IMF Executive Board Concludes 2025 Article IV Consultation with Kyrgyz Republic

IMF News, June 4, 2025

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The Kyrgyz Republic has shown strong economic performance despite global uncertainties with robust growth, stabilizing inflation, and declining public debt.
Recent outcomes:
- Economy grew by 9 percent annually since 2022.
- Headline inflation has returned to the central bank’s target range.
- Public debt declined to 36.6 percent of GDP in 2024.
Growth and inflation projections:
- Growth is projected to moderate to 6.8 percent in 2025.
- Growth is projected to converge to about 5¼ percent in the medium term.
- Inflation is expected to remain broadly stable under the assumption of prudent monetary policy.
Fiscal outlook:
- Large-scale public investments would widen the overall fiscal deficit.
- Public debt would remain contained under 42 percent of GDP thanks to robust GDP growth.

Assessment highlights:
- Remarkable resilience amid global economic uncertainty.
- Robust growth supported by expansion of external trade, inflows of remittances and labor, and resilient domestic demand.
- Inflation moderated to mid-single digits; underlying demand pressures warrant vigilance.
- Lower public debt provides needed fiscal space for priority investment in public infrastructure, energy generation capacity and human capital development.
Downside and upside scenarios:
- Downside: A further escalation of sanctions on Russia could weaken remittances and growth due to a depreciation of the ruble and slower growth in Russia.
- Upside/alternative: A lasting peace in the region could strengthen growth but may also unwind some of the trade and financial flows that have boosted recent growth.
Strategic medium-term priority:
- Rebuild policy buffers and advance structural reforms to strengthen resilience to shocks and support higher and more inclusive growth.

Raise fiscal sustainability and create space for development needs by:
- Enhancing tax policy by reducing tax exemptions and special tax regimes.
- Increasing progressivity of the Personal Income Tax.
- Further strengthening revenue administration.
- Containing the public wage bill and energy subsidies.
- Channeling Kumtor profits to the budget.
- Privatization of nonstrategic commercial SOEs.
Additional fiscal objectives:
- Containing fiscal deficits to limit borrowing and ease inflation pressures.

Preserve monetary policy independence to contain inflationary pressures and maintain price stability.
Suggested actions to ensure inflation remains within the central bank’s target range:
- Tightening of interest rates and liquidity conditions might be warranted if inflation pressures persist or rise.
- Lift interest rate caps.
- Extend instrument maturities.
- Phase out subsidized lending.
- Enhance exchange rate flexibility.
Specific policy recommendations for the NBKR:
- Staff supports the discontinuation of domestic gold purchases by the NBKR.
- Recommend halting NBKR profit transfers to the budget until its capital reaches the statutory threshold.

Sustaining high growth requires reforms to increase productivity and improve the business climate. Priority areas:
- Governance and SOE management.
- Competition policies.
- Labor markets.
- Climate adaptation.
Expected impacts of reforms:
- If duly implemented, the authorities’ anti-corruption strategy could lay a solid foundation for a more resilient and dynamic economy.
- Strengthening rule of law and protection of property rights, reducing the SOE footprint, and enhancing competition are crucial to build trust in public institutions and encourage private investment and innovation.
- Reforms to increase labor market flexibility, reduce gender gaps, and improve social safety nets would support more inclusive economic growth.
- Investments in sustainable energy and infrastructure, and health and education remain vital to enhance resilience to climate risks.

Growth since 2022: 9 percent (annual).
Public debt: 36.6 percent of GDP in 2024.
Growth projection for 2025: 6.8 percent.
Medium-term growth convergence: about 5¼ percent.
Public debt ceiling under projections: under 42 percent of GDP.
Inflation: moderated to mid-single digits; headline inflation returned to the central bank’s target range.

Press Release No. 25/176 — IMF Executive Board conclusion on the 2025 Article IV Consultation with the Kyrgyz Republic (June 4, 2025).