The International Monetary Fund (IMF) Executive Board has concluded its 2025 Article IV consultation with the Kyrgyz Republic, noting the country's strong economic performance amid global uncertainties. Since 2022, the Kyrgyz economy has grown at an annual rate of 9 percent, with inflation returning to the central bank's target range and public debt decreasing to 36.6 percent of GDP in 2024.
Future growth is projected to moderate to 6.8 percent in 2025 and stabilize around 5¼ percent in the medium term as re-export trade normalizes and domestic demand eases. Inflation is expected to remain stable if monetary policy remains prudent. Despite large-scale public investments potentially widening the fiscal deficit, public debt is anticipated to stay below 42 percent of GDP due to robust GDP growth.
In light of ongoing global uncertainty, priorities for the medium term include rebuilding policy buffers and advancing structural reforms to enhance economic resilience and support more inclusive growth.
The IMF's assessment highlights that "the Kyrgyz Republic has demonstrated remarkable resilience amidst global economic uncertainty." The report attributes this resilience to robust external trade expansion, remittance inflows, labor contributions, and strong domestic demand. While inflation has moderated, underlying demand pressures require vigilance.
Looking forward, economic activity is expected to slow from recent high levels as re-export trade stabilizes. Growth should align with a potential rate of 5¼ percent in the medium term; however, this outlook remains uncertain due to regional geopolitical developments. Sanctions on Russia could impact remittances and growth negatively through ruble depreciation and slower Russian growth. Conversely, regional peace might have positive effects but could also reduce some beneficial trade and financial flows experienced recently.
To maintain fiscal sustainability while addressing development needs, authorities are advised to improve tax policies by reducing exemptions and special regimes, increasing personal income tax progressivity, and strengthening revenue administration. Limiting public wage bills and energy subsidies while channeling Kumtor profits into the budget are recommended measures for fiscal sustainability.
Monetary policy independence is deemed essential for containing inflationary pressures and maintaining price stability. Given robust domestic demand, further efforts are needed to keep inflation within target ranges through possible interest rate tightening if necessary.
Sustaining high growth rates requires structural reforms aimed at productivity enhancement and business climate improvement. Key reform areas include governance enhancement, competition policies adaptation, labor market flexibility increase, gender gap reduction, social safety net improvements along with sustainable energy investments crucial for climate risk resilience enhancement.