Economy of Kyrgyzstan

According to cheeroutdoor, sovereign Kyrgyzstan has embarked on a course of radical market reforms, the program of which was prepared by experts from the IMF and the World Bank. In 1995–97, the deep crisis that had engulfed the Kyrgyz economy in 1991–94 was on the whole overcome, and financial stabilization tendencies were strengthened.

Since 1998, economic growth has begun, which, however, is not yet sustainable. Macroeconomic stabilization has not yet been achieved.

The economy, including the foreign economic sphere, is highly liberalized. Completed so-called. small-scale privatization; from 1999-2000, the privatization of strategically important sectors began – energy, mining, telecommunications. The non-state sector accounts for more than 79% of the total number of employees. But an effective owner has not yet formed. Introduced private ownership of land.

In 2001, the GDP of Kyrgyzstan, calculated at the official exchange rate, was 1.5 billion US dollars (308 dollars per capita), at purchasing power parity of currencies – 13.4 billion US dollars (2702 dollars per capita). According to the World Bank classification, Kyrgyzstan is included in the group of countries with low incomes. The share of Kyrgyzstan in world GDP is 0.004%.

The dynamics of investments is unstable, in 2002 they were only 54% of the level of 1991. Unemployment in recent years 3 – 3.1%. The growth of consumer prices slowed down, the index of which (compared to the previous year) was 109.6% in 2000 and 105.9% in 2002.
The involvement of the majority of the population in the market economy was accompanied by the agrarianization of employment and, accordingly, the economy. During 1991-2001, the share of those employed in agriculture increased from 34.5% to 52.9%, and in industry it decreased from 18.1
% to 8.2%. The share of industry in GDP decreased from 27.5% to 24.2%, agriculture increased from 35.6% to 37.1%. The service sector provides approx. 35% of GDP, construction – 4%.

Industrial production in 2002 amounted to 38% of the 1991 level. Main industries: non-ferrous metallurgy (including gold mining), hydropower (electricity production in 2002 amounted to 11.9 billion kWh), mining (mercury, antimony, rare metals), food, textile and footwear, mechanical engineering (production of technological equipment for trade and public catering enterprises, laboratory equipment, insulated winding wire, electric lamps, AC motors, assembly of color televisions, computers). During 1991-2002, the share of resource-extracting industries in the structure of industrial production increased from 9 to 60%, while the share of mechanical engineering decreased from 19 to 6%. The industrial sector is not efficient enough, less than 50% of enterprises are profitable.

The most important sector of the economy is agriculture. In 2002, agricultural production exceeded the level of 1991 by 12%. More than 55% of the gross agricultural output is plant growing products (cereals, sugar beet, cotton, tobacco, potatoes, vegetables); 45% – livestock products. Miscalculations in the implementation of reforms in the 1st half. 1990s caused serious damage to the traditional industry – mountain sheep breeding, its recovery is slow. 93% of agricultural products are produced in the non-state sector. A significant part of it is exported.

Being at the intersection of two major transport axes – North-South and West-East, Kyrgyzstan has the potential to become a major transport hub. The development of transport infrastructure (participation in the TRACECA project, reconstruction of the Andijan-Osh-Kashgar automobile route, the planned construction of a railway to China) is an important part of the concept of the revival of the Great Silk
Road, developed by President A. Akaev.

The main mode of transport is automobile. It accounts for 90% of the volume of transported goods, rail transport – 5.8%, pipeline transport – 4%. The length of roads is 36.7 thousand km, including 27.9 thousand km with a hard surface (1991), railways – 0.4 thousand km, gas pipelines – 200 km, inland waterways 0, 5 thousand km. 50 airports, 4 of which have paved runways. Balykchy port on Issyk-Kul lake.

The availability of modern means of communication is low – 392 thousand telephone sets, 39 registered telex and 44 fax machines in 2001. The level of Internetization is high: more than 51 thousand Internet users. A part of the Trans-Asian-European fiber optic communication line passes through the territory of the country.

Turnover of trade from ser. 1990s is growing steadily. In the structure of retail trade turnover, 53% falls on food and 47% on non-food products. The share of the non-state sector in the retail turnover is more than 99%. The service sector is dominated by traditional directions. In the total volume of paid services to the population, more than 60% account for transport services, housing and communal services, personal services, and 12% for educational services. The share of the private sector here is more than 70%.

International tourism is becoming an important branch of the economy. Its prospects are connected with the development of the resort area of Lake Issyk-Kul, skiing, mountaineering, the presence of numerous historical monuments, with the biosphere reserve Sary-Chelek. In 2000 more than 90 thousand foreign tourists visited Kyrgyzstan. The tourism infrastructure is underdeveloped. Since 2001, the process of privatization of resort facilities and tourism has revived.

The economic policy is aimed at deepening systemic market reforms, reducing government spending through a significant reduction in the state apparatus, creating the most favorable conditions for the development of the private sector as the basis for an economic breakthrough, stimulating foreign direct private investment, and preparing industrial projects that are attractive to investors. The primary goal of social policy is to overcome extreme poverty.

Since June 1991 a two-tier banking system has been created. The independence of the National Bank of Kyrgyzstan, which is the emission center, is envisaged. In 2000, there were 18 domestic commercial banks and 4 foreign ones, incl. 2 Russian. Since 1997, the NBK has been pursuing a policy of tightening requirements for the activities of commercial banks, the size of their authorized capital, reserves, and stimulating lending to the real sector. The refinancing rate decreased from 46% in 1995 to 6.8% in 2002. The
non-banking financial sector is poorly developed. The stock exchange has been functioning since 1995. The turnover of securities is low due to their lack of attractiveness for investors.

The chronic state budget deficit has been replaced by a surplus since 2001 (0.3% of GDP in 2002). More than 70% of the budget revenues are tax revenues, in the expenditure side of St. 1/2 – spending on social and cultural needs, more than 30% – on defense and security.

The standard of living of the population is extremely low. 52.3% of the population belongs to the poor, 17.8% – to the extremely poor, income differentiation is growing. The average monthly nominal wage in 2002 was $34.5, the minimum was approx. 2.13 dollars, the average monthly pension is 10.3 dollars. 90% falls on the purchase of consumer goods and services, approx. 6% – mandatory payments and contributions, approx. 4% – current savings. The fight against poverty includes measures to strengthen the targeting of support, create jobs, primarily through the development of small businesses, expand the microcredit system for rural residents, etc. The Araket and Emgek programs are supported by the World Bank and Western countries.

Based on the doctrine of the Great Silk Road, Kyrgyzstan seeks to develop foreign economic relations simultaneously in three directions – with neighboring countries (including the CIS countries), with Europe and with the countries of Southeast and East Asia, not opposing them to each other, but guided by its national interests.

The Russian Federation is considered as a strategic partner. Despite the growing dependence of the Kyrgyz economy on foreign trade, in 1992-2000 it was not possible to significantly increase its volume and stabilize the dynamics. Foreign trade turnover in 2002 amounted to 1072.2 million dollars (exports 485.5 million, imports 586.7 million), which is still below the level of 1998. The share of the CIS countries in Kyrgyzstan’s exports is 35%, in imports – 55% (2002). Main trading partners: Germany, Switzerland (for export), RF (15.6% of export and 19% of import in 2002), Uzbekistan, Kazakhstan, China.

Exports are dominated by goods with a low degree of processing (to the CIS countries – electricity, food products, cotton; in exports to countries outside the CIS, 60-70% is gold). More than half of imports are machinery, equipment and other investment goods. Kyrgyzstan was the first of the CIS countries to be admitted to the WTO in 1998.

The economy of Kyrgyzstan is completely dependent on the inflow of funds from outside, coming mainly in the form of loans and credits from the IMF, World Bank, EBRD, ADB and donor countries. The volume of foreign direct investment in 1994-2000 is estimated at 327 million US dollars.

Economy of Kyrgyzstan