## IMF Staff Concludes Visit to The Kyrgyz Republic

_IMF News, February 16, 2017_

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## Bibliographic details
- Published: February 16, 2017

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### Mission overview
- IMF mission led by Mr. Edward Gemayel visited Bishkek during February 9–15.
- Purpose: take stock of latest economic developments, discuss progress on economic reforms, and prepare for the upcoming combined Article IV consultation and fourth review under the ECF program planned for April.
- Views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board. This mission will not result in a Board discussion.

### Key economic developments and indicators
- Growth accelerated towards the end of 2016, reaching 3.8 percent.
- Deflation of 0.5 percent in 2016, due in part to exchange rate appreciation of about 9 percent.
- Despite a shortfall in tax revenue, the 2016 deficit was contained to 4.5 percent of GDP due to restrained spending on non-priority items and the rephasing of some investment projects.

### Fiscal policy findings and recommendations
- Consolidation efforts should continue to meet the 2017 fiscal deficit target of 3 percent of GDP.
- Important revenue and expenditure measures to continue implementing (as announced last year):
  - Elimination of the value added tax (VAT) exemption on flour.
  - Rationalizing the public sector wage bill.
  - Streamlining spending on goods and services.
- Resisting spending pressures will be critical in the run up to the presidential election.
- Developing a credible and transparent fiscal rule will help maintain fiscal discipline.

### Monetary policy guidance
- The current neutral and cautious monetary policy stance is appropriate.
- Further easing should be conditional on inflation being on track to reach the target range of 5-7 percent.
- The National Bank of the Kyrgyz Republic (NBKR) should continue to carry out foreign exchange interventions only when necessary to smooth out excessive fluctuations while maintaining two-way flexibility.

### Financial sector resilience and AML/CFT
- Efforts to bolster financial sector resilience should continue.
- The liquidation of banks remaining under DEBRA should be completed as planned.
- The unification of bank capital requirements should not be delayed.
- The passage of the anti-money laundering and counter finance of terrorism (AML/CFT) law is vital for the stability of the financial sector.
  - The law is necessary to keep the Kyrgyz Republic on the white list of the Eurasian Group on AMl/CFT.
  - Failure to pass the law could lead to loss of correspondent banking relations and cut the financial sector off from the outside world.

### Engagement and acknowledgments
- During the visit, the team met with government officials, private sector representatives, and the diplomatic community.
- The IMF team thanked the Kyrgyz authorities and technical staff for a warm welcome and constructive discussions.

*IMF Staff statement — IMF Staff Concludes Visit to The Kyrgyz Republic (February 16, 2017).*

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## References

- [Kyrgyz Republic and the IMF](http://www.imf.org/external/country/KGZ/index.htm)
- [Press Releases](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
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_Source: https://www.imf.org/en/news/articles/2017/02/16/pr1752-imf-staff-concludes-visit-to-the-kyrgyz-republic_