IMF Staff Completes 2023 Article IV Mission to the Kyrgyz Republic

December 4, 2023

End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.
  • The Kyrgyz economy grew strongly in 2022 and so far in 2023, fiscal revenue improved, and public debt declined, but inflation has remained elevated despite the recent downward trend.
  • In the face of the heightened global uncertainty, the country could strengthen its resilience to future shocks by creating additional fiscal space, reducing inflation further, and rebuilding reserves.
  • Improving governance, management of state-owned enterprises, and competition, and reforming the electricity sector are essential to boost medium-term growth prospects and support job creation.

Washington, DC: An International Monetary Fund (IMF) mission led by Mr. Nikoloz Gigineishvili held the 2023 Article IV consultation with the Kyrgyz Republic during November 9 - 22, 2023 in Bishkek. At the conclusion of the mission, Mr. Gigineishvili issued the following statement:

The Kyrgyz economy performed strongly in 2022 and expanded at 6.3 percent despite the headwinds from the difficult regional environment. Tax revenue improved sharply, and public debt declined to 49 percent of GDP. Headline inflation fell from 14.7 percent in December 2022 to 9.2 percent in October 2023, but demand pressures have kept core inflation elevated. The current account deficit widened significantly to 43.6 percent of GDP in 2022 as non-oil imports increased by 26 percent of GDP and gold exports were suspended, while re-exports to Russia were not captured in official statistics. Growth is expected to remain around 4 percent in the medium term and inflation would decline to mid-single digits. However, further escalation of the war in Ukraine and secondary sanctions could weaken the Russian economy, result in a return of Kyrgyz migrant workers, and reduce trade and growth.

Strong revenue performance and lower public debt provide an additional fiscal buffer to counter adverse external shocks. Reducing fiscal deficits further would strengthen debt sustainability and support disinflation, but in the absence of new tax measures, VAT collections could decline in the medium term with the envisaged moderation of imports. Additional fiscal space could be created by eliminating inefficient tax exemptions and streamlining special tax regimes, increasing the progressivity of the Personal Income Tax, strengthening revenue administration, and optimizing the public wage bill and reducing energy subsidies.

Strengthening operational and legal autonomy of the central bank is essential for the credibility of monetary policy. To effectively serve its primary objectives of price and financial sector stability, the central bank should refrain from pursuing other activities such as gold exports or prematurely lowering interest rates. To reduce inflation, adequately tight interest rate policy should go hand in hand with liquidity tightening, including by discontinuing central bank’s gold purchases and avoiding unwarranted transfers of central bank profits to the budget, while greater exchange rate flexibility would improve competitiveness and strengthen international reserves. The banking sector remains sound, but the heightened uncertainty warrants supervisory vigilance as non-performing loans may increase if growth slows. 

Medium to long-term growth can be raised through structural reforms that improve the efficiency of resource allocation in the economy. The priorities are strengthening governance, including public procurement and management of state-owned enterprises, enhancing competition, reforming the electricity sector, and strengthening social safety nets. Early efforts are also needed to strengthen resilience of the Kyrgyz economy to climate change including by investing in green infrastructure, healthcare, and education. These reforms will also help unlock concessional external financing.

The mission is grateful to the authorities for open and constructive discussions and their hospitality.

 

 

 

 

 

 

 

Kyrgyz Republic: Selected Social and Economic Indicators, 2019-2028

 


I. Social and Demographic Indicators



Population (in millions, 2021)

6.9

 

GINI Index (2020)

0.29

Unemployment rate (ILO estimate, in percent, 2021)

9.1

 

Life Expectancy at birth in years (2020)

72.0

Poverty rate (in percent, national definition, 2021)

33

 

Adult literacy rate (percent of pop., 2018)

99.6

Per capita GDP (world Bank, in million U.S. dollars, 2021)

1,276

 

Under-five mortality (per 1000 live births, 2020)

18








II. Economic Indicators


                   


         



       



2019

2020

2021

2022


2023

2024

2025

2026

2027

2028


                 

Estimate


Projections



Real Sector

               


         



Nominal GDP (in billions of soms)

   

654

640

783

971


1,134

1,286

1,429

1,568

1,708

1,847


Nominal GDP (in millions of U.S. dollars)

   

9,372

8,283

9,256

11,672


12,782

13,791

14,873

15,842

16,752

17,594


Real GDP (growth in percent)

   

4.6

-7.0

5.5

6.3


4.2

4.4

4.2

4.0

4.0

4.0


Nongold real GDP (growth in percent)

   

4.1

-7.5

5.9

5.2


4.5

4.3

4.3

4.1

4.1

4.1


GDP per capita (in U.S. dollars)

   

1,467

1,271

1,391

1,718


1,844

1,949

2,058

2,149

2,226

2,289


Consumer prices (12-month percent change, eop)

   

3.1

9.7

11.2

14.7


10.0

8.0

5.5

5.5

4.0

4.0


Consumer prices (12-month percent change, average)


 

1.1

6.3

11.9

13.9


11.7

8.6

6.6

5.5

4.8

4.0


                   


         



General government finances (in percent of GDP 1/

         


         



Revenue

   

30.8

29.0

31.4

36.5


38.5

36.0

35.2

34.6

34.2

33.9


Of which: Tax revenue

   

18.6

16.4

18.9

23.4


25.5

25.2

24.6

24.1

23.8

23.7


Expense

   

25.9

28.2

26.1

27.8


30.3

29.3

29.1

28.9

28.9

29.0


Gross operating balance

   

4.9

0.8

5.3

8.7


8.2

6.8

6.1

5.6

5.3

4.9


Net acquisition of nonfinancial assets

   

4.9

3.9

6.0

9.0


8.1

8.4

7.8

7.8

7.9

7.8


Overall balance (net lending/ borrowing) 2/

   

-0.1

-3.1

-0.7

-0.3


0.1

-1.6

-1.7

-2.2

-2.6

-2.9


Primary net lending/ borrowing

           









   

0.8

-2.1

0.0

0.8


1.1

-0.5

-0.6

-0.9

-1.2

-1.3


Total state government debt 3/

     

48.8

63.6

56.2

49.2


46.9

44.3

42.7

42.1

42.2

42.9


Of which domestic debt

     

7.8

9.2

9.5

9.7


9.8

10.0

10.2

11.5

13.2

14.9


                   


         



Monetary sector

               


         



Reserve money (percent change, eop)

   

11.0

24.8

6.5

44.9


3.0

7.1

     



Broad money (percent change, eop)

   

12.8

23.9

19.1

30.6


18.4

10.8

     



Credit to private sector (private change, eop)

 

14.9

12.6

11.7

11.5


21.9

13.7

     



Credit to private sector (in percent of GDP)

 

22.9

26.4

24.1

21.7


22.6

22.7

     



Velocity of broad money 4/

     

2.8

2.2

2.3

2.0


2.2

2.2

     



Policy Rate

       

4.3

5.0

8.0

13.0


...

     



                   


         



External sector

               


         



Current account balance (in percent of GDP)

 

-11.5

4.5

-8.0

-43.6


-31.8

-9.7

-7.9

-5.9

-5.0

-5.0


Export of goods and services (in millions of U.S. dollars)

3,126

2,444

3,301

3,564


6672

9,598

10,212

10,575

10,783

10,903


Export growth (percent change)

     

13.8

-21.8

35.1

8.0


87.2

43.9

6.4

3.6

2.0

1.1


Import of goods and services (in millions of U.S. dollars)

5,690

4,060

5,938

10,497


11,989

12,434

13,017

13,328

13,641

14,036


Import growth (percent change)

     

-3.8

-28.7

46.3

76.8


14.2

3.7

4.7

2.4

2.4

2.9


Gross International reserves (in millions of U.S. dollars) 5/

2,176

2,628

2,779

2,624


2,944

2,584

2,318,

2,240,

2,200

2,182


Gross reserves (months of next year imports, eop)

 

6.4

5.3

3.2

2.6


2.8

2.4

2.1

2.0

1.9

1.8


Gross reserves (months of next year imports adjusted for re-exports, eop)


6.5

5.3

3.2

3.6


3.8

3.2

2.7

2.5

2.3


     2.2


External public debt outstanding (in percent of GDP)

 

41.0

54.5

46.7

39.5


37.1

34.4

32.5

30.6

29.0

28.0


External public debt service-to-export ratio (in percent)

6.6

9.7

5.6

7.3


6.2

4.9

4.6

4.1

4.0

3.6


                   


         



Memorandum items:

               


         



Exchange rate) soms per U.S. dollar, average)

 

69.8

77.4

84.7

83.2


...

...

...

...

...


Real effective exchange rate (2010=100) (average)

 

99.9

95.8

95.2

105.8


...

...

...

...

...


                   


         



Sources: Kyrgyz authorities and IMF staff estimates and projections.

 


1/ General government comprises the State government, the Social Fund, and the Mandatory Health Insurance Fund (MHIF).


The State government comprises central and local governments.


2/ Includes loans by the State government to state-owned enterprises in the energy sector.


3/ Calculated at end-period exchange rates. 


4/ Twelve-month GDP over end-period broad money.


5/ Gross international reserves exclude reserve assets in non-convertible currencies.

 

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