IMF Executive Board Concludes 2023 Article IV Consultation with Kyrgyz Republic
IMF News, March 4, 2024
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- Published: March 4, 2024
Overview
- The Executive Board concluded the 2023 Article IV consultation with the Kyrgyz Republic and considered and endorsed the staff appraisal at a meeting on February 5, 2024.
- Press Release No. 24/68. Date on page: March 4, 2024.
- The Kyrgyz economy grew strongly in 2023, led by construction and trade. Tax revenue mobilization improved, and public debt declined.
- Headline inflation fell from 14.7 percent in December 2022 to 7.3 percent in December 2023, supported by a marked reduction in food and fuel inflation; core inflation remained elevated due to demand pressures.
- The official current account deficit remained significant because of the decline in net remittance inflows, lower gold exports, and unrecorded re-exports.
Outlook and risks
- Medium-term expectations:
- Output is expected to grow at its potential rate of 4 percent in the medium term.
- Inflation is expected to decline to mid-single digits.
- Public debt is expected to remain contained.
- External accounts:
- The current account deficit should narrow to more sustainable levels provided exports of gold production fully resume and re-exports are reflected in external accounts.
- Main downside risk:
- A further escalation of the war in Ukraine and secondary sanctions that could weaken the Russian economy, reduce remittances and trade, and thereby reduce growth and fiscal revenue.
- Directors noted other substantial risks, including geoeconomic fragmentation and climate change.
Executive Board assessment and policy recommendations
- Directors agreed with the thrust of the staff appraisal and welcomed the strong recovery and steps taken to preserve macroeconomic stability.
- Fiscal policy:
- Welcome strong fiscal discipline and revenue performance that contained the fiscal deficit and reduced debt.
- Emphasized need for continued consolidation to strengthen debt sustainability while creating space for priority development and social spending.
- Encouraged efforts to sustainably increase revenues by streamlining tax exemptions and special tax regimes and further strengthening revenue administration.
- Recommended measures to contain the wage bill and reduce energy subsidies.
- Monetary and financial policy:
- Underscored need for tight monetary policy to durably reduce inflation and for measures to improve the effectiveness of monetary policy.
- Highlighted that discontinuing central bank purchases of domestically produced gold would help to contain liquidity injections.
- Stressed need to strengthen the autonomy and governance of the central bank by implementing the remaining Safeguards Assessment recommendations.
- Encouraged greater exchange rate flexibility to buttress competitiveness and safeguard reserves.
- Welcomed authorities’ commitment to improving balance of payments statistics and noted the important role of Fund technical assistance.
- While the banking sector remains sound, Directors encouraged continued vigilance given risks related to nonperforming loans and increased foreign exchange exposures.
- Structural reforms and governance:
- Called for ambitious reforms to support higher and more inclusive growth.
- Priorities: strengthening governance (including management and privatization of state-owned enterprises), enhancing competition, reforming the electricity sector, and strengthening social safety nets.
- Recommended anticorruption efforts, enhancing transparency, and strengthening the AML/CFT framework.
- Noted that energy sector reform and governance improvements would help improve resource allocation efficiency, mitigate climate and geoeconomic risks, and catalyze external concessional financing.
Selected social and economic indicators (highlights)
- Social and demographic indicators:
- Population (in millions, 2022): 7.0
- GINI Index (2020): 0.29
- Unemployment rate (ILO estimate, in percent, 2022): 4.6
- Life Expectancy at birth in years (2021): 72
- Poverty rate (in percent, national definition, 2021): 33
- Adult literacy rate (percent of popul., 2019): 100
- Per capita GDP (World Bank, in million U.S. dollars, 2022): 1,655
- Under-five mortality (per 1000 live births, 2021): 17.4
- Real and nominal output (selected years):
- Nominal GDP (in billions of soms): 2019: 654; 2020: 640; 2021: 783; 2022: 971; 2023: 1,134; 2024: 1,286; 2025: 1,429; 2026: 1,568; 2027: 1,708; 2028: 1,847
- Nominal GDP (in millions of U.S. dollars): 2019: 9,372; 2020: 8,283; 2021: 9,256; 2022: 11,672; 2023: 12,782; 2024: 13,791; 2025: 14,873; 2026: 15,842; 2027: 16,752; 2028: 17,594
- Real GDP (growth in percent): 2019: -7.0; 2020: 5.5; 2021: 6.3; 2022: 4.2; 2023: 4.4; 2024: 4.0
- Nongold real GDP (growth in percent): 2019: 4.1; 2020: -7.5; 2021: 5.9; 2022: 5.2; 2023: 4.5; 2024: 4.3
- GDP per capita (in U.S. dollars): 2019: 1,467; 2020: 1,271; 2021: 1,391; 2022: 1,718; 2023: 1,844; 2024: 1,949; 2025: 2,058; 2026: 2,149; 2027: 2,226; 2028: 2,289
- Inflation:
- Consumer prices (12-month percent change, eop): 2019: 3.1; 2020: 9.7; 2021: 11.2; 2022: 14.7; 2023: 10.0; 2024: 8.0
- Consumer prices (12-month percent change, average): 2019: 1.1; 2020: 11.9; 2021: 13.9; 2022: 11.7; 2023: 8.6; 2024: 6.6; 2025: 4.8
- General government finances (in percent of GDP):
- Revenue: 2019: 30.8; 2020: 29.0; 2021: 31.4; 2022: 36.5; 2023: 38.5; 2024: 36.0; 2025: 35.2; 2026: 34.6; 2027: 34.2; 2028: 33.9
- Of which: Tax revenue: 2019: 18.6; 2020: 16.4; 2021: 18.9; 2022: 23.4; 2023: 25.5; 2024: 25.2; 2025: 24.6; 2026: 24.1; 2027: 23.8; 2028: 23.7
- Expense (selected years): 2019: 25.9; 2020: 28.2; 2021: 26.1; 2022: 27.8; 2023: 30.3; 2024: 29.3; 2025: 29.1; 2026: 28.9
- Gross operating balance: 2019: 4.9; 2020: 0.8; 2021: 5.3; 2022: 8.7; 2023: 8.2; 2024: 6.8; 2025: 6.1; 2026: 5.6
- Net acquisition of nonfinancial assets: 2019: 3.9; 2020: 6.0; 2021: 9.0; 2022: 8.1; 2023: 8.4; 2024: 7.8; 2025: 7.9
- Overall balance (net lending/ borrowing) 2/: 2019: -0.1; 2020: -3.1; 2021: -0.7; 2022: -0.3; 2023: 0.1; 2024: -1.6; 2025: -1.7; 2026: -2.2; 2027: -2.6; 2028: -2.9
- Primary net lending/ borrowing: 2019: -2.1; 2020: 0.0; 2021: -0.5; 2022: -0.6; 2023: -0.9; 2024: -1.2; 2025: -1.3
- Total state government debt 3/: 2019: 48.8; 2020: 63.6; 2021: 56.2; 2022: 49.2; 2023: 46.9; 2024: 44.3; 2025: 42.7; 2026: 42.1; 2027: 42.2; 2028: 42.9
- Of which domestic debt: 2019: 9.2; 2020: 9.5; 2021: 9.8; 2022: 10.2; 2023: 11.5; 2024: 13.2; 2025: 14.9
- Monetary sector (selected):
- Reserve money (percent change, eop): 2019: 11.0; 2020: 24.8; 2021: 6.5; 2022: 44.9; 2023: 3.0; 2024: 7.1
- Broad money (percent change, eop): 2019: 12.8; 2020: 23.9; 2021: 19.1; 2022: 30.6; 2023: 18.4; 2024: 10.8
- Credit to private sector (percent change, eop): 2019: 12.6; 2020: 11.4; 2021: 21.5; 2022: 14.1
- Credit to private sector (in percent of GDP): 2019: 22.9; 2020: 26.4; 2021: 21.7; 2022: 22.5; 2023: 22.6
- Velocity of broad money 4/: 2019: 2.8; 2020: 2.2; 2021: 2.3
- Policy Rate: 2019: 5.0; 2020: 13.0
- External sector (selected):
- Current account balance (in percent of GDP): 2019: -11.5; 2020: -8.0; 2021: -43.6; 2022: -31.8; 2023: -9.7; 2024: -7.9; 2025: -5.9; 2026: -5.0
- Export of goods and services (in millions of U.S. dollars): 2019: 3,126; 2020: 2,444; 2021: 3,301; 2022: 3,564; 2023: 6,672; 2024: 9,598; 2025: 10,212; 2026: 10,575; 2027: 10,783; 2028: 10,903
- Export growth (percent change): 2019: 13.8; 2020: -21.8; 2021: 35.1; 2022: 87.2; 2023: 43.9; 2024: 6.4; 2025: 3.6; 2026: 2.0
- Import of goods and services (in millions of U.S. dollars): 2019: 5,690; 2020: 4,060; 2021: 5,938; 2022: 10,497; 2023: 11,989; 2024: 12,434; 2025: 13,017; 2026: 13,328; 2027: 13,641; 2028: 14,036
- Import growth (percent change): 2019: -3.8; 2020: -28.7; 2021: 46.3; 2022: 76.8; 2023: 14.2; 2024: 3.7; 2025: 4.7; 2026: 2.4; 2027: 2.9
- Gross International reserves (in millions of U.S. dollars) 5/: 2019: 2,176; 2020: 2,628; 2021: 2,779; 2022: 2,633; 2023: 2,953; 2024: 2,584; 2025: 2,311; 2026: 2,185; 2027: 2,167
- Gross reserves (months of next year imports, eop): 2019: 3.2; 2020: 2.6; 2021: 2.1; 2022: 1.9; 2023: 1.8
- Gross reserves (months of next year imports adjusted for re-exports, eop): 2019: 3.8; 2020: 2.7; 2021: 2.5
- External public debt outstanding (in percent of GDP): 2019: 41.0; 2020: 54.5; 2021: 46.7; 2022: 39.5; 2023: 37.1; 2024: 34.4; 2025: 32.5; 2026: 28.0
- External public debt service-to-export ratio (in percent): 2019: 7.3; 2020: 6.2
- Memorandum items:
- Exchange rate (soms per U.S. dollar, average): 2019: 69.8; 2020: 77.4; 2021: 84.7; 2022: 83.2
- Real effective exchange rate (2010=100) (average): 2019: 99.9; 2020: 95.8; 2021: 95.2; 2022: 105.8
Source: IMF Executive Board concluding statement and staff appraisal (Press Release No. 24/68).
