Baku, Azerbaijan, Dec. 15
By Nigar Guliyeva – Trend:
The Kyrgyz economy is showing welcoming signs of recovery as the external environment is gradually improving, Acting Chair and IMF Deputy Managing Director, Tao Zhang said.
He made the remark following the Executive Board of the International Monetary Fund (IMF) discussion on the Kyrgyz Republic’s economic performance under the three-year Extended Credit Facility (ECF) arrangement on Dec.15.
The Board’s completion of the reviews enables the immediate disbursement of an amount equivalent to 19.028 million soms (about $26.9 million). This would bring total disbursements under the arrangement to an amount equivalent to 57.084 million soms (about $80.7 million). The ECF arrangement for 66.6 million soms (about $94.2 million) was approved on April 8, 2015
Zhang said that while significant risks remain, debt and financial sector vulnerabilities have subsided in Kyrgyzstan
“Fiscal consolidation remains essential to rebuild buffers and ensure debt sustainability. Consolidation should focus on increasing tax revenues by implementing permanent measures, such as broadening the tax base and strengthening the tax and custom administration. Rationalizing expenditures will also be needed, and involves reforming public wages, cutting subsidies, better targeting social benefits, and improving the public investment framework," he added.
Zhang stressed that monetary policy remains appropriately focused on maintaining price stability.
"The National Bank of the Kyrgyz Republic (NBKR) should continue to pursue a two-way flexible exchange rate policy, and limit interventions only to smoothing the excessive volatility of the som. The envisaged transition to inflation targeting is welcome.
“To ensure a level playing field, the NBKR should refrain from taking equity positions in banks or investment entities. Further progress is needed in amending the Banking Law to strengthen NBKR independence and governance," he said.
Zhang further noted that the authorities are encouraged to swiftly resume their structural reform agenda, especially in public finance management to enhance public sector efficiency. Improving the business environment and fighting corruption will be essential to promote private sector-led growth.