## 1. Sectoral Distribution

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---

### A. Introduction and Scope
- There are eighty-two SOEs, broadly classified as Joint Stock Companies (JSCs) and State Enterprises (SEs), with both groups making roughly equal proportions.
- This number exceeds the OECD average of 51 SOEs.
- The largest SOEs operate in energy, mining and quarrying, finance, and communications.
- In 2023, the total assets of major SOEs accounted for 50 percent of GDP, while their revenues represented 15 percent of GDP (State Agency for the Management of State Property – SAMSP, 2024).
- The paper assesses fiscal risks from SOEs at both aggregate and firm levels and applies the IMF’s SOE Health Check Tool (IMF, 2021a).

### B. Aggregate Fiscal Risks and Key Statistics
- Total liabilities of the largest twenty-eight SOEs amounted to 25 percent of GDP in 2022 and 2023 (SAMSP, 2024).
- Non-financial SOEs held liabilities equivalent to 12 percent of GDP as of end 2023, with about 90 percent of that debt concentrated in the energy sector.
- Total liabilities in the energy sector fell by 2 percent of GDP over 2022-23, but increased in nominal terms by above 10 percent from KGS 127 billion to KGS 140 billion, primarily because of large operating losses.
- Approximately 85 percent of energy sector liabilities are long term debt.
- Liabilities of SOEs in the finance and banking sector amounted to 13 percent of GDP in 2023.
- There is currently no outstanding state-guaranteed debt for SOEs; a moratorium on state guarantees was introduced in 2007 and later reinforced in the Budget Code.
- For comparison, state-guaranteed debt is about 10 percent in the ME&CA as well as in European Union countries on average.
- On-lending of external loans to SOEs by the Ministry of Finance implies de-facto guarantees; a couple of agencies issue guarantees and sureties on behalf of the central government (Guarantee Fund and Finance and Credit Fund of the Ministry of Finance).
- Average contribution of SOEs to the budget was 1.4 percent of GDP in 2022-2023: direct tax contribution of 0.5 percent of GDP and dividends of 0.9 percent of GDP.
- Direct fiscal support to SOEs was about 0.6 percent of GDP in subsidies and about 0.9 percent of GDP in lending.
- The National Investment Fund (NIF) was established by the Cabinet of Ministers in November 2024 to improve SOE corporate management and long-term growth.

### C. Solvency and Sectoral Risks
- Debt-to-asset (D/A) ratios remain below 50 percent for most sectors; transportation and mining and quarrying sectors have D/A less than 10 percent.
- The D/A ratio for the energy sector was about 97 percent in 2023, up from 89 percent in 2018, indicating elevated solvency risk.
- NESK and EPS hold a high concentration of liabilities among SOEs and warrant in-depth monitoring.

### D. Firm-Level Analysis: Coverage and Selected SOEs
- The firm-level analysis focuses on eight large non-financial SOEs across energy (NESK, EPS, Chakan GES), transportation (Kyrgyz Temir Zholu, Manas International Airport), telecommunications (Kyrgyztelecom), and mining and quarrying (Kyrgyzaltyn, Kyrgyzneftegaz).
- These eight SOEs account for approximately 95 percent of the total assets and liabilities of the non-financial SOEs analyzed in the SAMSP 2024 report.
- High concentration of liabilities is observed in two energy SOEs—NESK and EPS.

### E. Profitability, Liquidity, and Solvency Findings (Firm Level)
- Among the twenty-eight largest SOEs, twenty-two made total profits of KGS 35.5 billion in 2023; six incurred aggregate losses of KGS 18.9 billion; resulting aggregate net profit was KGS 16.6 billion. Losses are generated primarily by energy sector SOEs.
- All three energy companies (EPS, NESK, Chakan) had lower return on assets (ROA) compared to SOEs in other sectors. Chakan’s profitability remains close to zero.
- Persistent energy SOE losses stem from below-the-cost residential tariffs for electricity, cost inefficiencies, and poor governance.
- Kyrgyztelecom and NESK have an average current ratio below 1, indicating insufficient liquid assets to meet short-term liabilities.
- EPS’s current ratio declined from 2 in 2021 to 1.1 in 2023.
- NESK and, to some extent, EPS face heightened solvency concerns with debt-to-asset ratios close to 100 percent. A firm with ratio greater than 100 percent and negative equity is technically insolvent.
- NESK’s debt-to-asset ratio declined sharply to 64 percent in 2024 from 99 percent in 2023, mainly due to capital injections, lowering its solvency risks.

### F. IMF SOE Health Check Tool: Indicators and Risk Mapping
- The Health Check Tool assesses twelve indicators across three metrics: profitability, solvency, and liquidity.
- Key indicators (as defined in the tool) include:
  - Liquidity: Current Ratio; Quick Ratio; Debtor Turnover Days; Creditor Turnover Days.
  - Solvency: Debt to Assets; Debt to Equity; Debt to EBITDA; Interest Coverage; Cash Interest Coverage; Debt Coverage.
  - Profitability: Return on Assets; Return on Equity; Cost Recovery.
- Examples of numeric thresholds applied (risk categories from low risk to high risk):
  - Return on assets: greater than 8% (low risk), 4% (low-moderate), 0% (moderate), -5% (moderate-high), (high risk beyond Category 5).
  - Return on equity: greater than 16% (low risk), 8% (low-moderate), 0% (moderate), -10% (moderate-high).
  - Cost recovery: greater than 1.5 (low risk), 1.3 (low-moderate), 1.0 (moderate), 0.8 (moderate-high).
  - Current ratio: greater than 2.0 (low risk), 1.5 (low-moderate), 1.3 (moderate), 1.0 (moderate-high).
  - Quick ratio: greater than 1.2 (low risk), 1.0 (low-moderate), 0.8 (moderate), 0.7 (moderate-high).
  - Debtor turnover days: less than 30.0 (low risk), 40.0 (low-moderate), 50.0 (moderate), 75.0 (moderate-high).
  - Creditor turnover days: less than 30.0 (low risk), 60.0 (low-moderate), 90.0 (moderate), 120.0 (moderate-high).
  - Debt to assets: less than 30% (low risk), 50% (low-moderate), 80% (moderate), 100% (moderate-high).
  - Debt to equity: less than 50% (low risk), 100% (low-moderate), 150% (moderate), 200% (moderate-high).
  - Debt to EBITDA: less than 1.5 (low risk), 2.0 (low-moderate), 3.0 (moderate), 5.0 (moderate-high).
  - Interest coverage: greater than 2.0 (low risk), 1.5 (low-moderate), 1.2 (moderate), 1.0 (moderate-high).
  - Cash interest coverage: greater than 3.0 (low risk), 2.0 (low-moderate), 1.5 (moderate), 1.0 (moderate-high).
  - Debt coverage: greater than 0.8 (low risk), 0.6 (low-moderate), 0.4 (moderate), 0.3 (moderate-high).
- ROE thresholds: Category 1 is ROE greater than 16% (the 90th-percentile of ROEs in the Kyrgyz Republic); Category 2 is ROE greater than 8% (median ROE). ROA Category thresholds derive from ROE thresholds adjusted by an asset-to-equity leverage ratio of 2 (for 2022-23 period).

### G. Policy Implications and Recommendations (extracts from analysis)
- Strengthen oversight and transparency for the National Investment Fund (NIF) to avoid conflicts of interest with the SPMSP, prevent overlapping responsibilities, and ensure fiscal discipline.
- Ensure consistent policy frameworks and full disclosure of SOE financial performance to manage borrowing, quasi-fiscal activities, and contingent liabilities.
- Avoid preferential treatment of SOEs and maintain a level playing field for all businesses.
- Closely monitor energy sector SOEs (NESK, EPS, Chakan) given their concentrated liabilities, high D/A ratios, persistent losses, and liquidity challenges.
- Continue strengthening MoF monitoring of SOE fiscal risks, especially where on-lending implies de-facto guarantees.

---

### 15. SOEs in energy and telecommunications sectors had risk ratings above moderate levels

### Pre‑COVID and 2019 firm‑level assessment
- SOEs with risk ratings above moderate in the pre‑COVID period include: NESK, EPS, and Kyrgyztelecom.
- Key weaknesses for these SOEs:
  - Low profitability and liquidity ratios.
  - High solvency risk as measured by debt to EBITDA.
  - Challenges covering financing costs (low interest coverage).
  - High debt‑to‑equity ratios indicating greater reliance on debt financing and increased financial vulnerability.
- Other SOEs with available data (Chakan, MIA, and Kyrgyzaltyn) had risk ratings below the moderate level, although Chakan and Kyrgyzaltyn showed some profitability concerns.

### Financial performance developments 2019–2023
- Overall 2023 changes outside the energy sector:
  - MIA: consistently maintained a low‑risk rating.
  - Kyrgyzaltyn and Kyrgyztelecom: gradual risk reduction driven by profitability and solvency improvements over the 2019–2023 period.
  - Liquidity risk remains a concern for several SOEs (low current and quick ratios).
  - KTJ and Kyrgyzneftegaz (data only post‑COVID) are classified as low‑risk.
- Energy sector in 2023:
  - NESK and EPS: risk ratings remained above moderate, reflecting ongoing challenges in profitability, liquidity, and solvency.
  - NESK: improvement in cost recovery—generating adequate revenue to cover operating expenses.
  - Chakan: rating deteriorated relative to 2019, primarily due to a significant increase in debt between 2019 and 2023.

### International comparison: NESK and EPS vs peers (2023 or last available data)
- Two international comparison groups: (i) SOEs with a similar operating revenue range (about 200 SOEs) and (ii) top 1,000 SOEs by operating revenue. Median operating revenue of these groups is about $200 million.
- Profitability and productivity:
  - Peer SOEs generally have positive ROA and ROE, greater than 2 percent and 5 percent on average, respectively.
  - NESK and EPS returns fall significantly below the first quartile of peers.
  - EPS’s cost recovery of 0.7 is notably weaker than most peers; lower profitability is attributed to below‑the‑cost tariffs.
  - EPS and NESK employ about 20 times more staff than peers, lowering operating revenue or profit per employee.
- Liquidity and solvency:
  - EPS: current ratio of 1 aligns with peer benchmarks.
  - NESK: current ratio is three times lower than the industry average, indicating higher liquidity risk.
  - Both EPS and NESK rely more heavily on debt financing than peers, increasing solvency risk.

- Selected international comparison statistics (values listed as in source):
  - Operating Revenue (ml USD): NESK 264, EPS 184, Similar International SOEs in Revenue 220 [182 ; 267], Top 1000 International SOEs 220 [71 ; 657].
  - ROA (%): NESK -5.6, EPS -21, Similar peers 2 [-2.1 ; 5.5], Top 1000 peers 3.3 [0.2 ; 6.3].
  - ROE (%): NESK -399, EPS -999, Similar peers 5.5 [-1.5; 14.5], Top 1000 peers 9.4 [1.3; 17].
  - Cost recovery: NESK 1.1, EPS 0.7, Similar peers 1.1 [1.0 ;1.3], Top 1000 peers 1.1 [1.0; 1.3].
  - Current ratio (%): NESK 0.4, EPS 1.1, Similar peers 1.4 [1.0; 1.8], Top 1000 peers 1.2 [0.8; 2.0].
  - Debt to Assets (%): NESK 99, EPS 98, Similar peers 68 [46; 80], Top 1000 peers 68.6 [50; 87].
  - Number of employees: NESK 10400, EPS 5246, Similar peers 247 [132; 468], Top 1000 peers 218 [65 ; 768].
  - Operating revenue per employee (th USD): NESK 25, EPS 35, Similar peers 786 [445; 1510], Top 1000 peers 848 [465 ; 1706].
  - Profit per employee (th USD): NESK -5, EPS -31, Similar peers 29 [0; 160], Top 1000 peers 88 [14 ; 279].

- Annex global comparison for NESK (2023 or last available data) (values listed as in source):
  - Operating Revenue (ml USD): NESK 264; Similar International SOEs in Revenue 264 [166; 479]; International SOEs 65 [12; 858].
  - ROA (%): NESK -5.6; Similar peers 2.9 [0.9; 6.3]; International SOEs 2.7 [0.4 ; 6.4].
  - ROE (%): NESK -399; Similar peers 6.8 [2.0; 12.5]; International SOEs 6.5 [1.2; 12.1].
  - Cost recovery: NESK 1.1; Similar peers 1.1 [1.0; 1.3]; International SOEs 1.1 [1.0; 1.3].
  - Current ratio (%): NESK 0.4; Similar peers 1.2 [0.7; 1.8]; International SOEs 1.2 [0.7; 2.0].
  - Debt to Assets (%): NESK 99; Similar peers 54 [43 ; 70]; International SOEs 49 [25 ; 67].
  - Number of employees: NESK 10400; Similar peers 571 [248 ; 1452]; International SOEs 284 [45 ; 1925].
  - Operating revenue per employee (th USD): NESK 25; Similar peers 470 [230; 1150]; International SOEs 406 [62 ; 1053].
  - Profit per employee (th USD): NESK -5; Similar peers 46 [7.0 ; 199]; International SOEs 34 [3.1 ; 169].

### Policy measures implemented and fiscal implications
- Debt‑to‑equity conversions:
  - 2022 Cabinet decree converted outstanding debt to capital for EPS and NESK with amounts: KGS 10.7 billion in 2023, KGS 55.8 billion in 2024, and KGS 57 billion in 2025.
  - These amounts are roughly equal to the loan repayments toward the state budget in 2026-2030.
  - Conversion reduced debt pressure on SOE balance sheets and improved financial health, but should be accompanied by full financial disclosure.
  - Note: Debt‑to‑equity conversion made by the Ministry of Finance, which becomes a co‑shareholder with stake to reach 1/3 of total share capital; Ministry of Energy remains majority shareholder.
- Fiscal risk magnitude and firm‑level confirmation:
  - Contingent liabilities of 12 percent of GDP, mainly from the energy sector, could lead to long‑term fiscal challenges.
  - Firm‑level analysis confirms major energy SOEs underperform international peers, partly due to below‑the‑cost tariffs and cost inefficiencies.
  - Energy SOEs incur heavy losses, have difficulties managing short‑term debts, and have high liabilities relative to assets, raising long‑term solvency concerns.

### Recommendations
- Monitoring and information sharing:
  - Establish a (digital) unified database between the MoF and SAMSP to facilitate information exchange, analysis of SOEs’ financial performance, and fiscal risks assessment.
  - The aggregate report on SOEs’ financial performance in the 2023 SAMSP report is a welcome step; MoF’s Statement of Information on Fiscal Risks and its chapter on SOE fiscal risks could be supplemented with tables and charts from the IMF SOE Health Check Tool and expanded coverage over time to include energy sector SOEs.
- Financial and governance reforms:
  - Continue tariff reform to improve cost‑recovery for energy SOEs and reduce costs of quasi‑fiscal activities; target noted in analysis is to reach full cost‑recovery by 2030.
  - Accompany ongoing debt‑to‑equity conversions with full financial disclosure.
  - Strengthen SOE governance—management, oversight, and transparency—to raise productivity, lower costs, and improve financial performance over time, supporting overall economic competitiveness and productivity.

*Source: Kyrgyz Republic: Fiscal Risks from State-Owned Enterprises (May 7, 2025), IMF staff synthesis of SAMSP (2024) and IMF tools and datasets.*

### 1. Sectoral Distribution _________________________________________________________________ 3

### 1. Sectoral Distribution

### A. Introduction and Scope
- There are eighty-two SOEs, broadly classified as Joint Stock Companies (JSCs) and State Enterprises (SEs), with both groups making roughly equal proportions.  
- This number exceeds the OECD average of 51 SOEs.  
- The largest SOEs operate in energy, mining and quarrying, finance, and communications.  
- In 2023, the total assets of major SOEs accounted for 50 percent of GDP, while their revenues represented 15 percent of GDP (State Agency for the Management of State Property – SAMSP, 2024).  
- The paper assesses fiscal risks from SOEs at both aggregate and firm levels and applies the IMF’s SOE Health Check Tool (IMF, 2021a).

### B. Aggregate Fiscal Risks and Key Statistics
- Total liabilities of the largest twenty-eight SOEs amounted to 25 percent of GDP in 2022 and 2023 (SAMSP, 2024).  
- Non-financial SOEs held liabilities equivalent to 12 percent of GDP as of end 2023, with about 90 percent of that debt concentrated in the energy sector.  
- Total liabilities in the energy sector fell by 2 percent of GDP over 2022-23, but increased in nominal terms by above 10 percent from KGS 127 billion to KGS 140 billion, primarily because of large operating losses.  
- Approximately 85 percent of energy sector liabilities are long term debt.  
- Liabilities of SOEs in the finance and banking sector amounted to 13 percent of GDP in 2023.  
- There is currently no outstanding state-guaranteed debt for SOEs; a moratorium on state guarantees was introduced in 2007 and later reinforced in the Budget Code.  
- For comparison, state-guaranteed debt is about 10 percent in the ME&CA as well as in European Union countries on average.  
- On-lending of external loans to SOEs by the Ministry of Finance implies de-facto guarantees; a couple of agencies issue guarantees and sureties on behalf of the central government (Guarantee Fund and Finance and Credit Fund of the Ministry of Finance).  
- Average contribution of SOEs to the budget was 1.4 percent of GDP in 2022-2023: direct tax contribution of 0.5 percent of GDP and dividends of 0.9 percent of GDP.  
- Direct fiscal support to SOEs was about 0.6 percent of GDP in subsidies and about 0.9 percent of GDP in lending.  
- The National Investment Fund (NIF) was established by the Cabinet of Ministers in November 2024 to improve SOE corporate management and long-term growth.

### C. Solvency and Sectoral Risks
- Debt-to-asset (D/A) ratios remain below 50 percent for most sectors; transportation and mining and quarrying sectors have D/A less than 10 percent.  
- The D/A ratio for the energy sector was about 97 percent in 2023, up from 89 percent in 2018, indicating elevated solvency risk.  
- NESK and EPS hold a high concentration of liabilities among SOEs and warrant in-depth monitoring.

### D. Firm-Level Analysis: Coverage and Selected SOEs
- The firm-level analysis focuses on eight large non-financial SOEs across energy (NESK, EPS, Chakan GES), transportation (Kyrgyz Temir Zholu, Manas International Airport), telecommunications (Kyrgyztelecom), and mining and quarrying (Kyrgyzaltyn, Kyrgyzneftegaz).  
- These eight SOEs account for approximately 95 percent of the total assets and liabilities of the non-financial SOEs analyzed in the SAMSP 2024 report.  
- High concentration of liabilities is observed in two energy SOEs—NESK and EPS.

### E. Profitability, Liquidity, and Solvency Findings (Firm Level)
- Among the twenty-eight largest SOEs, twenty-two made total profits of KGS 35.5 billion in 2023; six incurred aggregate losses of KGS 18.9 billion; resulting aggregate net profit was KGS 16.6 billion. Losses are generated primarily by energy sector SOEs.  
- All three energy companies (EPS, NESK, Chakan) had lower return on assets (ROA) compared to SOEs in other sectors. Chakan’s profitability remains close to zero.  
- Persistent energy SOE losses stem from below-the-cost residential tariffs for electricity, cost inefficiencies, and poor governance.  
- Kyrgyztelecom and NESK have an average current ratio below 1, indicating insufficient liquid assets to meet short-term liabilities.  
- EPS’s current ratio declined from 2 in 2021 to 1.1 in 2023.  
- NESK and, to some extent, EPS face heightened solvency concerns with debt-to-asset ratios close to 100 percent. A firm with ratio greater than 100 percent and negative equity is technically insolvent.  
- NESK’s debt-to-asset ratio declined sharply to 64 percent in 2024 from 99 percent in 2023, mainly due to capital injections, lowering its solvency risks.

### F. IMF SOE Health Check Tool: Indicators and Risk Mapping
- The Health Check Tool assesses twelve indicators across three metrics: profitability, solvency, and liquidity.  
- Key indicators (as defined in the tool) include:
  - Liquidity: Current Ratio; Quick Ratio; Debtor Turnover Days; Creditor Turnover Days.  
  - Solvency: Debt to Assets; Debt to Equity; Debt to EBITDA; Interest Coverage; Cash Interest Coverage; Debt Coverage.  
  - Profitability: Return on Assets; Return on Equity; Cost Recovery.
- Examples of numeric thresholds applied (risk categories from low risk to high risk):
  - Return on assets: greater than 8% (low risk), 4% (low-moderate), 0% (moderate), -5% (moderate-high), (high risk beyond Category 5).  
  - Return on equity: greater than 16% (low risk), 8% (low-moderate), 0% (moderate), -10% (moderate-high).  
  - Cost recovery: greater than 1.5 (low risk), 1.3 (low-moderate), 1.0 (moderate), 0.8 (moderate-high).  
  - Current ratio: greater than 2.0 (low risk), 1.5 (low-moderate), 1.3 (moderate), 1.0 (moderate-high).  
  - Quick ratio: greater than 1.2 (low risk), 1.0 (low-moderate), 0.8 (moderate), 0.7 (moderate-high).  
  - Debtor turnover days: less than 30.0 (low risk), 40.0 (low-moderate), 50.0 (moderate), 75.0 (moderate-high).  
  - Creditor turnover days: less than 30.0 (low risk), 60.0 (low-moderate), 90.0 (moderate), 120.0 (moderate-high).  
  - Debt to assets: less than 30% (low risk), 50% (low-moderate), 80% (moderate), 100% (moderate-high).  
  - Debt to equity: less than 50% (low risk), 100% (low-moderate), 150% (moderate), 200% (moderate-high).  
  - Debt to EBITDA: less than 1.5 (low risk), 2.0 (low-moderate), 3.0 (moderate), 5.0 (moderate-high).  
  - Interest coverage: greater than 2.0 (low risk), 1.5 (low-moderate), 1.2 (moderate), 1.0 (moderate-high).  
  - Cash interest coverage: greater than 3.0 (low risk), 2.0 (low-moderate), 1.5 (moderate), 1.0 (moderate-high).  
  - Debt coverage: greater than 0.8 (low risk), 0.6 (low-moderate), 0.4 (moderate), 0.3 (moderate-high).
- ROE thresholds: Category 1 is ROE greater than 16% (the 90th-percentile of ROEs in the Kyrgyz Republic); Category 2 is ROE greater than 8% (median ROE). ROA Category thresholds derive from ROE thresholds adjusted by an asset-to-equity leverage ratio of 2 (for 2022-23 period).

### G. Policy Implications and Recommendations (extracts from analysis)
- Strengthen oversight and transparency for the National Investment Fund (NIF) to avoid conflicts of interest with the SPMSP, prevent overlapping responsibilities, and ensure fiscal discipline.  
- Ensure consistent policy frameworks and full disclosure of SOE financial performance to manage borrowing, quasi-fiscal activities, and contingent liabilities.  
- Avoid preferential treatment of SOEs and maintain a level playing field for all businesses.  
- Closely monitor energy sector SOEs (NESK, EPS, Chakan) given their concentrated liabilities, high D/A ratios, persistent losses, and liquidity challenges.  
- Continue strengthening MoF monitoring of SOE fiscal risks, especially where on-lending implies de-facto guarantees.

*Source: Kyrgyz Republic: Fiscal Risks from State-Owned Enterprises (May 7, 2025), IMF staff synthesis of SAMSP (2024) and IMF tools and datasets.*

### 15.      SOEs in energy and telecommunications sectors had risk ratings above moderate levels

### 15.      SOEs in energy and telecommunications sectors had risk ratings above moderate levels

### Pre‑COVID and 2019 firm‑level assessment
- SOEs with risk ratings above moderate in the pre‑COVID period include: NESK, EPS, and Kyrgyztelecom (Table 5.A).
- Key weaknesses for these SOEs:
  - Low profitability and liquidity ratios (see Figure 8 reference).
  - High solvency risk as measured by debt to EBITDA (a higher indicator denotes a more indebted company and a higher risk of default).
  - Challenges covering financing costs (low interest coverage).
  - High debt‑to‑equity ratios indicating greater reliance on debt financing and increased financial vulnerability.
- Other SOEs with available data (Chakan, MIA, and Kyrgyzaltyn) had risk ratings below the moderate level, although Chakan and Kyrgyzaltyn showed some profitability concerns.

### Financial performance developments 2019–2023
- Overall 2023 changes outside the energy sector:
  - MIA: consistently maintained a low‑risk rating.
  - Kyrgyzaltyn and Kyrgyztelecom: gradual risk reduction driven by profitability and solvency improvements over the 2019–2023 period (Table 5.B and Annex Table A2).
  - Liquidity risk remains a concern for several SOEs (low current and quick ratios).
  - KTJ and Kyrgyzneftegaz (data only post‑COVID) are classified as low‑risk.
- Energy sector in 2023:
  - NESK and EPS: risk ratings remained above moderate, reflecting ongoing challenges in profitability, liquidity, and solvency.
  - NESK: improvement in cost recovery—generating adequate revenue to cover operating expenses.
  - Chakan: rating deteriorated relative to 2019, primarily due to a significant increase in debt between 2019 and 2023.

### International comparison: NESK and EPS vs peers (2023 or last available data)
- Two international comparison groups: (i) SOEs with a similar operating revenue range (about 200 SOEs) and (ii) top 1,000 SOEs by operating revenue. Median operating revenue of these groups is about $200 million.
- Profitability and productivity:
  - Peer SOEs generally have positive ROA and ROE, greater than 2 percent and 5 percent on average, respectively.
  - NESK and EPS returns fall significantly below the first quartile of peers.
  - EPS’s cost recovery of 0.7 is notably weaker than most peers; lower profitability is attributed to below‑the‑cost tariffs.
  - EPS and NESK employ about 20 times more staff than peers, lowering operating revenue or profit per employee.
- Liquidity and solvency:
  - EPS: current ratio of 1 aligns with peer benchmarks.
  - NESK: current ratio is three times lower than the industry average, indicating higher liquidity risk.
  - Both EPS and NESK rely more heavily on debt financing than peers, increasing solvency risk.

- Selected international comparison statistics (Table 6; values listed as in source):
  - Operating Revenue (ml USD): NESK 264, EPS 184, Similar International SOEs in Revenue 220 [182 ; 267], Top 1000 International SOEs 220 [71 ; 657].
  - ROA (%): NESK -5.6, EPS -21, Similar peers 2 [-2.1 ; 5.5], Top 1000 peers 3.3 [0.2 ; 6.3].
  - ROE (%): NESK -399, EPS -999, Similar peers 5.5 [-1.5; 14.5], Top 1000 peers 9.4 [1.3; 17].
  - Cost recovery: NESK 1.1, EPS 0.7, Similar peers 1.1 [1.0 ;1.3], Top 1000 peers 1.1 [1.0; 1.3].
  - Current ratio (%): NESK 0.4, EPS 1.1, Similar peers 1.4 [1.0; 1.8], Top 1000 peers 1.2 [0.8; 2.0].
  - Debt to Assets (%): NESK 99, EPS 98, Similar peers 68 [46; 80], Top 1000 peers 68.6 [50; 87].
  - Number of employees: NESK 10400, EPS 5246, Similar peers 247 [132; 468], Top 1000 peers 218 [65 ; 768].
  - Operating revenue per employee (th USD): NESK 25, EPS 35, Similar peers 786 [445; 1510], Top 1000 peers 848 [465 ; 1706].
  - Profit per employee (th USD): NESK -5, EPS -31, Similar peers 29 [0; 160], Top 1000 peers 88 [14 ; 279].

- Annex global comparison for NESK (2023 or last available data) (values listed as in source):
  - Operating Revenue (ml USD): NESK 264; Similar International SOEs in Revenue 264 [166; 479]; International SOEs 65 [12; 858].
  - ROA (%): NESK -5.6; Similar peers 2.9 [0.9; 6.3]; International SOEs 2.7 [0.4 ; 6.4].
  - ROE (%): NESK -399; Similar peers 6.8 [2.0; 12.5]; International SOEs 6.5 [1.2; 12.1].
  - Cost recovery: NESK 1.1; Similar peers 1.1 [1.0; 1.3]; International SOEs 1.1 [1.0; 1.3].
  - Current ratio (%): NESK 0.4; Similar peers 1.2 [0.7; 1.8]; International SOEs 1.2 [0.7; 2.0].
  - Debt to Assets (%): NESK 99; Similar peers 54 [43 ; 70]; International SOEs 49 [25 ; 67].
  - Number of employees: NESK 10400; Similar peers 571 [248 ; 1452]; International SOEs 284 [45 ; 1925].
  - Operating revenue per employee (th USD): NESK 25; Similar peers 470 [230; 1150]; International SOEs 406 [62 ; 1053].
  - Profit per employee (th USD): NESK -5; Similar peers 46 [7.0 ; 199]; International SOEs 34 [3.1 ; 169].

### Policy measures implemented and fiscal implications
- Debt‑to‑equity conversions:
  - 2022 Cabinet decree converted outstanding debt to capital for EPS and NESK with amounts: KGS 10.7 billion in 2023, KGS 55.8 billion in 2024, and KGS 57 billion in 2025.
  - These amounts are roughly equal to the loan repayments toward the state budget in 2026-2030.
  - Conversion reduced debt pressure on SOE balance sheets and improved financial health, but should be accompanied by full financial disclosure.
  - Note: Debt‑to‑equity conversion made by the Ministry of Finance, which becomes a co‑shareholder with stake to reach 1/3 of total share capital; Ministry of Energy remains majority shareholder.

- Fiscal risk magnitude and firm‑level confirmation:
  - Contingent liabilities of 12 percent of GDP, mainly from the energy sector, could lead to long‑term fiscal challenges.
  - Firm‑level analysis confirms major energy SOEs underperform international peers, partly due to below‑the‑cost tariffs and cost inefficiencies.
  - Energy SOEs incur heavy losses, have difficulties managing short‑term debts, and have high liabilities relative to assets, raising long‑term solvency concerns.

### Recommendations
- Monitoring and information sharing:
  - Establish a (digital) unified database between the MoF and SAMSP to facilitate information exchange, analysis of SOEs’ financial performance, and fiscal risks assessment.
  - The aggregate report on SOEs’ financial performance in the 2023 SAMSP report is a welcome step; MoF’s Statement of Information on Fiscal Risks and its chapter on SOE fiscal risks could be supplemented with tables and charts from the IMF SOE Health Check Tool and expanded coverage over time to include energy sector SOEs.
- Financial and governance reforms:
  - Continue tariff reform to improve cost‑recovery for energy SOEs and reduce costs of quasi‑fiscal activities; target noted in analysis is to reach full cost‑recovery by 2030.
  - Accompany ongoing debt‑to‑equity conversions with full financial disclosure.
  - Strengthen SOE governance—management, oversight, and transparency—to raise productivity, lower costs, and improve financial performance over time, supporting overall economic competitiveness and productivity.

*Source: IMF staff analysis in “Kyrgyz Republic: SOEs Health Check” (selected issues chapter content).*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2025/english/sipea2025083.pdf_