IMF/Kyrgyz Republic: Staff Concluding Statement of the 2026 Article IV Consultation Mission

 

Kyrgyz Republic: Staff Concluding Statement of the 2026 Article IV Consultation Mission

FOR IMMEDIATE RELEASE

A Concluding Statement describes the preliminary findings of IMF staff at the end of an official staff visit (or ‘mission’), in most cases to a member country. Missions are undertaken as part of regular (usually annual) consultations under Article IV of the IMF’s Articles of Agreement, in the context of a request to use IMF resources (borrow from the IMF), as part of discussions of staff monitored programs, or as part of other staff monitoring of economic developments.

The authorities have consented to the publication of this statement. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF Executive Board for discussion and decision.

 

Washington, DC – April 9, 2026: An International Monetary Fund (IMF) mission led by Mr. Dmitry Gershenson conducted discussions for the 2026 Article IV consultation with the authorities of the Kyrgyz Republic during March 18 – April 1, 2026 in Bishkek. At the conclusion of the mission, Mr. Gershenson issued the following statement:

Economic Developments, Outlook, and Risks

1. 1. The Kyrgyz Republic continues to record strong economic performance as the economy transitions toward emerging market status. Since 2022, expanded trade flows, robust remittance and capital inflows, and strong construction activity supported by government spending have underpinned rapid growth. These dynamics have contributed to rising per-capita income. At the same time, stronger domestic demand pressures and external factors have pushed inflation above the National Bank of the Kyrgyz Republic (NBKR)’s target range. In the context of rapid credit growth, strong wage increases, and elevated liquidity, this points to signs of overheating that requires timely policy recalibration.

 

1. 1. Growth is projected to moderate as trade-related gains normalize, but it remains slightly above its estimated potential with large infrastructure projects advancing. Inflation is expected to remain elevated through 2027 and decline gradually thereafter, provided macroeconomic policies are appropriately calibrated. Strong remittances and high gold prices are expected to continue to support the external position, although persistent BOP errors and omissions complicate the assessment of underlying external dynamics and highlight the need for improvements in data quality and transparency.

 

1. Risks to the outlook are tilted to the downside. External risks include potential reversals in re-export trade, volatile commodity prices, and heightened geopolitical uncertainty affecting remittances and investor sentiment. Even though the Kyrgyz Republic has limited exposure to the war in the Middle East, sustained high oil prices could add to inflation pressures. Domestic risks stem from an entrenchment of expectations of higher inflation, expansionary fiscal dynamics, and quasi-fiscal operations. Growing exposure to crypto asset activities and cross-border trade and financial flows could pose new risks. At the same time, the overall favorable economic environment provides a window of opportunity to strengthen policy buffers, recalibrate the macroeconomic policy mix, and accelerate structural reforms to support sustainable, private-sector-led growth.

Fiscal Policy

4. 4. After recording fiscal surpluses during 2023–25, the overall fiscal balance is projected to shift into deficit in 2026, reflecting mainly higher public wages and increased capital spending. While the projected deficit remains moderate, gross financing needs are considerably larger due to the net acquisition of financial assets and quasi-fiscal operations. The mission notes that these dynamics imply a more expansionary fiscal impulse than suggested by the overall fiscal balance and underscores the importance of fully capturing fiscal operations within the budget framework to allow for a clearer assessment of the underlying fiscal stance.

 

4. Creating fiscal space is essential to support priority infrastructure and social spending while containing domestic demand. Additional revenue can be mobilized by streamlining VAT exemptions and special tax regimes, increasing PIT progressivity, and strengthening revenue administration. On the expenditure side, containing the public wage bill, gradually reducing energy subsidies, improving social spending targeting, and strengthening public investment management would enhance efficiency and resilience. The mission also stressed the importance of prudent debt management, avoiding quasi-fiscal financing, and strengthening fiscal risk monitoring—especially related to SOEs—to safeguard debt sustainability and policy credibility. Continued efforts to enhance fiscal transparency, including through comprehensive coverage of all public sector operations, would help ensure that fiscal risks are fully identified and managed.

Monetary and Exchange Rate Policies

6. 6. Monetary policy should remain focused on bringing inflation back within NBKR’s target range and anchoring expectations. With external factors and strong domestic demand keeping inflation above target, the mission welcomes NBKR’s recent increase in the policy rate as a necessary step toward containing inflationary pressures. However, persistent excess liquidity and a relatively wide and asymmetric interest rate corridor continue to impair monetary policy transmission. The mission emphasizes the need to further strengthen the operational framework of monetary policy by enhancing liquidity management, narrowing the interest rate corridor and making it more symmetric, and curbing subsidized and directed lending through state-owned banks.

 

6. 6. Strengthening the independence and governance of the NBKR remains critical to safeguard price stability. Repeated transfers of central bank profits to the budget while capital remains below statutory thresholds risk undermining institutional credibility and the conduct of monetary policy. The mission encourages the authorities to uphold the provisions of the constitutional law governing the NBKR, discontinue regular profit transfers until capital is adequately restored, and ensure that monetary policy decisions remain fully aligned with the price stability mandate.

 

6. Greater exchange rate flexibility and diversification of reserve composition would enhance resilience to shocks. While international reserves have increased due to the revaluation of gold holdings, the high concentration in gold exposes the economy to commodity-price volatility. Continued diversification of reserves and conversion of eligible gold into monetary gold would strengthen external resilience and further enhance reserve management.

Financial Sector Policies 

9. 9. The banking sector is stable, well capitalized, and liquid, but supervisory vigilance is warranted amid heightened uncertainty. Nonperforming loans remain stable but elevated, and strong credit growth could increase vulnerabilities if macroeconomic conditions deteriorate. The mission encourages the authorities to continue strengthening risk-based supervision and to consider proactive macroprudential measures to safeguard financial stability and enhance resilience to shocks.

 

9. The rapid expansion of crypto-asset activities and cross-border financial flows requires implementation capacity and risk monitoring to keep pace with the sector’s development. While regulatory and legal frameworks have been strengthened, efforts to enhance the effectiveness of the AML/CFT regime—ahead of the assessment by the Eurasian Group’s on Money Laundering—should continue, including operationalization of the beneficial ownership registry and assessment of risks from virtual assets. The mission emphasizes the importance of (i) strengthened supervision and governance of virtual asset service providers; (ii) alignment with international prudential standards; (iii) strong safeguards to ensure financial stability; (iv) consumer protection; (v) mitigation of illicit finance risks; and (vi) implementation of measures to monitor trade in controlled goods.

Structural Reforms

11. Structural reforms remain crucial to enhance sustainable and inclusive growth. The reforms should aim at strengthening governance, reducing the state footprint in the economy, and fostering private-sector-led development. Priorities include advancing SOE reform, improving the business environment and competition, strengthening the rule of law and anti-corruption efforts, and addressing informality and labor market rigidities. Continued investment in human capital and digital infrastructure—while enhancing governance and labor market policies—will be important to realize the gains from digitalization and AI adoption, raise productivity, and bolster long-term resilience.

Capacity Development

12. The IMF remains committed to supporting the authorities’ reform agenda through capacity development. Ongoing and planned support includes areas such as fiscal risk management, public investment management, AML/CFT, external sector statistics, financial sector oversight, digital assets, and reserve management. Continued close engagement will help strengthen policy frameworks and support implementation of reforms aimed at preserving macroeconomic stability and sustaining long-term growth.

The mission would like to thank the authorities for their hospitality and for the open and constructive discussions.

Media contact:

Angham Al Shami aalshami@IMF.org

(+1) 202.623.7100

 

Download broadcast quality video from IMF Media Center

Follow us:  @IMFSpokesperson, @IMFNews , and Facebook

Sign up for personalized news & updates from IMF Blog, IMF Finance & Development Magazine, IMF Podcasts and more.