Economic week of Kyrgyzstan May 25

The week showed the compulsion to revitalize the country's business life, because despite the still difficult situation due to the coronavirus, entrepreneurs and employees began active work throughout the country. And although not everyone is allowed to fully begin working, an economic need requires activity. In particular, the National Bank of the Kyrgyz Republic is fully operational. It announced remittances from abroad declined markedly due to the pandemic. This week, the need was announced to import electricity from neighbors, the interest of international financial institutions in the construction of the Kambarata HPP-2, the total amount allocated to the republic to solve budget problems in connection with the pandemic. Kyrgyzstan this week raised not just the issue of public debt, but the question of its deep restructuring at the international level. In general, the week reflected the complexity of the situation both during the pandemic and its possible consequences for Kyrgyzstan.

Less remittances. In the first quarter of 2020, remittances to Kyrgyzstan decreased.

Chairman of the National Bank of the Kyrgyz Republic Tolkunbek Abdygulov said that in the first quarter of 2020, the amount of money transfers from individuals amounted to USD 343 million and decreased by 19% compared to the same period in 2019.

“A decrease in remittances by migrants will affect the aggregate demand in the country and will slow down the growth of population consumption,” he said.

NBKR about loans. The financial market of Kyrgyzstan remains stable.

According to data of the National Bank of the Kyrgyz Republic, the country has seen a steady growth in both loans and deposits.

“As for the work of the National Bank on the restructuring of loans, the total amount of the restructured loan portfolio is KGS 65 billion 299 million. This is not a limit amount,” according to the National Bank of the Kyrgyz Republic.

Today, restrictions on the movement of the population have been lifted, which will lead to activity in the financial market.

Golden reserves. Chairman of the National Bank of the Kyrgyz Republic Tolkunbek Abdygulov expressed his position on the proposals of the deputies of the Jogorku Kenesh on the use of the reserves of the National Bank of the Kyrgyz Republic to support the economy.

He stated that using the reserves of the National Bank is undesirable. The reason is that Kyrgyzstan is an import-dependent country.

“This will affect the exchange rate. Things like using reserves are not allowed. But parliament can consider such issues. We will defend our position,” he said.

The head of the National Bank also noted that foreign exchange reserves have a psychological impact on the participants in the foreign exchange market.

“That is, the larger the reserves, the more interventions the National Bank can carry out. This solves the problem of speculative attacks,” the head of the National Bank of the Kyrgyz Republic added.

Electricity export. Kyrgyzstan is in talks with Kazakhstan, Tajikistan and Turkmenistan to import electricity.

Chairman of the board of the National Energy Holding Aitmamat Nazarov assured that the tariff for electricity for subscribers will not change.

“We are currently negotiating with neighboring countries - Kazakhstan, Tajikistan and Turkmenistan. This year we plan to buy 1 billion kW for the autumn-winter period and until April next year. But the price is much more expensive than the price of the tariff of the population. In this case, the tariff will not increase. We find other sources. We will cover these costs at the expense of other consumers,” assured the head of the National Energy Holding.

About the exchange rate in the Kyrgyz Republic. Chairman of the National Bank of the Kyrgyz Republic Tolkunbek Abdygulov believes that the drop in the dollar against the som is associated with a decrease in economic activity in the country.

He said that the global economy is currently slowing, oil prices are volatile. In addition, the situation on the domestic market is not unambiguous due to the fact that there are restrictions on the border for movement with neighboring countries. There is no large increase in economic activity in the country.

At the same time, Abdygulov recalled that the reserves of the National Bank amount to USD 2.5 billion, which covers imports for 5.2 months.

“We do not see any problems for Kyrgyzstan in the foreign exchange market,” he added.

If at the beginning of the coronavirus pandemic, the US dollar exchange rate in Kyrgyzstan rose to the level of KGS 83 for one dollar, but now it has dropped to KGS 73.

Interest to Kambarata HPP. Chairman of the board of the National Energy Holding Aitmamat Nazarov announced this week that the Asian Development Bank (ADB) and the World Bank (WB) are interested in financing the Kambarata HPP-1 project.

He said that the project on Kambarata HPP (hydropower plant) -1 is under consideration in the government.

“A group is being created to develop a financial model for the project, on negotiations between partners, and on negotiations with financial institutions. The other day, I think, the government will accept this project. Negotiations are ongoing. There are options, several investors. There is great interest on the part of the Asian Bank and the World Bank in financing this project,” Nazarov said.

Kambarata HPP-1 is being built on the Naryn River above the already built Kambarata HPP-2 and will be able to provide sufficient water for uninterrupted operation below the hydroelectric power station, including Toktogul, as it will be able to accumulate upstream water reserves all year round and generate electricity at the same time.

Energy import from Kazakhstan. This year, Kyrgyzstan imports from Kazakhstan 500 million kW / h of electricity.

Chairman of the board of the National Energy Holding Aitmamat Nazarov told that Kyrgyzstan will receive electricity before the end of the year. “500 million kW is net imports. Till the end of December, we will import 500 mln. KW / h from Kazakhstan,” Nazarov said.

In addition, it was agreed that neighboring countries will exchange another 300 million kW / h.

“Commodity exchange is an annual practice that we carry out with Kazakhstan. We release 300 million electric power to them in summer time, and in autumn they return. When they return, we reduce production, thereby preserving the same volume of water in the reservoir,” Nazarov explained.

Less turnover. For the first quarter of this year, which was partially covered by the coronavirus pandemic, there is a decrease in trade turnover by 15.8% compared to the same period last year.

Head of the trade policy department of the Ministry of Economy of the Kyrgyz Republic Bubusara Toktonalieva told that the turnover in the non-food product group is declining, while in the food product group the situation remains stable.

“Import deliveries decreased by 21.8%, while exports decrease by 0.8% compared to the same period last year. These are statistics for the first quarter of 2020, part of which was affected by the pandemic. The turnover indicators with one of the main strategic partners, China, also sharply worsened. For the first quarter of this year, the turnover between countries decreased by 2.5 times. This is due to the fact that in January last year, China began to impose restrictions on the movement of goods in connection with the growth of coronavirus. In addition, we can separately note the decline in turnover in the industrial sphere of goods and the clothing industry,” she said.

A new wave of help. It has been announced that today there is an agreement on the provision of financial assistance to Kyrgyzstan from international donors in order to combat COVID-19 in the amount of more than USD 462 million.

According to data of the Republican headquarters on COVID-19, two tranches of almost USD 242 million have been received from the International Monetary Fund in the form of a loan. All of them are aimed at replenishing the republican budget.

The Asian Development Bank allocates assistance in three tranches. On the first tranche, an agreement with ADB has already been signed and internal procedures are underway. By the beginning of June, USD 50 million is expected, half of which is on a grant basis. The second tranche of also USD 50 million should come to the Kyrgyz Republic after approval by the ADB Board of Directors. The entire amount is provided in the form of a loan. These two tranches will be aimed at supporting the state budget.

In addition, ADB will provide another USD 20 million, of which half in the form of a grant, the other - a loan. These funds will be directed to an investment project for the purchase of medical supplies and medicines necessary to combat COVID-19. Project details are discussed with ADB. In total, the Asian Development Bank provides USD 120 million.

The World Bank allocates for two investment projects - “Emergency project on COVID-19” and “Improving resilience to natural disasters in Kyrgyzstan”: USD 21 million 150 thousand. Half of them is credit, the other on a grant basis. Projects involve the purchase of facilities and equipment for the health sector.

The Islamic Development Bank allocates USD 15 million for the purchase of medicines from the savings of existing projects in Kyrgyzstan.

The European Union allocates EUR 15 million 300 thousand for the implementation of the educational program in the Kyrgyz Republic, for digitalization events - EUR 6 million, in the field of social protection EUR 9 million 500 thousand. In total, the EU allocates for Kyrgyzstan EUR 33 million 880 thousand on a grant basis.

The German Development Bank's counter-funds allocate funds in the amount of USD 30 million 352 thousand 500, which will be used to support Kyrgyz farmers in order to further ensure food security.

The stock exchange is working. Head of the State Financial Supervision Arzybek Kozhoshev this week congratulated the management of the Kyrgyz Stock Exchange (KSE) on its anniversary — the 25th anniversary of the establishment of the company. He noted that the Financial Supervision is ready to provide comprehensive support for the dynamic development of the Kyrgyz Stock Exchange within its authority.

Touching upon the development of the country's stock exchange, he noted the need to develop a new KSE Development Strategy taking into account the current situation in the country and in the world, as well as ongoing work to create a common exchange space in the EAEU countries.

As a result of the meeting of the parties, an agreement was reached on the provision of a KSE analytical note to the State Financial Supervision of the Kyrgyz Republic with a description of the current situation, needs for the development of the stock exchange in Kyrgyzstan and a draft new KSE development strategy.

Less transfers from Kazakhstan. In March, transfers from Kazakhstan to Kyrgyzstan declined markedly.

According to data of the National Bank of Kazakhstan, it turns out that in March 5.3 billion Kazakh tenge were transferred to Kyrgyzstan through a money transfer system. But in April, less than 1.1 billion tenge was transferred. That is, the volume of transfers of labor migrants from Kyrgyzstan decreased by almost 5 times.

“Obviously, the main reason for the April decline is quarantine measures.

Domestic airlines resume to work. Starting from June 8, domestic air communications will be resumed in Kyrgyzstan.

First Vice Prime Minister Kubatbek Boronov told that the aircrafts will operate with strict observance of sanitary measures developed by the country’s Ministry of Health.

He noted that one of the biggest risks of coronavirus infection is public transport. But, nevertheless, Boronov explained that a decision was being made to resume, since economic processes could not be stagnant for a long time.

External debt is in focus. This week, the Kyrgyz leadership has taken the first steps to address external debt issues.

Minister of Finance of the Kyrgyz Republic Baktygul Zheenbaeva, commenting the participation of President of the Kyrgyz Republic Sooronbay Zheenbekov in the High-Level Event on Financing for Development in Era of COVID-19 and Beyond, said that the President of the Kyrgyz Republic proposed three stages to solve external debt problems.

First of all, a “deep” restructuring of external debt is needed, and not just suspension or transfer of payments to subsequent years.

The second stage is the development of a debt exchange program for projects in the field of health, food security and social protection.

The third stage is the development of debt exchange programs for projects in the field of ecology, climate change and the green economy.

“The Ministry of Finance of the Kyrgyz Republic faces a big task - to develop programs and begin work on the exchange of debt and the beginning of the restructuring of external debt,” the minister said.

Gas stations to be automated. This week, it was announced that owners of all types of gas stations are required to complete the installation of an automated gas station management system by July 1, 2020.