The International Monetary Fund (IMF) expects the economy of Kyrgyzstan to grow by 3.5 percent for 2017 with inflation inching up, but remaining within the National Bank of Kyrgyz Republic (NBKR) target range of 5 to7 percent. The recent tightening of controls at the border with Kazakhstan could shave as much as 0.2 percentage points from this year’s output growth and is expected to increase next year, if not resolved soon, an IMF team led by Mr. Edward Gemayel said in a statement at the conclusion of its visit to Bishkek from October 26 to November 8.
During the visit the team met with First Deputy Prime Minister Abdygulov, Minister of Finance Kasymaliev, Minister of Economy Novikov, Chairman of the National Bank Kulmatov, and Head of the Financial and Economic Analysis and Monitoring Department at the President’s Administration Ahmetova.
Kyrgyzstan’s growth continues across most sectors, benefiting from the impact of rising remittances on domestic demand and the recovery in key trading partners’ economies, according to the statement.
“Fiscal performance in 2017 veered off course under the impact of pre-election spending and rehabilitation efforts following the landslides in the south. More recently complications at the border with Kazakhstan have also put upward pressure on this year’s fiscal deficit. Policy initiatives, including the recently adopted universal child allowance, wage and pension increases, and tax exemptions, could add a permanent fiscal burden of 2 percent of GDP from 2018 onward, undermining consolidation efforts.
“The authorities recognize the serious risk these slippages pose for fiscal and debt sustainability. Together with the authorities the team discussed corrective actions, including in the areas of taxes, wages, energy subsidies, and social transfers. To this end, the authorities plan to streamline tax exemptions and take other measures aimed at broadening the tax base and improving administration, including through the Taza Koom Smart City program. Efforts will continue to improve the efficiency of the public-sector workforce and contain the burden of the wage bill on the economy. As part of the government’s program recently approved by Parliament, a new medium-term tariff policy for the energy sector will be developed with the aim to restoring cost recovery and financial sustainability to this sector. The mission emphasized the importance of targeting as the most efficient and equitable way of utilizing the limited resources of the social benefits program. In this context, the mission encouraged the authorities to explore ways to introduce targeting into the recently adopted universal child allowance law.
“The authorities are determined to maintain the Kyrgyz Republic’s leading position in the region when it comes to the openness of the economy and structural reforms. The government will develop a credible, effective, and enforceable fiscal rule to act as an anchor for fiscal policy and safeguard against slippages. The authorities are also committed to protect the integrity of the competitive and transparent public procurement framework enshrined in the procurement law, helping to improve the efficiency of public spending and combat corruption. The NBKR will continue to enhance its governance framework, and will remain focused on its core objective of maintaining price stability and ensuring a level playing field among the banks and financial institutions it supervises,” the statement concludes.
Posted by the Times of Central Asia.