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International Reserves of Kyrgyzstan National Bank Reached $1.96 bln

Saturday 20 October 2012

Bishkek (24.kg news agency) – International reserves and Foreign Currency Liquidity of Kyrgyzstan National Bank (NBKR) have reached US $1.96 bln, 8.6% of which is in gold, NB’s Chairwoman Zina Asankozhoeva told journalists.

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Assessing Development Strategies to Achieve the MDGs in The Kyrgyz Republic (PDF)
This report was elaborated as part of the capacity-development project “Realizing the Millennium Development Goals through socially-inclusive macroeconomic policies”, which was implemented by the Development Policy an Analysis Division of the United Nations Department of Economic and Social Affairs (DPAD/UN-DESA), in close collaboration with the United Nations Development Programme in Kyrgyzstan. The overall objective of the project was to strengthen the capacity of policymakers to formulate and evaluate socially-inclusive macroeconomic policies aimed at facilitating the achievement of the MDGs through the adaptation of an integrated modelling framework to country-specific conditions.
The methodological framework is based on the adaptation of the economy-wide model system, known as Maquette for MDGs Simulation (MAMS) – a dynamic computable general equilibrium (CGE) model that includes a special module for the “production” of services associated with the Millennium Development Goals (MDGs). It also compromises methodologies at the micro level to identify determinants of MDG achievement, on the one hand, and to quantify effects on poverty and inequality, on the other.

“These are the data for October 1, 2012, she explained. Since June 2011, the foreign reserves increased by $67 million. They include assets in gold, special holdings and portfolio of currencies”.

In 2012, to diversify the assets of Kyrgyzstan, the basket of currencies has been expanded by means of the Chinese yuan and the Singapore dollar.

“Prior to 2011, the amount of gold on the balance of Kyrgyzstan NBKR was 2.5 tons, Zina Asankozhoeva said. It remained at this level from 1997, but in late 2011, the Board decided to increase reserves and allow the economy to create money.”

According to her, in 2012, 1 billion soms will be spent for the purchase of gold. Gold proportion in international reserves has already grown to 8.6%. The bank plans to increase it to 12-15% in future.

Details of the International Reserves and Foreign Currency Liquidity of Kyrgyzstan can be found in the IMF web site.

Despite recent economic growth and significant poverty reduction, different imbalances still persist in the Kyrgyz economy. The most important of them relate to inflation, unemployment, and government budget and balance of payments deficits.

The history of the Kyrgyz economy belonging to an independent State started with a period of hyperinflation. In the 2000s, the Government switched to a much more conservative monetary and fiscal policy reducing the government budget deficit and making low inflation the main target of monetary policy. This set of policies took the inflation rate to nearly 5% per annum in 2001-2006. Several years of low inflation substantially reduced inflationary expectations, which had been high in 1990s. This created conditions to an increase in demand for money and remonetization of the economy. Monetization of the economy increased from 11.1% in 2001 to 30.3% in 2007. Ant-inflationary efforts by the Government and the NBKR, coupled with a price decline in the global commodity markets in mid-2008, allowed for some reduction in inflation up to 0 for the 12-month inflation rate in December 2009. This inflation story seems to demonstrate that the scope for expansionary monetary policies in Kyrgyzstan is still very limited.

Since the moment of the introduction of the national currency som in 1993, the exchange rate regime was defined as managed floating. The NBKR never had enough international reserves to effectively fix the exchange rate. From its introduction in in May 1993, the som began to devaluate from 4 soms/USD to 48.44 soms/USD in 2001. In the 2002-2008 period, the som appreciated up to reaching 36.57 soms/USD in 2008. This was a reflection of both the improving economic situation in the country and a global trend of USD depreciation. As it happened to many other currencies in the world in 2009, the som devaluated to 42.89 soms/USD. In the 2000s, until the inflation hike in the second half of 2007, the real exchange rate of the som relative to the currencies of major trading partners (Russian ruble and Kazakh tenge) was moderately depreciating. So, the exchange rate dynamics did not have as much effect on trade as it really had it on external debt.

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