Country brief 2007 Updated April 2008
The Kyrgyz Republic is a low-income country with a gross national income (GNI) per capita of $600 in 2007 (Atlas method). A country of 5.2 million people, the Kyrgyz Republic is landlocked and mostly mountainous. The agricultural and industrial production base is relatively small. Gold, agricultural products, and hydropower make up the bulk of the country’s exports.
The Kyrgyz Republic has implemented broad systemic reforms to create the foundations of a market economy. Some 70 percent of farm land is privately owned as a result of generally equitable land reforms; and the economy is relatively open with a liberalized foreign trade regime and full convertibility of the Som – the Kyrgyz currency.
The country has made considerable progress in attaining macroeconomic stability in the past few years. Average GDP has grown at about 5 percent a year since 1996, and the high rates of poverty have started to decline since 2000. Despite pro-poor growth in the past few years, the country remains one of the poorest in the world with about 40 percent of the population below the poverty line, making the Kyrgyz Republic eligible for grant funds from the International Development Agency (IDA), the World Bank’s concessional lending facility. Despite steady growth in agriculture, almost three-quarters of the poor live in the rural and mountainous regions. Moreover, access to basic public services such as running water, public sewerage, health, and education has deteriorated over the past 15 years.
Reducing poverty will require strong and sustained economic performance with strong growth at the local level, especially in the rural areas. It will also require growth in small and medium enterprises, improved debt management, better social protection strategies, and good governance.
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Economy
Developments Since Independence
After the collapse of the Soviet Union in 1991, the country dealt with the loss of Soviet subsidies through external borrowing, depletion of assets, a reduction in private consumption, and increased government expenditures. As a result, between 1991 and 1995, GDP declined to 50 percent of the 1990 levels. All economic indicators deteriorated; hyperinflation, rising unemployment, and a reduction of real incomes led to a dramatic rise in poverty.
Since 1993, a national currency has been introduced, prices liberalized, commercial legislation and agriculture reformed, assets privatized, and an open external trade regime adopted. As a result, the economy began to recover from 1996 onward.
After recovering from the impact of the 1998 Russian financial crisis, the Kyrgyz economy stabilized and has grown by about 5 percent a year since then, with the traditionally strong sectors of agriculture and mining leading. However, in recent years these two sectors were lagging behind other rapidly growing sectors such as construction, power, and service sub-sectors of transportation, communication, and trade. This performance was supported by macroeconomic and exchange rate stability and reduced fiscal deficits.
Recent Economic Developments
In the last two years the Kyrgyz Republic’s economic performance has been strong. The growth base continued to broaden towards non-gold sectors, mainly non-gold industry, construction and services, which have been developing strongly and most substantially contributing to GDP growth. The average inflation rate remained low at 4.4 and 5.1 percent in 2005-2006, but went up to 10.3 in 2007, reflecting food price increase worldwide.
Challenges Ahead
Despite major achievements, the following issues still need to be addressed:
Reducing poverty. With GNI per capita of $600, the Kyrgyz Republic is among the poorest countries in the world.
Diversifying the economy. The agriculture, hydropower, and mining sectors are vulnerable to adverse weather conditions and natural disasters. Medium-term reforms aimed at diversifying the economy and strengthening the private sector are therefore essential.
Improving the business climate. Excessive business regulation was identified as one of the major constraints for broad based and sustainable growth.
Strengthening governance. Ineffective governance and corruption are serious impediments to growth and poverty reduction. Reforms in the public sector will encourage the development of the private sector and ensure that available public resources are targeted to the most vulnerable groups in the population.
Human development. Reforming the education and health sectors and more generally improving the performance of the social sectors in meeting the needs of the population today and tomorrow.
Increasing regional cooperation on water, energy, and trade.. This is critical to achieving sustained growth and poverty reduction as the Kyrgyz Republic is a mountainous, landlocked country with limited access to world markets.
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Program to Date
- Landmark Projects
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Since the Kyrgyz Republic joined the World Bank in 1992, the Bank has helped the country transform its mainly rural economy. It has assisted the country’s largely equitable land reform program, which distributed the land of former collective farms to small, private farmers.
Grant funds have also empowered rural communities to pursue development projects based on their own needs and initiatives. This helps ensure that government bureaucracy cannot interfere with local priorities. Rehabilitated irrigation systems and widely available rural credit have increased agricultural production, and access to safe drinking water and better sanitation has improved in rural areas.
The Bank is helping the country establish a health care system that is accessible, affordable, and efficient. Hospitals, primary health care centers, laboratories, and training centers have been rehabilitated and equipped, and doctors and nurses are being trained in family medicine. A regional HIV/AIDS program that includes Kyrgyzstan is also being supported. The Bank’s assistance has also been used to rehabilitate urban roads in the cities of Bishkek, Osh, and Jalalabad.
World Bank commitments to the country were $12 million (in fiscal year 2008), and $36 million (in fiscal year 2007). Overall commitments for active projects total $220 million.
Over the last two years the Village Investment Project has affected almost half the country's population.
Read moreGoing Forward
The World Bank’s program of assistance supports the country’s vision for its development, spelled out in the Country Development Strategy (CDS). The new Joint Country Support Strategy (JCSS) covering FY07-10 has been approved by the World Bank’s Board of Directors on June 19, 2007. The World Bank Country team, jointly with four development partners (ADB, DFID, SWISS, and UN Agencies), developed the JCSS to support implementation of the Country Development Strategy. The proposed JCSS is results oriented, with a monitoring and evaluation framework derived from the CDS. The reform agenda in the JCSS draws upon the authorities own stated commitments, explicitly articulated in the CDS, which will be supported by donor engagement, policy dialogue, financial assistance, and analytical work.
World Bank’s Analytical Work
IDA focuses significant attention on providing the Government with a strong base of analytical work and capacity building. This includes preparing assessments on poverty, the financial sector, procurement, and financial accountability, as well as a public-expenditure review, a governance survey, a growth and trade study, and a new framework for leasing and microfinance. Other support includes an Institutional Development Fund (IDF) grant for better governance in the natural resource industries, technical assistance to implement an Extractive Industries Transparency initiative, a plan for sustainable tourism, and a study on the potential for information technology and the telecommunications sector. Regional analytical works in trade and transportation facilitation, civil aviation, and water and energy also have assisted the governments of Central Asia in areas of regional cooperation.
NB: Lending is per fiscal year, July 1-June 30
Active Portfolio by Sector as of June 2006
(US$ millions)
The Country Aggregate Report provides more lending data for the Kyrgyz Republic
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Jyldyz Djakypova
jjakypova@worldbank.org
The World Bank Office
214 Moskovskaya St.,
Bishkek, 720010, Kyrgyz Republic
Tel: (996-312) 610-650
Fax: (996-312) 610-356
Website: http://www.worldbank.org/kg
Natalya Iosipenko
Public Information Center
niosipenko@worldbank.org
World Bank Depository Library in the Kyrgyz Republic
Republic Library for Children and Youth
242 Ogonbaeva St.,
Bishkek, 720040, Kyrgyz Republic
Tel.: (996-312) 662-031; 662-268
Fax: (996-312) 662-268
Email: rdbu@netmail.kg
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