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Deficit of Public Finances in Kyrgyzstan to Rise to 5.7%

Saturday 3 October 2015

BISHKEK (24.kg news agency) — According to the Eurasian Development Bank (EDB) the deficit of public finances in Kyrgyzstan may rise to 5.7% of GDP at the end of 2015.

The analystes of EDB think the change of exchange rate of major countries-partners of Kyrgyzstan affects the dynamics of balance of payments and increase the volatility of the exchange rate of som. Renewed in August devaluation fluctuations led to growth of inflation in mid-September to 5.9% in annual terms. In this situation, preservation by the National Bank of the current policy of exchange rate flexibility is an important precondition to support the economy both in terms of regulation of the external balance, and from the point of view of monetary policy.

The EDB report says:

In 2015, there expected to increase the salaries of certain categories of civil servants and social support, the spendings on the parliamentary elections and growth of capital investments. The bulk of the expenditures expected during the second half of the year, before and after the parliamentary elections. Amid modest revenue growth, the continuation of cost containment would allow the government to create a buffer stock in case of a sharp deterioration in the economy. However, consolidation of budget expenditures is difficult against the background of parliamentary elections.

[…]

Some increase in prices can be observed before the end of the year amid lower economic activity and an increase in government spending. Periodic foreign exchange intervention and a possible increase in interest rates of the National Bank of the Kyrgyz Republic will compensate this factor in some extent. The average annual inflation rate is expected to reach 6-7 percent.

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