IMF Executive Board Concludes 2023 Article IV Consultation with Kyrgyz Republic

March 4, 2024

Washington, DC: The Executive Board of the International Monetary Fund (IMF) concluded the 2023 Article IV consultation[1]with the Kyrgyz Republic and considered and endorsed the staff appraisal on a meeting on February 5, 2024.

The Kyrgyz economy grew strongly in 2023, led by construction and trade, despite the challenging regional environment. 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, but demand pressures have kept core inflation elevated. The official current account deficit has remained significant due to the decline in net remittance inflows, lower gold exports, and unrecorded re-exports.

Output is expected to grow at its potential rate of 4 percent in the medium term, inflation decline to mid-single digits, and public debt remain contained. 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. The main risk to the outlook is a further escalation of the war in Ukraine and secondary sanctions that could weaken the Russian economy, reduce remittances and trade, and thereby growth and fiscal revenue.

Current favorable macroeconomic conditions present a window of opportunity to strengthen the policy framework and raise growth prospects through structural reforms. The priorities are strengthening governance, including management and privatization of state-owned enterprises, enhancing competition, reforming the electricity sector, and strengthening social safety nets. Early reform efforts will also help to unlock concessional external financing.

Executive Board Assessment[2]

Directors agreed with the thrust of the staff appraisal. They welcomed the strong recovery and steps taken to preserve macroeconomic stability, amidst the challenging external environment. Directors highlighted that while the outlook is favorable, it is subject to substantial risks, including related to the war in Ukraine, geoeconomic fragmentation, and climate change. Directors emphasized the need to capitalize on the favorable macroeconomic conditions to strengthen the policy framework and implement reforms to build resilience and support higher and more inclusive growth.

Directors welcomed the strong fiscal discipline and revenue performance, which have contained the fiscal deficit and reduced debt. They emphasized the need for continued consolidation to strengthen debt sustainability, while creating space for priority development and social spending. Noting the need to sustainably increase revenues, Directors encouraged efforts to streamline tax exemptions and special tax regimes and further strengthen revenue administration. Measures to contain the wage bill and reduce energy subsidies are also important.

Directors underscored the need for tight monetary policy to durably reduce inflation and for measures to improve the effectiveness of monetary policy. They highlighted that discontinuing central bank purchases of domestically produced gold would help to contain liquidity injections. Directors stressed the need to strengthen the autonomy and governance of the central bank by implementing the remaining Safeguards Assessment recommendations. Noting the need to buttress competitiveness and safeguard reserves, Directors encouraged greater exchange rate flexibility. Directors welcomed the authorities’ commitment to improving balance of payments statistics and highlighted the important role that Fund technical assistance could play. While noting that the banking sector remains sound, Directors encouraged continued vigilance, given risks related to nonperforming loans and increased foreign exchange exposures.

Directors called for ambitious reforms to support higher and more inclusive growth. They underscored the importance of measures to improve governance, strengthen competition policies, and enhance management of state‑owned enterprises. Noting the importance of anticorruption efforts, Directors recommended steps to enhance transparency and strengthen the AML/CFT framework. These efforts together with energy sector reform would help to improve the efficiency of resource allocation, mitigate risks from climate change and geoeconomic fragmentation, and catalyze external concessional financing.


Kyrgyz Republic: Selected Social and Economic Indicators, 2019–28

I. 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

II. Economic Indicators

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

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

11.4

21.5

14.1

Credit to private sector (in percent of GDP)

22.9

26.4

24.1

21.7

22.5

22.6

Velocity of broad money 4/

2.8

2.2

2.3

2.2

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

6,672

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

2,633

2,953

2,584

2,311

2,226

2,185

2,167

Gross reserves (months of next year imports, eop)

6.4

5.3

3.2

2.6

2.9

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

5.0

4.6

4.2

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).


[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report that forms the basis for discussion by the Executive Board.

[2] At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: http://www.IMF.org/external/np/sec/misc/qualifiers.htm .

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