年-IMF国际货币组织全球_Kyrgyz_Republic_Third_Review_Under_the_Three_126页_3mb

Kyrgyz Republic: Third Review Under the Three-Year Arrangement Under the Extended Credit Facility

Core Content Overview

The IMF Executive Board completed the third review of the Kyrgyz Republic's economic performance under the Three-Year Arrangement under the Extended Credit Facility (ECF) on December 14, 2016. The review was based on discussions held from September 15–28, 2016, with Kyrgyz Republic officials and other stakeholders. The approval of the review allows for the immediate disbursement of SDR 9.514 million (about US$12.9 million), bringing total disbursements under the ECF arrangement to SDR 38.056 million (about US$51.5 million). The total ECF arrangement was approved on April 8, 2015 for SDR 66.6 million (about US$92.4 million).

Main Views and Key Information

Economic Outlook and Risks

• Economic pressures are moderating, but the near-term outlook remains challenging due to a subdued external environment and weak domestic demand.
• Non-gold growth in 2016 is projected at 2.4 percent, which is lower than historical levels and will remain on a lower trajectory in the short term.
• Inflation is expected to decline in 2016 and gradually rise as economic activity recovers.
• Current account deficits are expected to narrow in 2016 due to the rescheduling of public investment projects (PIPs), but widen in 2017/18.
• Downside risks include declining commodity prices, slow regional recovery, and political instability. Upside risks include strengthening economic ties with China and projects financed by the Russia-Kyrgyz Development Fund (RKDF).

Program Issues

A. Resuming Fiscal Consolidation

• The Kyrgyz authorities remain committed to a deficit target of 4.5 percent of GDP for 2016.
• Tax revenues are slightly below projections due to VAT exemptions on grain imports and flour sales.
• Non-tax revenues are expected to exceed projections, mainly due to higher dividends from state-owned enterprises (SOEs) and increased NBKR revenues.
• Expenditures are under pressure, with goods and services and domestically financed capital expenditures exceeding second review projections by 1.3 and 2 percentage points of GDP, respectively.
• To meet the deficit target, the authorities plan to rephase foreign-financed capital expenditures and implement tax policy and administration measures identified during the second review, although some measures may only be implemented in 2017.

B. Preserving Debt Sustainability

• Total public debt is expected to decline slightly in 2016 due to currency appreciation and rephasing of PIPs.
• External public debt is projected to remain at around 60-63 percent of GDP.
• Fiscal consolidation is critical to maintaining public finances on a sustainable path, and the authorities have committed to a looser fiscal stance in 2017 (3 percent of GDP).

C. Balancing Monetary and Exchange Rate Policies

• The National Bank of the Kyrgyz Republic (NBKR) has gradually lowered the policy rate as inflationary and exchange rate pressures declined.
• The som appreciated by about 9.5 percent against the U.S. dollar over the first 10 months of 2016.
• The NBKR should continue a flexible exchange rate policy and limit interventions to smoothing excessive volatility.
• The planned transition to inflation targeting is welcomed.

D. Safeguarding Financial Stability

• The banking sector remains vulnerable despite strong capital buffers and falling dollarization.
• Credit to the private sector contracted by 2 percent in the first three quarters of 2016.
• Dollar-denominated loan demand fell sharply, while som-denominated loans grew by 21 percent.
• Nonperforming loans (NPLs) increased to 9.0 percent, and loans under watch reached 24 percent.
• The Banking Law was adopted by Parliament but key provisions were weakened, posing a risk to financial sector stability.
• The authorities have committed to introducing amendments to the Banking Law to increase central bank independence and strengthen the resolution framework.

E. Advancing Structural Reforms

• The authorities have delivered on most program commitments, with all June quantitative performance criteria and all but two structural benchmarks met.
• The Banking Law needs further amendments to preserve financial stability and enhance central bank independence.
• A fiscal rule is recommended to support fiscal discipline and sustainable public finances.

F. Program Modalities

• The program is facing significant domestic and external risks, including dwindling commodity prices, protracted regional recovery, and policy slippages in the run-up to the 2017 presidential elections.
• The authorities' track record and policy commitments are seen as sufficient safeguards.
• The political environment remains fluid, with sporadic protests, disagreements over constitutional amendments, and frequent personnel changes at key positions.
• The constitutional referendum and presidential elections are expected to detract from the reform agenda.

Key Economic Indicators

Summary of Program Performance

• All June quantitative performance criteria and all but two structural benchmarks were met.
• Two structural benchmarks were not met: review of subsidies due to capacity constraints and publication of the Banking Law in the Official Gazette.
• The authorities requested IMF technical assistance for the subsidy review and committed to introducing amendments to the Banking Law.
• The fiscal stance for 2017 was relaxed to 3 percent of GDP, reflecting the weak economic environment and improved debt outlook.

Conclusion

The Kyrgyz Republic has made progress in implementing the IMF program, but challenges remain in fiscal consolidation, debt sustainability, and structural reforms. The authorities are committed to meeting their fiscal targets and improving the financial sector. However, political and external risks continue to pose a threat to the reform agenda and economic recovery. The IMF remains supportive of the Kyrgyz Republic's efforts and encourages continued implementation of structural reforms and fiscal discipline.