FEDERATION OF EURO-ASIAN STOCK EXCHANGES
ANNUAL REPORT JUNE 2013
KYRGYZ STOCK EXCHANGE
The government forecasts its budget deficit at
5.1% of GDP in 2010. The widening deficit is a
result of the increased budgetary allocations for
the development budget (mainly infrastructure
projects), monetization of benefits, higher
pensions, and increased compensation to
vulnerable groups (to offset an increase in
electricity and heating tariffs). The National Bank
of the Kyrgyz Republic (NBKR) followed an
expansionary monetary policy. It reduced banks’
reserve requirement from 10% at the start of
the year to 9.5% from June; and lowered the
discount rate from 14.4% in January to a record
low 0.9% at year-end. Although the commercial
banks’ lending rate remained almost unchanged
(at about 20%), credit to the private sector
surged by 46.5%. For the year, money supply
rose by 20.4%, carried by increased net foreign
assets (reflecting the budget assistance) and
the expanded credit to the private sector.
Among financial reforms, a deposit insurance
scheme was launched in April 2009, covering
deposits up to Som100,000 ($2,290). All banks
are required to participate. A new law under
which agricultural land can be used as collateral
for loan receipts was adopted on 29 June
2009. In the energy sector, the government
believes that the new tariff will bring the sector
to cost-recovery levels and attract private
investment. It has no plans for any further tariff
increases this year. The PRC made a preliminary
agreement to grant a $342 million loan for a
power transmission line, which would help the
country ensure energy security. Construction is
expected to start in 2011 and finish 2 years later.
In October 2009, the country embarked on
a government sector reform under which the
number of ministries and agencies has been
reduced. The reform also envisages cutting the
number of government employees by 30% and
aims to streamline the work of government and
cut other costs.
Economic prospects
GDP is projected to grow at 5.5% and 6.0% in
2010 and 2011, respectively. The expansion
is mainly due to the expected recovery of
Kazakhstan and the Russian Federation,
boosting demand for exports, foreign direct
investment inflows, and migrants’ remittances—
the last of which will directly bolster private
consumption. Foreign-financed hydropower
projects should carry on underpinning
strong construction growth, but until all those
projects are brought into commission (the
first is scheduled for May), power shortfalls
will continue to hamper manufacturing. The
government will also provide impetus to growth
as it is planning to raise spending on wages
and pensions and on infrastructure, the latter
with financing assistance from development
partners.
The expected increase in global food and oil
prices will exert upward pressure on prices,
though the contracted import price for natural
gas will fall by about 10%, as will stronger
workers’ remittances. These forces will push
up inflation in 2010 and 2011, to 8.5% and
9.0%, respectively. Given the large import share
in the consumer basket, the NBKR will use
the exchange rate to mitigate inflation. Credit
growth will remain subject to the bottlenecks
that face Kazakh banks (which account for half
the banking sector) in supplying capital to their
subsidiaries in this country. However, increased
foreign exchange inflows may allow the NBKR to
adopt an accommodative credit policy.
Information obtained from the Exchange.
Key Information Contacts
National Bank of the Kyrgyz Republic www.nbkr.kg
Ministry of Finance www.minfin.kg
The Service of Supervision and Regulations of Financial Market of Kyrgyz Republic www.nsc.kg
Ministry of Foreign Trade and Industry of the Kyrgyz Republic www.mvtp.kg
CONTACT INFORMATION
Contact Name Mr. Kumushbek Shamkanov
E-mail [email protected]
Website www.kse.kg
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