The International Monetary Fund (IMF) has commended the Kyrgyz Republic for its strong economic performance amid global uncertainties, while urging fiscal prudence and cautious regulation of digital assets. Following a two-week mission to Bishkek led by IMF official Nikoloz Gigineishvili, the Fund issued a detailed assessment of the country’s macroeconomic outlook, highlighting both its achievements and emerging challenges.
Rapid Growth, Tamed Inflation, and Lower Debt
According to the IMF, the Kyrgyz economy has grown at an impressive 9% annually since 2022, buoyed by increased trade, capital inflows, and government-backed construction initiatives. Inflation—once surging post-Covid—has been successfully contained, while public debt dropped sharply from 64% of GDP in 2020 to approximately 36.5% in 2024.
Per capita income has nearly doubled, with unemployment and poverty levels falling significantly. However, a sizable portion of the country’s external trade activity remains unrecorded, particularly goods re-exported into the Eurasian Economic Union, which the IMF estimates at about 23% of GDP in 2024.
Adjusting for these unofficial trade flows, the IMF estimates that exports of goods and services rose by 40% last year, narrowing the actual current account deficit to around 8% of GDP, down from the reported 30.7%.
Outlook: Slower Growth Ahead, Major Investments on the Horizon
Growth is expected to cool to below 7% in 2025 and further to 5.25% over the medium term, reflecting a normalization of the re-export boom. The government is embarking on ambitious infrastructure projects, including the Kambarata-1 hydropower plant and the China-Kyrgyzstan-Uzbekistan railway, which will increase public investment and widen fiscal deficits.
Despite this, the IMF believes that strong GDP growth will keep public debt under control. However, risks loom large, particularly from geopolitical shocks, including potential escalations in Western sanctions on Russia, commodity price swings, and climate-related disruptions.
Fiscal Policy: Balance to Shift into Deficit
The fiscal outlook points to a swing from a surplus (1.9% of GDP in 2024) to a deficit (3.4% in 2025), driven largely by increased capital expenditure and declining trade-related tax revenues. The IMF recommends careful spending prioritization, stronger revenue mobilization—including tax reform and better targeting of social spending—and restraint in taking on external commercial debt.
“Lowering fiscal deficits would strengthen buffers, improve resilience to shocks, and ease inflation pressures,” the Fund noted.
Monetary Policy: Inflation Control Requires Vigilance
Inflation has risen from its low of 3.8% in August 2024 to 7% in February 2025, prompting the IMF to recommend timely interest rate hikes and improved liquidity management. It applauded the central bank’s decision to stop domestic gold purchases and emphasized the importance of independence and strong governance at the National Bank of the Kyrgyz Republic (NBKR).
The IMF criticized the ongoing practice of transferring NBKR profits to the state budget, warning that it undermines the bank’s credibility and price stability mandate.
Crypto and Digital Assets: Proceed with Caution
On digital assets, the IMF urged caution, stating that while a central bank digital currency (CBDC) could improve financial inclusion, granting legal tender status to crypto assets would jeopardize monetary sovereignty and financial stability.
The Fund called for robust regulatory frameworks aligned with international standards, particularly those of the Basel Committee on Banking Supervision, to mitigate the systemic risks associated with crypto volatility, AML/CFT concerns, and fraud.
Financial Sector: Stable but Needs Oversight
While banks remain well-capitalized and liquid, non-performing loans remain high at over 10%. The IMF advised proactive macroprudential measures to guard against shocks and suggested aligning capital markets regulation with global best practices to attract more investment.
Structural Reforms and Anti-Corruption Drive
The IMF welcomed the Kyrgyz government’s new 2025–2030 Anti-Corruption Strategy and called for deeper structural reforms in governance, SOE management, labor markets, and climate resilience. It emphasized the importance of private sector development, protection of property rights, and competitive markets.
Continued Support Through Technical Assistance
Finally, the IMF reaffirmed its commitment to support Kyrgyzstan through ongoing and expanded technical assistance, including in areas such as national accounts, reserve management, and regulation of digital assets.
As the country navigates a challenging global environment, the IMF concluded that now is the time to build policy buffers and accelerate reforms to sustain growth and protect macroeconomic stability.
