policy, and the banking system. - Trading in crypto assets and establishment of crypto banks could create systemic vulnerabilities due to volatility, ML/TF and fraud risks. - Granting legal tender status to crypto assets should be avoided to safeguard monetary sovereignty and stability and ensure consumer protection. - Regulatory design recommendations: - Design digital som to encourage use primarily as a means of payment, backed by clear legal and regulatory framework, robust cybersecurity measures, AML/CFT controls and international cooperation. - Integrate FATF and Basel Committee on Banking Supervision standards for crypto assets, including risk-based capital charges, robust risk management, and clear categorization and reporting of crypto assets. - The mission offered Fund technical assistance on crypto assets. ### Financial sector risks and supervision - Systemic risks are contained but supervisory vigilance warranted given heightened uncertainty. - Key indicators: - Nonperforming loans (NPLs) remain elevated at over 10 percent of total loans. - Credit grew by 34 percent in 2024 despite high interest rates. - Consumer loans rose from 11 percent of total loans in 2020 to 27 percent by end-2024; 68 percent of consumer loans classified as long-term. - The credit gap is negative but on an upward trajectory with a shift toward debt-driven consumption. - Staff advice and recommended measures: - Consider proactive macroprudential measures: build countercyclical capital buffers, impose limits on loan-to-value ratios, enhance liquidity requirements. - Align capital markets legislation with international standards and clearly define roles of Central Security Depositories, custodians, registrars, and settlement agents. - Sanctions assessment: initial assessment of recent US sanctions on one commercial bank suggests limited, bank-specific impact on the sector. ### Structural reforms and governance - Governance and institutional performance: - Kyrgyz Republic scores below peers on most World Governance Indicators, especially Control of Corruption, Rule of Law, and Government Efficiency; ratings worsened since 2021 on almost all WGIs. - Potential gains from reforms: - Reforms estimated to raise growth potential by about 2.5 percentage points per year. - Key reform priorities: - Improve governance and SOE management, strengthen competition, reform electricity sector, bolster labor markets. - Modernize anti-corruption legislation; enhance income and asset disclosure; improve public procurement transparency and SOE management; develop digital governance; strengthen rule of law; reduce administrative barriers for businesses. - SOE strategy: develop comprehensive ownership and management strategy, improve corporate governance, oversight, reporting and disclosure; divest non-strategic commercial SOEs through open and transparent privatization. - Labor market specifics: - Labor force participation: 45 percent of working-age women employed versus 70 percent for men. - Boosting female employment by 10 percent could unlock an additional 4-5 percent in GDP growth by 2050. - Recommended reforms: increase labor market flexibility, strengthen social safety nets, expand active labor market programs, improve education to address skills gaps and reduce emigration. - Climate and green agenda: - National commitments: reduce emissions by 15.97 percent unconditionally and by 43.62 percent conditional on external financing by 2030. - National Green Economy Program for 2025-28 priorities: enhance energy efficiency, improve mineral resource management, increase hydropower capacity, promote low carbon transportation, sustainable agriculture, tourism, water and waste management. - Financing secured: US$50 million from the Asia Development Bank and the Green Climate Fund; authorities seeking more development partner support. ### Data adequacy - Overall: data quality has shortcomings but is broadly adequate for surveillance. - Main challenge: exceptionally high errors and omissions in the balance of payments. - Staff recommendations: - Explore alternative data sources, including mirror trade statistics, banking and fiscal data. - Improve national accounts to reduce revision frequency; develop and publish discrete quarterly GDP estimates with CCAMTAC support. - STA technical assistance to address public debt statistics discrepancies from cash versus accrual accounting. ### Staff appraisal and macro-fiscal outlook - Recent resilience: economy sustained robust growth supported by expansion of external trade, remittances and labor, and resilient domestic demand; inflation moderated to mid-single digits but demand pressures persist. - Growth outlook: - Projected to converge to its potential rate of 5¼ percent in the medium term. - Outlook highly uncertain and sensitive to regional geopolitical developments (e.g., further escalation of sanctions on Russia could weaken remittances and growth; lasting peace could have opposite but complex effects). - Fiscal policy: - Strong revenue performance and prudent stance contained public debt. - Recommendations to strengthen fiscal sustainability and create space for priority investment: reduce tax exemptions and special regimes, increase progressivity of Personal Income Tax, strengthen revenue administration, contain public wage bill and energy subsidies, channel Kumtor profits to the budget, privatize nonstrategic commercial SOEs. - Monetary policy recommendations reiterated: - Preserve monetary policy independence to contain inflation. - Tighten interest rates and liquidity conditions if inflation pressures persist. - Support discontinuation of domestic gold purchases and halt NBKR profit transfers to the budget until capital reaches statutory threshold. - Overall medium-term priority: rebuild policy buffers, strengthen resilience to shocks, and implement structural reforms to enhance higher and more inclusive growth. *Source: IMF staff assessment and mission findings as presented in the provided content unit.* ### 34. Staff recommends that the next Article IV consultation is held on a standard 12-month ### 34. Staff recommends that the next Article IV consultation is held on a standard 12-month cycle. ### Real sector and social indicators - Growth outpaced comparators for the past 3 years thanks to trade and construction. - Inflation dynamics: - "Inflation eased, but food prices are rising threatening recent poverty reduction." - Income and inequality: - "Per capita income rose sharply since 2021... but income inequality remains significant." - Selected headline statistics (as reported): - Population (in millions, 2023): 7.2 - GINI Index (2022): 0.26 - Unemployment rate (ILO, in percent, 2023): 4.1 - Life expectancy at birth in years (2022): 72.1 - Poverty rate (in percent, national definition, 2023): 29.7 - Adult literacy rate (percent of popul., 2019): 100 - Per capita GDP (World Bank, in million U.S. dollars, 2023): 1,970 - Under-five mortality (per 1000 live births, 2022): 17.3 ### External and monetary sectors - External accounts: - "External accounts are undermined by large errors and omissions... offsetting the sizable CA deficit." - Conversion of non-monetary gold to monetary gold boosted international reserves. - Exchange rate, interest rates, and monetary aggregates: - "The exchange rate appreciated in real effective terms..." - "while interest rates declined... and money and credit increased" - Selected external and monetary figures (Table 1, Table 3, Table 4, Table 5): - Nominal GDP (in billions of soms): - 2023: 1,334 - 2024: 1,523 - 2025: 1,763 - 2026: 1,963 - 2027: 2,185 - 2028: 2,416 - 2029: 2,675 - 2030: 2,958 - Nominal GDP (in millions of U.S. dollars): - 2023: 15,148 - 2024: 17,722 - 2025: 19,849 - 2026: 21,222 - 2027: 22,807 - 2028: 24,427 - 2029: 26,202 - 2030: 28,068 - Real GDP (growth in percent): - 2023: 9.0 - 2024: 9.0 - 2025: 6.8 - 2026: 5.3 - 2027: 5.8 - 2028: 5.3 - 2029: 5.4 - 2030: 5.3 - Nongold real GDP (growth in percent): - 2023: 11.0 - 2024: 10.3 - 2025: 6.9 - 2026: 5.3 - 2027: 5.8 - 2028: 5.3 - 2029: 5.3 - 2030: 5.3 - Consumer prices (12-month percent change, eop): - 2023: 7.3 - 2024: 6.3 - 2025: 6.0 - 2026: 5.5 - 2027: 5.0 - 2028: 5.0 - 2029: 5.0 - 2030: 5.0 - Current account balance (in percent of GDP): - 2023: -45.0 - 2024: -30.7 - 2025: -8.5 - 2026: -7.5 - 2027: -8.5 - 2028: -7.3 - 2029: -7.0 - 2030: -6.4 - Exports of goods and services (in millions of U.S. dollars): - 2023: 5,522 - 2024: 9,130 - 2025: 12,667 - 2026: 12,990 - 2027: 13,230 - 2028: 14,002 - 2029: 14,462 - 2030: 15,085 - Imports of goods and services (in millions of U.S. dollars): - 2023: 14,461 - 2024: 17,244 - 2025: 17,315 - 2026: 17,774 - 2027: 18,618 - 2028: 19,578 - 2029: 20,142 - 2030: 21,049 - Gross International reserves (in millions of U.S. dollars) 5/: - 2023: 3,044 - 2024: 4,684 - 2025: 4,597 - 2026: 4,535 - 2027: 4,482 - 2028: 4,437 - 2029: 4,393 - 2030: 4,358 - Gross reserves (months of next year imports, eop): - 2023: 2.1 - 2024: 3.2 - 2025: 3.1 - 2026: 2.9 - 2027: 2.7 - 2028: 2.6 - 2029: 2.5 - 2030: 2.3 - Policy Rate: - 2023: 13.0 - 2024: 9.0 - 2025–2030: "..." (not specified in the table) - NBKR Accounts (selected): - Reserve money (in millions of soms): - 2023: 249,946 - 2024: 293,647 - 2025: 329,130 - 2026: 367,179 - Exchange rate, som per U.S. dollar, end of period: - 2023: 89.1 - 2024: 87.0 - 2025: 90.7 - 2026: 94 ### Fiscal sector and public finances - Fiscal posture and dynamics: - "VAT on imports is ebbing but revenue remains strong, while expenditure is contained." - "Current and capital expenditure stabilized.... and the wage bill declined, but remains comparatively high." - "Despite the fiscal surplus, below-the-line spending is driving financing needs." - "Total public debt continued to decline thanks to fiscal discipline and strong nominal GDP growth." - General government headline ratios (Table 1, Table 6, Table 7, Table 8, Table 9): - Revenue (in percent of GDP): - 2023: 34.5 - 2024: 35.6 - 2025: 32.1 - 2026: 31.8 - 2027: 31.4 - 2028: 31.4 - 2029: 31.1 - 2030: 30.8 - Expense (in percent of GDP): - 2023: 26.1 - 2024: 26.6 - 2025: 26.8 - 2026: 26.8 - 2027: 26.8 - 2028: 26.9 - 2029: 26.9 - 2030: 26.8 - Overall balance (net lending/borrowing) (in percent of GDP): - 2023: 1.6 - 2024: 1.9 - 2025: -3.4 - 2026: -2.8 - 2027: -3.2 - 2028: -3.3 - 2029: -2.6 - 2030: -3.0 - Total state government debt (in percent of GDP): - 2023: 42.0 - 2024: 36.6 - 2025: 38.5 - 2026: 39.5 - 2027: 40.3 - 2028: 41.2 - 2029: 41.3 - 2030: 41.9 - Interest payments and financing fees (in millions of soms, Table 6): - 2023: 14,071 - 2024: 18,385 - 2025: 23,585 - 2026: 29,556 - 2027: 38,602 - 2028: 48,644 - 2029: 58,958 - 2030: 68,281 - Major capital projects noted: - Kambarata HPP-1 (spending schedule displayed across tables) - CKU railway (noted as large below-the-line and PIP item) - Energy Program (large entries in specific years) ### Financial soundness and banking sector - Summary of indicators and trends (Figure 4, Table 10): - "Kyrgyz banks remain well capitalized... and liquid." - "Profitability remained strong ... but NPLs remain high." - "Key indicators of banking income remained stable ... while FX exposure stayed at a 10-year low." - Selected financial soundness indicators (Dec-20 to Dec-24, Table 10): - Regulatory capital to risk weighted assets: - Dec-20: 24.9 - Dec-21: 22.2 - Dec-22: 25.6 - Dec-23: 24.8 - Dec-24: 22.0 - Tier 1 capital to risk weighted assets: - Dec-20: 21.6 - Dec-21: 19.2 - Dec-22: 19.2 - Dec-23: 20.3 - Dec-24: 17.4 - Nonperforming loans/total loans: - Dec-20: 10.5 - Dec-21: 11.1 - Dec-22: 12.8 - Dec-23: 9.2 - Dec-24: 10.8 - Loan-loss provisioning/nonperforming loans: - Dec-20: 58.9 - Dec-21: 63.2 - Dec-22: 67.1 - Dec-23: 67.6 - Dec-24: 45.9 - Return on equity: - Dec-20: 5.5 - Dec-21: 7.8 - Dec-22: 43.4 - Dec-23: 32.4 - Dec-24: 32.5 - Liquidity ratio: - Dec-20: 64.9 - Dec-21: 71.3 - Dec-22: 82.8 - Dec-23: 77.4 - Dec-24: 73.1 - Share of foreign currency deposits in total deposits 1/: - Dec-20: 43.4 - Dec-21: 42.2 - Dec-22: 48.3 - Dec-23: 49.3 - Dec-24: 45.7 - Share of foreign currency loans in total loans: - Dec-20: 33.0 - Dec-21: 28.0 - Dec-22: 23.6 - Dec-23: 22.1 - Dec-24: 20.1 ### Projections, risks, and fiscal/monetary interactions - Growth and inflation: - Real GDP growth projected to moderate from 9.0 percent in 2024 to 6.8 percent in 2025 and settle around 5.3–5.8 percent thereafter. - Consumer prices (eop) projected to slow to 5.0 percent by 2027–2030. - External position and reserves: - Current account deficits are projected to narrow substantially from -30.7 percent of GDP in 2024 to around -8.5 percent of GDP in 2025 and remain in the -7.3 to -6.4 percent range through 2030. - Gross international reserves rise from $3,044 million in 2023 to $4,684 million in 2024, then modestly decline toward $4,358 million by 2030. - Fiscal balance and public debt: - General government overall balance shifts from small surpluses in 2023–2024 to deficits in projection years (e.g., -3.4 percent of GDP in 2025). - Total state government debt trend: - Declines from 42.0 percent of GDP in 2023 to 36.6 percent in 2024, then rises gradually to 41.9 percent by 2030. - Monetary and credit dynamics: - Broad money (M2X) growth: - 2023: 15.0 percent - 2024: 31.9 percent - 2025: 14.9 percent - 2026: 12.0 percent - Credit to private sector (12-month percent change): - 2023: 25.9 - 2024: 33.9 - 2025: 15.3 - 2026: 13.0 *Source: Kyrgyz authorities and IMF staff estimates and projections.* ### Annex I. Risk Assessment Matrix ### Annex I. Risk Assessment Matrix ### Conjunctural risks - Trade policy and investment shocks - Likelihood / Timeframe: High / Medium - Description: Higher trade barriers or sanctions reduce external trade, disrupt FDI and supply chains, and trigger further U.S. dollar appreciation, tighter financial conditions, and higher inflation. - Possible Impact / Transmission Channels: The Kyrgyz Republic’s relatively limited integration into the global economy dampens the likely impact of trade policy and investment shocks. - Policy Advice: - Allow for more exchange rate flexibility and recalibrate monetary policy to respond to possible inflation pressures. - Provide targeted support and safety nets to the most vulnerable, while creating additional fiscal space by reducing universal subsidies, eliminating inefficient tax exemptions, and seeking external concessional financing. - Enhance oversight of the financial and banking systems, including crypto-based payments and assets. - Sovereign debt distress - Likelihood / Timeframe: High / Medium - Description: Higher interest rates, stronger U.S. dollar, and shrinking development aid amplified by sovereign-bank feedback result in capital outflows, rising risk premia, loss of market access, abrupt expenditure cuts, and lower growth in highly indebted countries. - Possible Impact / Transmission Channels: High global interest rates would increase the cost of the planned external borrowing, including a Eurobond, and the interest bill, and negatively impact public debt. - Policy Advice: - Increase fiscal space by strengthening tax policy and administration, and reducing energy subsidies and the public wage bill. - Accelerate structural reforms to support private sector-led growth. - Tighter financial conditions and systemic instability - Likelihood / Timeframe: Medium / Medium - Description: Higher-for-longer interest rates and term premia amid looser financial regulation, rising investments in cryptocurrencies, and higher trade barriers trigger asset repricing, market dislocations, weak bank and NBFI distress, and further U.S. dollar appreciation, which widens global imbalances, worsens debt affordability, and increases capital outflow from EMDEs. - Possible Impact / Transmission Channels: The limited integration of the Kyrgyz banking system in international financial markets would contain the impact, but a growth slowdown could weaken banks’ asset quality. - Policy Advice: - Maintain supervisory vigilance and closely monitor banks' balance sheets. - Calibrate stress tests to reflect such a risk. - Regional conflicts - Likelihood / Timeframe: Medium / Medium - Description: Intensification of conflicts (e.g., in the Middle East, Ukraine, Sahel, and East Africa) or terrorism disrupt trade in energy and food, tourism, supply chains, remittances, FDI and financial flows, payment systems, and increase refugee flows. - Possible Impact / Transmission Channels: A reversal of trade flows and a stronger contraction of the Russian economy could result in lower growth and remittances, trade disruptions, and a possible return of migrant workers; reduction in disposable incomes could increase poverty and add to social pressures. - Policy Advice: - Allow for more exchange rate flexibility and recalibrate monetary policy to respond to possible inflation pressures. - Provide targeted support and safety nets to the most vulnerable, while creating additional fiscal space by reducing universal subsidies, eliminating inefficient tax exemptions, and seeking external concessional financing. - Commodity price volatility - Likelihood / Timeframe: Medium / Medium - Description: Supply and demand volatility (due to conflicts, trade restrictions, OPEC+ decisions, AE energy policies, or green transition) increases commodity price volatility, external and fiscal pressures, social discontent, and economic instability. - Possible Impact / Transmission Channels: Higher food and energy prices would increase inflationary pressures, weaken the CA and the exchange rate, lead to food and energy insecurity, and cause social discontent. Depreciation would increase public debt. Higher gold prices would strengthen the current account. - Policy Advice: - Allow for more exchange rate flexibility and adequately recalibrate monetary policy to contain second round inflation. - Provide targeted social assistance to the poor, while seeking external concessional financing. - Global growth acceleration - Likelihood / Timeframe: Low / Medium - Description: Easing of conflicts, positive supply-side surprises (e.g., oil production shocks), productivity gains from AI, or structural reforms raise global demand and trade. - Possible Impact / Transmission Channels: Ending of war in Ukraine could strengthen the ruble and growth in Russia resulting in higher demand for Kyrgyz workers and tighter labor markets but higher remittances, wages, and inflationary pressures. Easing of sanctions on Russia, however, could also unwind some trade flows and reduce growth. - Policy Advice: - Allow for more exchange rate flexibility and adequately recalibrate monetary policy to contain second round inflation. - Provide targeted support and safety nets to the most vulnerable, while creating additional fiscal space by reducing universal subsidies, eliminating inefficient tax exemptions, and seeking external concessional financing. ### Structural risks - Deepening geoeconomic fragmentation - Likelihood / Timeframe: High / Medium - Description: Persistent conflicts, inward-oriented policies, protectionism, weaker international cooperation, labor mobility curbs, and fracturing technological and payments systems lead to higher input costs, hinder green transition, and lower trade and potential growth. - Possible Impact / Transmission Channels: A stronger contraction of the Russian economy and the weakening of the ruble could result in lower remittances, growth and tax revenue. - Policy Advice: - Allow for more exchange rate flexibility and recalibrate monetary policy to contain possible inflation pressures. - Provide targeted support to the most vulnerable, while creating additional fiscal space by reducing universal subsidies, eliminating inefficient tax exemptions, and seeking external concessional financing. - Enhance oversight of the financial system and mitigate risks to the banking sector. - Cyberthreats - Likelihood / Timeframe: High / Medium - Description: Cyberattacks on physical or digital infrastructure (including digital currency and crypto assets), technical failures, or misuse of AI technologies trigger financial and economic instability. - Possible Impact / Transmission Channels: Cyberattacks could disrupt the payment system, which relies on electronic means. - Policy Advice: - Enhance cybersecurity. - Climate change - Likelihood / Timeframe: Medium / Medium - Description: Extreme climate events driven by rising temperatures cause loss of life, damage to infrastructure, food insecurity, supply disruptions, lower growth, and financial instability. - Possible Impact / Transmission Channels: The Kyrgyz Republic could face escalating natural disasters such as droughts, heatwaves, floods, mudflows, and landslides, causing land degradation, air pollution, infrastructure damage, and loss of life. - Policy Advice: - Implement policies to advance the green transformation, including by fostering mitigation and adaptation. Build fiscal buffers if needed to facilitate the transition. - Social discontent - Likelihood / Timeframe: Medium / Medium - Description: Real income loss, spillovers from conflicts, dissatisfaction with migration, and worsening inequality ignite social unrest, populism, polarization, and resistance to reforms or suboptimal policies. This weakens growth and leads to policy uncertainty and market repricing. - Possible Impact / Transmission Channels: A significant reduction in remittances and incomes combined with high inflation would further increase poverty, result in social discontent, higher country risk and lower investment and growth. - Policy Advice: - Allow for more exchange rate flexibility and adequately recalibrate monetary policy to contain inflation. - Provide targeted support and safety nets to the most vulnerable, while creating additional fiscal space by reducing universal subsidies, eliminating inefficient tax exemptions, and seeking external concessional financing. - Accelerate reforms to support private sector-led growth. - RAM methodological note: - The Risk Assessment Matrix (RAM) shows events that could materially alter the baseline path (the scenario most likely to materialize in the view of IMF staff). - Likelihood definitions: "low" = probability below 10 percent; "medium" = probability between 10 and 30 percent; "high" = probability between 30 and 50 percent. - The RAM reflects staff views on the source of risks and the overall level of concern at the time of discussions with the authorities. Non-mutually exclusive risks may interact and materialize jointly. “Short-term” and “medium-term” indicate that the risk could materialize within one year and three years, respectively. *Source: Annex I. Risk Assessment Matrix (February 2025).* ### Annex III. Estimating Debt Limits ### Annex III. Estimating Debt Limits ### Introduction - Purpose: Estimate borrowing capacity via a maximum sustainable debt level (MSDL) — a maximum debt level that can be sustained economically and politically over long periods. - Key determinants: macroeconomic and fiscal factors; lower interest rate-growth differential enhances borrowing capacity; market perceptions can influence borrowing costs and financing availability. - Role: MSDL assessment complements standard debt sustainability analysis, enhancing policy credibility and fiscal resilience. - Scope: MSDL estimated for the Kyrgyz Republic using two methodologies: (1) interest payment capacity threshold and (2) an approach that endogenizes borrowing costs relative to debt levels. ### The Evolution of Public Debt - Public debt trajectory: - Public debt decreased to 36.6 percent of GDP in 2024 from 63.6 percent of GDP in 2020. - External public debt fell from 54.4 percent to 26.6 percent of GDP over the same period. - Domestic debt remained relatively stable at around 10 percent of GDP. - Drivers of decline: strong GDP growth since 2022, repayment of matured debt, and limited fiscal imbalances. - Near-term financing outlook (2025–2030): - Gross financing needs will average 6.2 percent of GDP annually. - Two-thirds of those needs are projected to be funded by external borrowing. - 2 percent of GDP annually projected to be financed through domestic borrowing from local banks. - Risks from financing composition: - Shift toward higher domestic borrowing, reduced concessionality, and shorter maturities will significantly increase the public debt stock and debt service obligations as domestic markets deepen and international donor support declines. ### Estimating Debt Limit: Interest Payment Capacity Threshold - Methodology: Follows Comelli and others (2023) — derives debt limit from the condition that interest payments as a fraction of revenue should not exceed a critical threshold beyond which fiscal stress becomes highly probable. - Empirical threshold: interest payments as share of revenue empirically range between 16 and 19 percent, beyond which fiscal distress risk increases significantly. - Country-specific calibration and results: - Assumptions used for one scenario: fiscal distress threshold of 19 percent; maximum sustainable revenue of 35 percent of GDP (based on historical measure); interest rate of 11 percent. - Resulting MSDL: 60 percent of GDP (Table 1, Row 1). - Table 1 (as presented): - Interest rates (percent) 11; Revenue (percent of GDP) 35; Debt limit (percent of GDP) 60 - Interest rates (percent) 11; Revenue (percent of GDP) 36; Debt limit (percent of GDP) 62 - Interest rates (percent) 12; Revenue (percent of GDP) 35; Debt limit (percent of GDP) 55 - Sensitivities highlighted: - A 1 percentage points increase in the revenue-to-GDP ratio boosts the MSDL by about 2 percent of GDP (Table 1, Row 2). - A 1 percentage point rise in borrowing costs reduces the MSDL by 5 percent of GDP (Table 1, Row 3). - Caveats: - The approach assumes constant interest rates and focuses solely on revenue; it omits endogeneity of interest rates with debt and does not consider non-interest expenditures (public wages, goods and services, investment, subsidies). - Note on interest-rate inputs (from footnote): - Domestic treasury bond yields in 2023: 8.5 percent for 3–24 month maturity, 16 percent for 2-10 year maturity, and 15.3 percent for 10 year maturity. - No Eurobond issued yet; estimated Eurobond yield based on 5-year US-Treasury and estimated credit spread is 9 percent (IMF, 2024). - The average rate over these rates is 11 percent. ### Estimating Debt Limit: Endogenous Response of Interest Rate to Debt - Framework: Incorporates endogenous relationship between debt and borrowing costs (IMF, 2023); defines MSDL as the level of debt consistent with a primary surplus that is economically and politically feasible to maintain over the long term. - Calibration and baseline inputs: - Initial debt of 40 percent of GDP (reflecting projected debt over the medium term). - Initial interest rate of 11 percent. - Nominal potential growth of 10.3 percent (with 5.3 percent of real growth and 5 percent inflation rate). - Elasticity of interest rate to debt of 0.015 (as in Mian and others (2022)). - Model outcomes: - The model indicates a sustainable debt level around 50 percent of GDP for the Kyrgyz Republic. - For a primary surplus of 0.5 percent of GDP, the upper bound of the MSDL is about 50 percent of GDP. - For a primary surplus of 1 percent of GDP, the debt limit would increase to 60 percent of GDP. - Risks and additional factors: - Debt beyond the modeled MSDL (~50 percent of GDP for base calibration) indicates risk of triggering a change of market perception on the “safe asset” status of government bonds. - The model does not account for stock-flow adjustments (SFA); positive SFA requires higher surpluses to stabilize debt. - Historical SFA: average annual SFA for the Kyrgyz Republic is approximately 2 percent of GDP over the 2001-24 period, largely due to supports to SOEs. - Implication: a 2 percent of GDP SFA would require a primary balance of 2.5 percent of GDP, rather than 0.5 percent of GDP, to stabilize debt at 50 percent of GDP over the long term. ### Conclusions and Recommendations - MSDL estimates: empirical estimates suggest the maximum sustainable debt level for the Kyrgyz Republic ranges between 50 and 60 percent of GDP. - Context and risk assessment: - These estimates depend on macroeconomic assumptions but provide an indicative measure of fiscal space. - Estimates from the two methodologies are broadly consistent. - Current debt is below 40 percent of GDP and most loans are on concessional terms, indicating ample fiscal space under baseline assumptions. - Under an adverse growth scenario, debt is projected to exceed 50 percent of GDP in the medium to long term, indicating fiscal risks. - These findings align with the DSA for the Kyrgyz Republic, which finds public debt as sustainable with moderate risks of debt distress. - Policy recommendations: - Strengthen tax administration and broaden the revenue base. - Improve expenditure efficiency. - Diversify financing sources. - Enhance investor confidence and foster macroeconomic stability to reduce borrowing costs and improve debt dynamics. - Improve profitability of SOEs, particularly in the energy sector, to address debt-contributing stock-flow adjustments. - Fiscal anchor advice: - Anchor debt at a level lower than the MSDL to establish a safety buffer; in many countries the buffer typically amounts to around 10 percent of GDP. - Further analysis is advised to estimate an appropriate safe buffer that balances debt sustainability and economic growth. *Source: Annex III. Estimating Debt Limits (Kyrgyz Republic), IMF staff analysis and estimates.* ### Annex V. Data Issues ### Annex V. Data Issues ### Data Adequacy and Dissemination (Table summaries) - Table 1–3 cover: Data Adequacy Assessment for Surveillance; Data Standards Initiatives; Table of Common Indicators Required for Surveillance (As of April 10, 2025). - Table of Common Indicators (selected entries and latest observations as reported): - Exchange Rates: Date of Latest Observation 4/11/2025; Date Received 4/11/2025; Frequency D; Frequency of Reporting D; Expected Frequency D; Expected Timeliness ...; Kyrgyz Republic entry D. - International Reserve Assets and Reserve Liabilities of the Monetary Authorities: Date of Latest Observation Mar 2025; Date Received 4/08/2025; Frequency M; Frequency of Reporting Q; Expected Frequency M; Expected Timeliness M; Kyrgyz Republic expected timeliness 1W; Kyrgyz Republic 1M. - Reserve/Base Money: Date of Latest Observation Mar 2025; Date Received 4/08/2025; Frequency M; Frequency of Reporting Q; Expected Frequency M; Expected Timeliness M; Kyrgyz Republic expected timeliness 2W; Kyrgyz Republic NLT 5D. - Broad Money: Date of Latest Observation Feb 2025; Date Received 3/14/2025; Frequency M; Frequency of Reporting Q; Expected Frequency M; Expected Timeliness M; Kyrgyz Republic expected timeliness 1M; Kyrgyz Republic 3W. - Central Bank Balance Sheet: Date of Latest Observation Feb 2025; Date Received 3/11/2025; Frequency M; Frequency of Reporting Q; Expected Frequency M; Expected Timeliness M; Kyrgyz Republic expected timeliness 2W; Kyrgyz Republic NLT 5D. - Consolidated Balance Sheet of the Banking System: Date of Latest Observation Mar 2025; Date Received 4/08/2025; Frequency M; Frequency of Reporting Q; Expected Frequency M; Expected Timeliness M; Kyrgyz Republic expected timeliness 1M; Kyrgyz Republic 3W. - Interest Rates: Date of Latest Observation Mar 2025; Date Received 4/08/2025; Frequency M; Frequency of Reporting M; Expected Frequency D; Expected Timeliness W; Kyrgyz Republic expected timeliness ...; Kyrgyz Republic 1D. - Consumer Price Index: Date of Latest Observation Feb 2025; Date Received 3/12/2025; Frequency M; Frequency of Reporting M; Expected Frequency M; Expected Timeliness M; Kyrgyz Republic expected timeliness 1M; Kyrgyz Republic 2W. - Revenue, Expenditure, Balance and Composition of Financing – General Government: Date of Latest Observation Jan 2025; Date Received 2/25/2025; Frequency M; Frequency of Reporting M; Expected Frequency A; Expected Timeliness A; Kyrgyz Republic expected timeliness 2Q; Kyrgyz Republic 5M. - Revenue, Expenditure, Balance and Composition of Financing – Central Government: Date of Latest Observation Jan 2025; Date Received 2/25/2025; Frequency M; Frequency of Reporting M; Expected Frequency M; Expected Timeliness M; Kyrgyz Republic expected timeliness 1M; Kyrgyz Republic 20D. - Stocks of Central Government and Central Government-Guaranteed Debt: Date of Latest Observation Q4 2024; Date Received 2/25/2025; Frequency Q; Frequency of Reporting Q; Expected Frequency Q; Expected Timeliness Q; Kyrgyz Republic expected timeliness 1Q; Kyrgyz Republic 40D. - External Current Account Balance: Date of Latest Observation Q3 2024; Date Received 1/31/2025; Frequency Q; Frequency of Reporting Q; Expected Frequency Q; Expected Timeliness Q; Kyrgyz Republic expected timeliness 1Q; Kyrgyz Republic 3M. - Exports and Imports of Goods and Services: Date of Latest Observation Q3 2024; Date Received 1/31/2025; Frequency Q; Frequency of Reporting Q; Expected Frequency M; Expected Timeliness M; Kyrgyz Republic expected timeliness 8W; Kyrgyz Republic 47D. - GDP/GNP: Date of Latest Observation Jan 2025; Date Received 10/2/2025; Frequency M; Frequency of Reporting M; Expected Frequency Q; Expected Timeliness Q; Kyrgyz Republic expected timeliness 1Q; Kyrgyz Republic 90D. - Gross External Debt: Date of Latest Observation Q4 2024; Date Received 3/27/2025; Frequency Q; Frequency of Reporting Q; Expected Frequency Q; Expected Timeliness Q; Kyrgyz Republic expected timeliness 1Q; Kyrgyz Republic Q. - International Investment Position: Date of Latest Observation Q3 2024; Date Received 1/31/2025; Frequency Q; Frequency of Reporting Q; Expected Frequency Q; Expected Timeliness Q; Kyrgyz Republic expected timeliness 1Q; Kyrgyz Republic 90D. - Notes and definitions included in the table: - 1 Includes reserve assets pledged or otherwise encumbered, as well as net derivative positions. - 2 Both market-based and officially determined, including discount rates, money market rates, rates on treasury bills, notes and bonds. - 3 Foreign, domestic bank, and domestic nonbank financing. - 4 The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments. - 5 Including currency and maturity composition. - 6 Frequency and timeliness codes: (“D”) daily; (“W”) weekly or with a lag of no more than one week after the reference date; (“M”) monthly or with lag of no more than one month after the reference date; (“Q”) quarterly or with lag of no more than one quarter after the reference date; (“A”) annual.; ("SA") semiannual; ("I") irregular; ("NA") not available or not applicable; and ("NLT") not later than. - 7 Encouraged frequency/timeliness under e-GDDS and required frequency/timeliness under SDDS and SDDS Plus; flexibility options or transition plans under SDDS/SDDS Plus are not reflected. - 8 Entries for the Kyrgyz Republic are based on information from the Summary of Observance for SDDS and SDDS Plus participants, and the Summary of Dissemination Practices for e-GDDS participants. For non-participants or those without a National Data Summary Page, entries are shown as "..." ### Relations with the Fund (as of March 31, 2025) - Membership Status: Joined: May 8, 1992; Article VIII. - General Resources Account: - Quota 177.60 SDR million; Percent of Quota 100.00. - Fund Holdings of Currency (Exchange Rate) 184.68 SDR million; Percent of Quota 103.98. - Reserve Tranche Position 0.49 SDR million; Percent of Quota 0.27. - SDR Department: - Net Cumulative Allocation 254.96 SDR million; Percent Allocation 100.00. - Holdings 158.20 SDR million; Percent Allocation 62.05. - Outstanding Purchases and Loans (SDR million; Percent of Quota): - Emergency Assistance (including ENDA, EPCA, and RFI) RCF Loans 7.40 SDR million; 4.17 percent of quota. - 59.20 SDR million; 33.33 percent of quota. - ECF Arrangements 20.93 SDR million; 11.79 percent of quota. - Latest Financial Arrangements (listed with dates, type, amounts approved and drawn): - ECF: Date of Expiration April 8, 2015; Date April 7,2018; Amount Approved (SDR million) 66.60; Amount Drawn (SDR million) 57.08. - ECF: June 20, 2011 – July 7, 2014; Amount Approved 66.60; Amount Drawn 66.60. - ESF: December 10, 2008 – June 9, 2010; Amount Approved 66.60; Amount Drawn 33.30. - Outright Loans: - RFI: Date of Expiration May 08, 2020 – May 12, 2020; Amount Approved 59.20; Amount Drawn 59.20. - RCF: May 08, 2020 – May 12, 2020; Amount Approved 29.60; Amount Drawn 29.60. - RCF: Mar 26, 2020 – Mar 30, 2020; Amount Approved 29.60; Amount Drawn 29.60. ### Projected Payments to the Fund (SDR million; based on existing use of resources and present holdings of SDRs) - Principal (forthcoming): - 2025: 23.79 - 2026: 18.50 - 2027: 15.65 - 2028: 11.84 - 2029: 11.84 - Charges/Interest: - 2025: 2.33 - 2026: 2.99 - 2027: 2.99 - 2028: 2.99 - 2029: 2.99 - Total: - 2025: 26.12 - 2026: 21.49 - 2027: 18.64 - 2028: 14.83 - 2029: 14.83 ### Safeguards, Exchange Rate Arrangements, and Article IV - Safeguards Assessments: - An update assessment of the National Bank of the Kyrgyz Republic (NBKR) in connection with RFI/RCF disbursements (approved March and May 2020) was completed on January 13, 2021. - The assessment found shortcomings in the NBKR legal framework had not been addressed and recommended amendments to the NBKR law. - Parliament amended the NBKR law in 2022 but did not fully address the 2020 Safeguards Assessment recommendations. The amended law envisages proper recapitalization and profit distribution mechanisms but does not introduce a majority of non-executive members of the NBKR Board and the Audit Committee, nor provisions to wind down non-core central bank operations. - Laws passed by Parliament in each of the last four years suspended NBKR profit distribution provisions to allow transfers of NBKR’s profit to the budget even though NBKR capital fell below the statutory floor. - Exchange Rate Arrangements: - De jure exchange rate arrangement: floating arrangement. - NBKR intervenes in the interbank foreign exchange market to limit exchange rate volatility as necessary. - During 2024, flexibility of the exchange rate against the U.S. dollar increased in both directions. - De facto classification: “crawl-like” and unchanged since October 21, 2022. - NBKR publishes daily the exchange rate of the som in terms of the U.S. dollar, determined in the interbank foreign exchange market; the official exchange rate is calculated as the daily weighted average of transactions through the Automated Trading System (ATS) from 3:00 pm of the previous trading day to 3:00 pm of the current trading day and becomes effective from the next working day. - Government uses the official exchange rate for budget and tax accounting and for all payments between the government and enterprises and other legal entities. - Article VIII obligations accepted: Article VIII, Section 2(a), 3, and 4 of the IMF’s Articles of Agreement; maintains an exchange system free of multiple currency practices (MCPs) and restrictions on current international transactions, except for exchange restrictions for security reasons related to U.N. Security Council resolutions and a U.S. Secretary of State terrorist organizations list. Authorities notified these measures to the Fund in May 2007 pursuant to Executive Board decision No. 144-(52/51). - Article IV consultations: Kyrgyz Republic is on a 12-month consultation cycle. 2023 Article IV consultation discussions held in November 2023 and completed by the Executive Board in February 2024. ### Relations with Other International Institutions (selection) - Asian Development Bank: country page and projects information referenced. - European Bank for Reconstruction and Development: country page and projects referenced. - World Bank Group: country page and overview of lending referenced. ### Technical Assistance Provided by the Fund (January 2014 – March 2025) — selected entries - FAD (tax and public finance): multiple missions including Tax Administration Enforcement (January 8–22, 2014), Public Finance Management (May 2–13, 2014; December 5–18, 2014; April 23–May 7, 2015), Tax Policy (Impact of the Accession to the EEU) April 29–May 13, 2015, and Implementing the Results Based Budgeting June 22– July 5, 2022. - MCM (monetary and banking): Operational Advice on Improving the Monetary Policy Framework (February 3–14, 2014; April 20–28, 2015), Strengthening Near-Term Modeling and Forecasting Capacities (April 18–29, 2016), Monetary Policy and Inflation Targeting Framework (April 10–25, 2017), Inflation Targeting missions (2018, 2019, virtual 2020), Cyber Security (March 6–20, 2019), Enhancing Monetary Operations October 23 – November 3, 2023. - LEG / AML-CFT: multiple follow-up missions (February 2014; January 2015; June 2015; October–November 2015; January 2016; April 2016), AML/CFT legal drafting (February 2018; July 2018). - STA / Statistics: Price Statistics (March 31–April 11, 2014); External Sector Statistics (February 16–27, 2015; October 26–November 6, 2015; April 4–15, 2016; June 24-July 5, 2019); Monetary and Financial Statistics (April 15–28, 2015; April 13–26, 2016); Quarterly National Accounts and National Accounts EDDI2 missions between 2016 and 2025; Government Finance Statistics missions between 2016 and 2024. - Resident advisors listed for various periods (FD, MFD, MCM, MCD, LEG). ### Debt Sustainability Analysis (Staff assessment) - Staff assesses the Kyrgyz Republic’s public debt as sustainable with moderate risks of external and overall debt distress. - Under a standard shock to exports: - There is a breach of the relevant thresholds for all four external debt ratios for a sustained period. - Under a standard shock to growth: - There is a breach of the threshold for the PV of total debt to GDP. - Baseline projection: - PV of the stock of public debt rises to 39.7 percent of GDP by 2035, which is below its threshold, resulting in a moderate risk of total debt distress. - None of the external debt ratios breach their threshold under the baseline, leading to a moderate risk of external debt distress. - Staff judgment: - Because external debt burden indicators trend downward and breaches are limited, external and total public debt are judged to be sustainable. - Policy implications and recommendations (as stated): - Create fiscal space and contain debt vulnerabilities by improving tax collections. - Sustain efforts to reduce the wage bill and energy subsidies. - Strengthen debt management. - Seek concessional financing. - Improve public investment management. - Risk ratings and metadata: - Risk of external debt distress: Moderate. - Overall risk of debt distress: Moderate. - Granularity in the risk rating: Some space to absorb shocks. - Application of judgment: No. - Date: May 7, 2025. *Source: Annex V. Data Issues; staff report and informational annex materials as provided in the Kyrgyz Republic Staff Report for the 2025 Article IV Consultation (as compiled in the supplied PDF content).* ### 1. Public and Publicly Guaranteed (PPG) debt covers state government debt (both ### 1kgzea2025001-print-pdf - 1. Public and Publicly Guaranteed (PPG) debt covers state government debt (both ### PPG coverage and contingent liability assumptions - PPG debt covers central and local government, state guarantees, and the debt of the central bank to the IMF. - Almost all public sector debt is issued by the central government. - The part of the 2021 SDR allocation that has been drawn down is counted toward public debt. - Local governments have no external debt and insignificant domestic debt. - The social security fund has no debt. - SOEs mostly borrow from the government and have no external debt by law; short-term domestic borrowing from the banking sector is limited and they do not have long-term domestic debt. - The government has no outstanding guarantees as of end-2024. - Contingent liability shock applied: 13 percent of GDP total, comprised of: - 8 percent of GDP as potential expenditures not included in the baseline (operational risk from loss-making energy sector SOEs); - 5 percent of GDP as the default value representing the average cost to the government during a financial crisis. - Rationale: large stock of liabilities associated with the energy sector (equivalent to around 15 percent of GDP in 2022) and recent conversion into equity of energy SOE debt. ### Public debt levels, composition, and creditors (end-2024 and trends) - Public debt decreased to 36.6 percent of GDP in 2024 from 42.1 percent of GDP in 2023. - Decline drivers: fiscal surplus, strong nominal GDP growth in 2024, broadly stable exchange rate. - External debt contribution: external debt decreased by 4.6 percentage points of GDP; domestic debt decreased by 0.9 percentage point of GDP. - Domestic public debt is held mostly by commercial banks and the social security fund. - Currency composition of external debt at end-2024: - US dollars and SDRs account for around 80 percent of nominal external debt; - Euro accounts for less than 5 percent. - Major creditors at end-2024: - China: 36.5 percent of total external debt (down from almost 40 percent at end-2023); - ADB and IDA–World Bank: each over 16 percent; - IMF: 7 percent of total (down from over 7.5 percent in 2023); - “Other” includes Japan, Islamic Development Bank, other bilateral lenders, Eurasian Development Bank. ### Macroeconomic outlook and underlying assumptions (selected indicators) - Real GDP growth (percent): - 2023: 9.0 - 2024: 9.0 - 2025: 6.8 - 2026: 5.3 - 2025-30: 5.6 - 2031-35: 4.8 - 2036-45: 4.9 - Overall fiscal balance (percent of GDP), Current DSA: - 2023: 1.6 - 2024: 1.8 - 2025: -3.4 - 2026: -2.8 - 2025-30: -3.1 - 2031-35: -2.7 - 2036-45: -3.2 - Revenues and grants (percent of GDP), Current DSA: - 2023: 34.6 - 2024: 35.1 - 2025: 32.1 - 2026: 31.8 - 2025-30: 31.4 - 2031-35: 30.3 - 2036-45: 29.3 - Public expenditure (percent of GDP), Current DSA: - 2023: 33.0 - 2024: 33.3 - 2025: 35.5 - 2026: 34.6 - 2025-30: 34.5 - 2031-35: 33.0 - 2036-45: 32.5 - Net acquisition of financial assets, General Government (percent of GDP), Current DSA: - 2023: 1.9 - 2024: 2.2 - 2025: 1.3 - 2026: 1.0 - 2025-30: 0.7 - 2031-35: 0.5 - 2036-45: 0.5 - Net incurrence of liabilities, General Government (percent of GDP), Current DSA: - 2023: 0.6 - 2024: 0.3 - 2025: 4.7 - 2026: 3.8 - 2025-30: 3.7 - 2031-35: 3.2 - 2036-45: 3.7 - Current account balance (percent of GDP), Current DSA: - 2023: -45.0 - 2024: -30.7 - 2025: -8.5 - 2026: -7.5 - 2025-30: -7.5 - 2031-35: -6.0 - 2036-45: -5.4 - Exports of goods and services (percent of GDP), Current DSA: - 2023: 36.5 - 2024: 51.5 - 2025: 63.8 - 2026: 61.2 - 2025-30: 58.2 - 2031-35: 52.3 - 2036-45: 48.1 - Imports of goods and services (percent of GDP), Current DSA: - 2023: 95.5 - 2024: 97.3 - 2025: 87.2 - 2026: 83.8 - 2025-30: 80.8 - 2031-35: 73.8 - 2036-45: 71.7 - PIP Disbursements (millions of US$), Current DSA: - 2023: 111 - 2024: 354 - 2025: 370 - 2026: 355 - 2025-30: 501 - 2031-35: 518 - 2036-45: 676 - Reserves in months of prospective imports, Current DSA: - 2023: 2.1 - 2024: 3.2 - 2025: 3.1 - 2026: 2.9 - 2025-30: 2.7 - 2031-35: 2.1 - 2036-45: 1.5 ### Drivers of projections and fiscal dynamics - Growth and inflation: - Strong growth in 2024 driven by trade expansion and increasing transport, communications, and construction. - Projected to moderate to 6.8 percent in 2025, converge to 5.6 percent in the medium term, and around 5 percent in the long term. - Inflation forecast in mid-single digits in 2025 and thereafter. - Fiscal policy: - Overall budget balance positive in 2023 and 2024 at around 1.6 and 1.8 percent of GDP. - Projected to turn negative in 2025 due to spending on new projects additional to the PIP (Kambarata-1 HPP, China-Kyrgyzstan-Uzbekistan railway project, small and medium-size energy projects), increased energy subsidies, tapering VAT on imports, and capital injections in other SOEs adding 1.3 percentage points of GDP to financing needs. - Deficit projected to increase gradually to around 3 percent of GDP through 2030. - Net financing needs expected to remain about 3½ percent of GDP in the medium and long term. - External sector: - Current account deficit estimated at 30.7 percent of GDP in 2024, partly offset by BoP errors and omissions of 22 percent of GDP reflecting unrecorded re-exports to the Eurasian Customs Union. - Current account deficit projected to narrow to 8.5 percent of GDP in 2025, 6.4 percent by 2030, and just over 5 percent by 2045. - Gross international reserves projected to decline from 3.2 months of imports to 2.3 months in 2030, and hover above one month by 2045. ### Financing assumptions and implications for debt structure - New external borrowing assumed to remain mostly on concessional terms. - IDA loan disbursements: US$157.5 million in 2025 rising to around US$234 million in 2030 to support Kambarata-1 HPP. - ADB: US$200 million in 2025 (US$100 million as budget support), plus US$120 million in 2026 and about US$70 million per year in 2027-30 for Kambarata-1 HPP. - Eurobond issuance: US$500 million projected in 2025, and US$400 million for each of the 3 subsequent years for the energy production program. - Additional non-concessional borrowing: US$100 million a year assumed for the railway for seven years starting in 2025. - Effect: expected reduction in average concessionality of external debt; share of net domestic borrowing in overall borrowing (excluding external amortization) expected to rise from around 43 percent in 2030 to almost 75 percent by 2045. - Domestic borrowing rates assumed at 8 to 15 percent for maturities between 1 year and 7 years in 2025, with gradual decrease by 2030 to between 8 and 12 percent. ### Debt dynamics, classification, and stress tests - Debt-carrying capacity: - Composite Indicator (CI) index: 3.06 (most recent vintage). - CI threshold for strong capacity: 3.05; classification remains medium given previous vintages under 3.05. - External debt burden thresholds for medium capacity: PV of PPG external debt-to-exports 180 percent; PV of PPG external debt-to-GDP 40 percent; PPG external debt service-to-exports 15 percent; PPG external debt service-to-revenue 18 percent. - Total public debt benchmark: 55 percent of PV of total public debt-to-GDP. - External DSA baseline outcomes: - External PPG debt was 26.6 percent of GDP at end-2024. - Private external debt estimated at 21.7 percent of GDP. - PV of PPG external debt decreased to 19.4 percent of GDP in 2024 (from 26.6 percent in previous DSA) and is projected to rise to 26.6 percent of GDP by end-2030 (below the 55 percent threshold). - Ratio falls to 21.1 percent in 2035 after the Eurobond issued in 2025 is repaid. - Stress tests: - All four external debt ratios remain below thresholds under the baseline. - Under a standard stress test to exports applied in 2026 and 2027, all external debt ratios breach their respective thresholds for at least 10 years (PV external debt-to-GDP, PV external debt-to-exports, debt service-to-exports, debt service-to-revenues). - Breach drivers: medium debt-carrying capacity thresholds, higher external borrowing for infrastructure, less concessional average terms from Eurobond issuances, high historic export volatility. - Under extreme standard stress tests, ratios start declining by 2034 at latest and fall back under or close to thresholds by 2045. ### Key risks, assumptions, and notable project details - Major infrastructure project costs and financing shares: - Kambarata-1 HPP: total cost estimated at US$3.9 billion (incurred between 2025-32); Kyrgyz Republic contributes 34 percent, Uzbekistan and Kazakhstan 33 percent each; projected fiscal balance accounts only for Kyrgyz Republic’s share. - CKU railway: cost estimated at US$4.7 billion (built during 2025-32); implementation TOT model with share distribution: 51% China Railway, 24.5% Kyrgyz side, 24.5% Uzbek side; financing expected 50% equity, 50% borrowed funds (loans from Chinese financial institutions); borrower will be the Joint Project Company (JSC); projected fiscal balance accounts only for Kyrgyz Republic’s share. - Small to medium-size energy projects: projected cost US$1.7 billion spread between 2025-28. - Climate vulnerability and adaptation: - Between 2000 and 2023: 23 climate-related disasters, 402 deaths, over 2.5 million people affected, US$76 million in damages. - National Green Economy Program for 2025-28 aims to enhance energy efficiency, improve mineral resource management, increase hydropower capacity, and promote low carbon transportation, sustainable agriculture, tourism and water and waste management practices. - Baseline reflects implementation of Kyrgyz climate strategy, with Kambarata hydro power plant an important component. - Projection realism checks noted: - Forecast error in change of public debt-to-GDP over past five years significant. - Total public debt in 2030 expected to increase modestly to 41.9 percent of GDP in nominal terms, and to 36.6 percent of GDP in PV terms due to mostly concessional external borrowing. - Gradual increase in total public debt-to-GDP beyond 2030 explained by widening general government deficit from lower revenue and high domestic debt cost. *Source: IMF staff analysis as presented in the Kyrgyz Republic Debt Sustainability Analysis chapter.* ### 11. The PV of debt-to-GDP ratio, used to assess the risk of total public debt distress, ### 1kgzea2025001-print-pdf - 11. The PV of debt-to-GDP ratio, used to assess the risk of total public debt distress, ### Baseline projections and key statistics - In 2024 public debt is estimated to have subsided to 36.6 percent of GDP from 44.3 percent of GDP in the previous DSA (Text Table 5). - Under the baseline scenario: - Public debt is expected to start increasing gradually from 2025 due to increasing financing needs and growing interest payments. - The PV of public debt-to-GDP ratio is projected to reach 47.5 percent of GDP by 2045. - The ratio of debt service-to-revenue (including grants) rises to 15.4 percent in 2030 and increases to almost 33.1 percent by 2045, reflecting the effect of high interest rates on domestic debt and higher external interest and amortization payments associated with projected non-concessional borrowing. - Over the medium-term (2025-31), the domestic debt-to-GDP ratio is projected to remain within its historical range and well below the median of domestic debt-to-GDP ratios across countries using LIC DSF of 17.2 percent. - The domestic debt-to-GDP ratio is expected to remain below the median threshold during the next 10 years of the forecast period and breaches it in 2035. - The domestic public debt service-to-revenue ratio is projected to remain within its historical range over 2025-32, and well below the median of this ratio across countries using LIC DSF of 21.7 percent over the entire forecast period. ### Stress tests and vulnerabilities - Total public debt is vulnerable to a growth shock, identified as the most extreme stress test: - Under the growth shock, the PV of debt-to-GDP ratio breaches the benchmark of 55 percent by 2028 and continues a persistent upward trajectory thereafter. - Under this shock the PV of debt-to-revenue ratio would reach over 130 percent by 2035. - Under this shock the debt service-to-revenue ratio would reach over 23 percent in 2035. - Although no explicit benchmark exists for the PV of debt-to-revenue and debt service-to-revenue ratios, these projections point to potential debt vulnerabilities in the long run. - The breach of a threshold by all four ratios under a standard stress test on exports leads to a “moderate” risk rating of external debt distress. - Heightened uncertainty from rapid decreases in exports and downside global risks (possible reversals of re-export trade expansion, higher global interest rates, limited export diversification) supports the “moderate” external risk rating. ### Solvency, liquidity indicators, and debt management weaknesses - Projections of solvency and liquidity domestic public debt indicators remain below their respective benchmarks (Figure 6). - Total public debt is assessed as sustainable under the baseline because the PV of public debt-to-GDP remains well below 55 percent of GDP by 2035, despite increasing monotonically. - The upward trajectory of total public debt is driven by growing domestic borrowing as a residual source of financing at relatively high interest rates in the absence of more concessional finance; over time interest payments become a significant expenditure item and drive financing needs. - Debt management weaknesses contribute to the overall moderate risk assessment. ### Policy recommendations and measures to build fiscal buffers - Strengthen domestic debt management, including: - Revising the Debt Management Strategy in line with the standards of the MTDS framework, including planned implementation through an Annual Borrowing Plan and Issuance Calendar. - Improving collaboration between the NBKR and the Ministry of Finance to strengthen liquidity management and forecasting. - Setting medium term targets for average Term-to-Maturity to design a better mix of domestic securities. - Defining debt management objectives within the Budget Code and the medium-term horizon of the cost and risk parameters. - Developing and publishing short-term yield curve based on NBKR notes and T-Bill auctions. - Lifting interest rate caps and yield change limits, and allowing full market price discovery in auctions. - Implementing a benchmark bond policy. - Issuing 3-month and 6-month T-Bills at market rate. - Strengthening technical and institutional capacity of Public Debt Management Department. - Fiscal and structural measures to create buffers and mitigate shocks: - Improve revenue mobilization, including by streamlining tax exemptions and strengthening tax administration. - Reduce the wage bill and energy subsidies; improve targeting of social benefits. - Improve public investment management. - Seek more concessional financing. - Strengthen debt management. - Reduce the state footprint in the economy to achieve faster growth, lower contingent liabilities, and stronger donor engagement. - The DSA implies a debt stabilizing primary deficit of less than one percent of GDP in the medium term (Table 2). - The breach of the PV of Debt-to-GDP benchmark under a standard stress test by 2028 indicates the need for fiscal buffers to address unexpected shocks and to avoid crowding out private sector lending from increased domestic financing. ### Risk assessment and downside scenarios - The mechanical risk rating based on baseline and stress tests indicates external debt is at moderate risk of debt distress. - The risk of overall public debt distress is judged “moderate,” reflecting: - The “moderate” external debt distress rating. - The breach by the PV of debt-to-GDP ratio of its benchmark of 55 percent before 2035 under a standard stress test. - Key external risks that could alter the assessment: - Tightening of Western sanctions on Russia could worsen prospects for the Russian economy, leading to depreciation of the ruble and the som, lower remittances, weaker CAD, and higher external debt service. - Conversely, an end to Russia’s invasion of Ukraine could improve the outlook for the Russian economy and reduce debt servicing costs; easing of sanctions could also unwind some trade flows and reduce growth. - These risks could be compounded by an increase in global oil prices, extreme weather events, and cyberthreats. *Source: IMF staff report excerpt (chapter 11).* ### 19. The authorities broadly shared the views of Bank and Fund staff. They noted the ### 19. The authorities broadly shared the views of Bank and Fund staff. ### Authorities' assessment and policy commitments - Noted the additional space afforded by the higher growth rate over the long term, and its dampening effect on debt accumulation, which remains well below their nominal debt ceiling of 70 percent of GDP. - Recognized the risks posed by new borrowing on commercial terms, and the importance of scheduling external debt repayments over time to avoid liquidity challenges for the treasury, with a commensurate effect on external reserves. - Reiterated their commitment to adhere to prudent fiscal and debt policies and sustained tax administration improvements. - Indicated that these efforts result in medium-term projections showing continuous revenue increases, higher surpluses, and reduced borrowing needs. ### External Debt Sustainability (Table 1 highlights; baseline scenario, 2022–2045) - External debt (nominal): 61.8 (2022); 54.2 (2023); 48.3 (2024); 50.0 (2025); 50.8 (2026); 51.8 (2027); 53.3 (2028); 52.8 (2029); 52.2 (2030); 44.9 (2035); 37.5 (2045); 73.2 (??). [values appear aligned in original table] - of which: public and publicly guaranteed (PPG): 37.7 (2022); 31.2 (2023); 26.6 (2024); 29.0 (2025); 30.8 (2026); 31.9 (2027); 33.3 (2028); 32.8 (2029); 32.3 (2030); 25.0 (2035); 17.6 (2045); 45.6 (??). - Change in external debt: -9.9 (2022); -7.6 (2023); -5.9 (2024); 1.7 (2025); 0.8 (2026); 1.1 (2027); 1.4 (2028); -0.5 (2029); -0.5 (2030); -1.9 (2035); -0.5 (2045). - Identified net debt-creating flows: 20.5 (2022); 32.1 (2023); 18.7 (2024); 2.2 (2025); 1.7 (2026); 2.0 (2027); 1.2 (2028); 0.2 (2029); -0.6 (2030); -0.8 (2035); -2.2 (2045); 9.0 (??); 0.8 (??). - Non-interest current account deficit: 41.6 (2022); 44.6 (2023); 30.4 (2024); 8.2 (2025); 6.7 (2026); 7.4 (2027); 6.0 (2028); 5.4 (2029); 4.8 (2030); 4.3 (2035); 4.4 (2045); 17.3 (??); 5.6 (??). - Deficit in balance of goods and services: 57.5 (2022); 59.0 (2023); 45.8 (2024); 23.4 (2025); 22.5 (2026); 23.6 (2027); 22.8 (2028); 21.7 (2029); 21.2 (2030); 22.2 (2035); 24.3 (2045); 37.9 (??); 22.1 (??). - Exports: 29.7 (2022); 36.5 (2023); 51.5 (2024); 63.8 (2025); 61.2 (2026); 58.0 (2027); 57.3 (2028); 55.2 (2029); 53.7 (2030); 50.7 (2035); 47.4 (2045). - Imports: 87.2 (2022); 95.5 (2023); 97.3 (2024); 87.2 (2025); 83.8 (2026); 81.6 (2027); 80.1 (2028); 76.9 (2029); 75.0 (2030); 72.9 (2035); 71.6 (2045). - Net current transfers (negative = inflow): -17.6 (2022); -15.3 (2023); -16.2 (2024); -16.0 (2025); -16.5 (2026); -17.0 (2027); -17.6 (2028); -17.1 (2029); -17.2 (2030); -18.6 (2035); -20.3 (2045); -24.0 (??); -17.4 (??). - Net FDI (negative = inflow): -4.2 (2022); -1.0 (2023); -4.2 (2024); -3.4 (2025); -3.3 (2026); -3.7 (2027); -3.6 (2028); -4.0 (2029); -4.4 (2030); -4.2 (2035); -5.6 (2045); -3.5 (??); -3.5 (??). - Endogenous debt dynamics (contribution): -16.9 (2022); -11.5 (2023); -7.5 (2024); -2.6 (2025); -1.7 (2026); -1.6 (2027); -1.2 (2028); -1.2 (2029); -1.1 (2030); -0.9 (2035); -1.0 (2045). - Contribution from nominal interest rate: 0.5 (2022); 0.4 (2023); 0.4 (2024); 0.3 (2025); 0.8 (2026); 1.1 (2027); 1.3 (2028); 1.5 (2029); 1.5 (2030); 1.2 (2035); 0.7 (2045). - Contribution from real GDP growth: -4.9 (2022); -4.5 (2023); -4.2 (2024); -2.9 (2025); -2.5 (2026); -2.7 (2027); -2.5 (2028); -2.7 (2029); -2.6 (2030); -2.1 (2035); -1.7 (2045). - Residual: -30.4 (2022); -39.7 (2023); -24.6 (2024); -0.5 (2025); -1.0 (2026); -0.9 (2027); 0.2 (2028); -0.7 (2029); 0.1 (2030); -1.1 (2035); 1.7 (2045); -12.5 (??); -1.1 (??). - PV of PPG external debt-to-GDP ratio: 19.4 (2025); 21.8 (2026); 24.0 (2027); 25.6 (2028); 27.2 (2029); 26.8 (2030); 26.6 (2035); 21.1 (2045); 15.2 (??). - PV of PPG external debt-to-exports ratio: 37.6 (2025); 34.2 (2026); 39.2 (2027); 44.1 (2028); 47.4 (2029); 48.6 (2030); 48.6 (2035); 49.5 (2045); 41.6 (??); 32.1 (??). - PPG debt service-to-exports ratio: 6.7 (2025); 5.1 (2026); 3.1 (2027); 3.8 (2028); 4.4 (2029); 4.8 (2030); 4.7 (2035); 5.4 (2045); 5.3 (??); 6.1 (??); 3.6 (??). - PPG debt service-to-revenue ratio: 6.1 (2025); 5.6 (2026); 4.6 (2027); 7.8 (2028); 8.8 (2029); 9.0 (2030); 8.8 (2035); 9.7 (2045); 9.5 (??); 10.4 (??); 5.9 (??). - Gross external financing need (Million of U.S. dollars): 5545.3 (2025); 7209.5 (2026); 5222.5 (2027); 1740.5 (2028); 1608.9 (2029); 1811.4 (2030); 1636.5 (2035); 1548.7 (2045); 1365.8 (??); 1841.3 (??); 427.1 (??). ### Public Sector Debt (Table 2 highlights; baseline scenario, 2022–2045) - Public sector debt: 47.0 (2022); 42.1 (2023); 36.6 (2024); 38.5 (2025); 39.5 (2026); 40.3 (2027); 41.2 (2028); 41.3 (2029); 41.9 (2030); 43.3 (2035); 47.5 (2045); 53.4 (??); 41.8 (average?). - of which: external debt: 37.7 (2022); 31.2 (2023); 26.6 (2024); 29.0 (2025); 30.8 (2026); 31.9 (2027); 33.3 (2028); 32.8 (2029); 32.3 (2030); 25.0 (2035); 17.6 (2045); 45.6 (??); 30.4 (??). - Change in public sector debt: -9.2 (2022); -4.9 (2023); -5.9 (2024); 2.3 (2025); 1.1 (2026); 0.8 (2027); 0.9 (2028); 0.2 (2029); 0.6 (2030); 0.0 (2035); 0.3 (2045). - Identified debt-creating flows: -10.9 (2022); -9.2 (2023); -5.8 (2024); 0.6 (2025); 2.7 (2026); 0.0 (2027); 0.9 (2028); 1.3 (2029); 0.5 (2030); 0.5 (2035); 0.6 (2045); -3.1 (??); 0.7 (??). - Primary deficit: -0.7 (2022); -2.6 (2023); -2.7 (2024); 2.2 (2025); 1.4 (2026); 1.5 (2027); 1.4 (2028); 0.5 (2029); 0.8 (2030); -0.2 (2035); -0.2 (2045); 0.4 (??); 0.8 (??). - Revenue and grants: 34.9 (2022); 34.6 (2023); 35.1 (2024); 32.1 (2025); 31.8 (2026); 31.4 (2027); 31.4 (2028); 31.1 (2029); 30.8 (2030); 30.1 (2035); 29.1 (2045); 33.0 (??); 30.9 (??). - Primary (noninterest) expenditure: 34.1 (2022); 31.9 (2023); 32.4 (2024); 34.4 (2025); 33.2 (2026); 33.0 (2027); 32.8 (2028); 31.6 (2029); 31.6 (2030); 29.9 (2035); 28.9 (2045); 33.4 (??); 31.7 (??). - Automatic debt dynamics: -12.1 (2022); -9.5 (2023); -6.1 (2024); -3.0 (2025); 0.3 (2026); -2.1 (2027); -0.8 (2028); 0.3 (2029); -0.8 (2030); 0.2 (2035); 0.3 (2045). - Contribution from interest rate/growth differential: -7.2 (2022); -4.0 (2023); -4.4 (2024); -3.0 (2025); 0.3 (2026); -2.1 (2027); -0.8 (2028); 0.3 (2029); -0.8 (2030); 0.2 (2035); 0.3 (2045). - Contribution from average real interest rate: -2.6 (2022); -0.1 (2023); -0.9 (2024); -0.7 (2025); 2.2 (2026); 0.1 (2027); 1.2 (2028); 2.4 (2029); 1.3 (2030); 2.2 (2035); 2.5 (2045). - Contribution from real GDP growth: -4.6 (2022); -3.9 (2023); -3.5 (2024); -2.3 (2025); -1.9 (2026); -2.2 (2027); -2.0 (2028); -2.1 (2029); -2.1 (2030); -2.0 (2035); -2.2 (2045). - Other identified debt-creating flows: 1.9 (2022); 2.9 (2023); 3.0 (2024); 1.3 (2025); 1.0 (2026); 0.5 (2027); 0.3 (2028); 0.4 (2029); 0.5 (2030); 0.5 (2035); 0.6 (2045); 0.8 (??); 0.6 (??). - Privatization receipts (negative) or capitalization (positive): 1.1 (2022); 2.8 (2023); 2.5 (2024); 4.2 (2025); 2.0 (2026); 0.3 (2027); 0.0 (2028–2035). - Recognition of contingent liabilities: 0.8 (2022); 0.1 (2023); 0.4 (2024); -2.9 (2025); -1.1 (2026); 0.2 (2027); 0.3 (2028); 0.4 (2029); 0.5 (2030); 0.5 (2035); 0.6 (2045). - Residual: 1.7 (2022); 4.3 (2023); -0.1 (2024); 1.7 (2025); -1.6 (2026); 0.8 (2027); -0.1 (2028); -1.1 (2029); 0.1 (2030); -0.5 (2035); -0.3 (2045); 1.3 (??); 0.0 (??). ### Stress tests, sensitivity analysis and scenarios (Tables 3–4, Figures) - Multiple stress and sensitivity tests are reported for 2025–35, including: - Alternative scenarios (A1: key variables at their historical averages in 2025–2035). - Bound tests (B1: Real GDP growth; B2: Primary balance; B3: Exports; B4: Other flows; B5: Depreciation; B6: Combination of B1–B5). - Tailored tests (C1: Combined contingent liabilities; C2: Natural disaster; C3: Commodity price; C4: Market Financing). - Examples of projected indicator paths (selected): - PV of debt-to-GDP ratio (baseline): 22 (2025); 24 (2026); 26 (2027); 27 (2028); 27 (2029); 27 (2030); 26 (2031); 24 (2032); 23 (2033); 21 (2034); 21 (2035). - PV of debt-to-revenue ratio (baseline): 34 (2025); 39 (2026); 44 (2027); 47 (2028); 49 (2029); 50 (2030); 50 (2031); 50 (2032); 47 (2033); 44 (2034); 42 (2035). - Debt service-to-revenue ratio (baseline): 44 (2025); 55 (2026); 55 (2027); 55 (2028); 56 (2029); 66 (2030); (values show increases under shocks; detailed table entries provide year-by-year outcomes). - Benchmarks and thresholds are applied (e.g., threshold values 40, 180, 15, 18 in respective tables) and bold values indicate breaches of thresholds in the original tables/figures. ### Key macroeconomic assumptions (selected) - Real GDP growth (in percent): 9.0 (2022); 9.0 (2023); 9.0 (2024); 6.8 (2025); 5.3 (2026); 5.8 (2027); 5.3 (2028); 5.4 (2029); 5.3 (2030); 4.8 (2035); 4.9 (2045); 4.6 (average); 5.3 (projection average). - GDP deflator in US dollar terms (change in percent): 21.2 (2022); 13.7 (2023); 7.3 (2024); 4.8 (2025); 1.6 (2026); 1.6 (2027); 1.7 (2028); 1.7 (2029); 1.7 (2030); 1.7 (2035); 1.7 (2045); 4.7 (??); 2.0 (??). - Effective interest rate (percent): 0.9 (2022); 0.9 (2023); 0.8 (2024); 0.8 (2025); 1.7 (2026); 2.3 (2027); 2.8 (2028); 3.1 (2029); 3.1 (2030); 2.8 (2035); 2.0 (2045); 0.8 (??); 2.7 (??). - Growth of exports of G&S (US dollar terms, in percent): 10.0 (2022); 52.0 (2023); 65.3 (2024); 38.7 (2025); 2.6 (2026); 1.8 (2027); 5.8 (2028); 3.3 (2029); 4.3 (2030); 4.7 (2035); 6.7 (2045); 13.8 (??); 7.6 (??). - Growth of imports of G&S (US dollar terms, in percent): 79.5 (2022); 35.6 (2023); 19.2 (2024); 0.4 (2025); 2.7 (2026); 4.8 (2027); 5.2 (2028); 2.9 (2029); 4.5 (2030); 6.4 (2035); 7.0 (2045); 14.4 (??); 4.6 (??). - Grant element of new public sector borrowing (in percent): 9.8 (2026); 9.4 (2027); 10.3 (2028); 12.3 (2029); 18.7 (2030); 14.1 (2035); 11.3 (2045); 11.5 (??); 11.8 (??). - Government revenues (excluding grants, in percent of GDP): 32.9 (2022); 33.4 (2023); 34.2 (2024); 31.3 (2025); 31.0 (2026); 30.7 (2027); 30.7 (2028); 30.5 (2029); 30.2 (2030); 29.6 (2035); 28.8 (2045); 31.2 (??); 30.3 (??). - Aid flows (in Million of US dollars): 234.3 (2022); 184.3 (2023); 161.9 (2024); 327.4 (2025); 230.2 (2026); 245.4 (2027); 287.6 (2028); 274.6 (2029); 217.6 (2030); 181.6 (2035); 215.4 (2045). - Nominal GDP (Million of US dollars): 12,224 (2022); 15,148 (2023); 17,722 (2024); 19,849 (2025); 21,222 (2026); 22,807 (2027); 24,427 (2028); 26,202 (2029); 28,068 (2030); 38,709 (2035); 74,095 (2045). - Nominal dollar GDP growth: 32.1 (2022); 23.9 (2023); 17.0 (2024); 12.0 (2025); 6.9 (2026); 7.5 (2027); 7.1 (2028); 7.3 (2029); 7.1 (2030); 6.6 (2035); 6.7 (2045); 9.8 (??); 7.4 (??). ### Key takeaways - Authorities agree with staff that higher long-term growth provides fiscal space and dampens debt accumulation; debt remains below the nominal debt ceiling of 70 percent of GDP. - Authorities stress caution on new commercial borrowing and the need to schedule external repayments to manage treasury liquidity and external reserves. - Projections (external and public sector DSAs) show rising revenues, higher surpluses, and reduced borrowing needs under the baseline, but multiple stress tests identify scenarios where debt and debt service indicators breach benchmarks. *Source: 1kgzea2025001-print-pdf - 19. The authorities broadly shared the views of Bank and Fund staff.* ### 2.5 percentage points of GDP in ### 1kgzea2025001-print-pdf - 2.5 percentage points of GDP in ### Qualification of the Moderate Category (2025–35) - For the PV debt/GDP and PV debt/exports thresholds: x is 20 percent and y is 40 percent. - For debt service/Exports and debt service/revenue thresholds: x is 12 percent and y is 35 percent. - Charts show categorizations labeled: Some space, Substantial space, Limited space, Threshold, Baseline. - Multipliers shown in time-series context: Multiplier = 0.2; Multiplier = 0.4; Multiplier = 0.6; Multiplier = 0.8; Baseline. - Time horizon in figures spans 2019 through 2035 across different panels (examples: 2019–2026; 2021–2030; 2025–2035). ### Indicators of Domestic Public Debt (2020–2035) - Panel labels and metrics: - Domestic debt to GDP ratio (time series 2020–2034). - Domestic debt service to revenues incl. grants (time series 2020–2034). - Net domestic debt issuance 1/ (time series 2020–2034). - Domestic debt stock and issuance split by maturity: Short-term; Medium and long-term; Domestic MLT debt. - Specific values called out in figures and notes: - 2.5 percentage points (appears as an annotation). - 5.9% (appears as an annotation). - 90% and 10% (appear as annotations/percentiles). - Note 1/ (text from figure): "Net domestic debt issuance is an estimate based on the calculated public gross financing need net of gross external financing, drawdown of assets, other adjustments and domestic debt amortization. It excludes short-term debt that was issued and matured within the calendar year." ### Borrowing Assumptions and Borrowing Terms (projection framing) - Borrowing assumptions labeled as "Median of average projected values over the first five years of the forecast period across countries using the LIC DSF with non-zero domestic debt, end-2023." - Shares in new domestic debt issuance include "Domestic short-term debt" and "Domestic MLT debt." - Variables shown for borrowing terms and conditions: - Avg. real interest rate (Short-term). - Avg. real interest rate on new borrowing (Domestic MLT debt). - Avg. maturity (incl. grace period). - Avg. grace period. ### Time-series and Projection Notes - Historical realizations and projected series are presented; labels include "Historical realizations", "Projected (Prev. DSA)", and "Projected (Curr. DSA)". - Multiple panels show values on dual axes (e.g., "As a ratio to GDP (LHS)" and "As a ratio to domestic debt stock in prev. year (RHS)"). - Vertical axes in different panels include scales such as: - In percentage points of GDP. - In percent. - Absolute value scales (0–200 in one panel; 0–45 in another; 0–16 in another). - Years explicitly shown in figure timelines include: 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027, 2028, 2029, 2030, 2031, 2032, 2033, 2034, 2035. *Sources: Country authorities; and staff estimates and projections.* --- _Source: https://www.imf.org/-/media/files/publications/cr/2025/english/1kgzea2025001-print-pdf.pdf_