IMF explains how Kyrgyzstan coped with pandemic
BICHKEK (TCA) – The Kyrgyz Republic was the first country to receive emergency funding from the International Monetary Fund (IMF) to deal with the COVID-19 crisis. IMF country focus spoke with Head of Mission Nikoloz Gigineishvili about the impact of the pandemic on the country’s economy and how the IMF has supported the recovery.
“The Kyrgyz Republic has been significantly affected by the COVID-19 pandemic and has been one of the hardest-hit countries in the region. The pandemic has caused an 8.6% production contraction in 2020, a substantial loss of jobs and an increase in poverty, ”said Mr. Gigineishvili. “Labor-intensive sectors of the economy have been hit the hardest. Tourism has fallen by nearly 80 percent. Transport, commerce and construction were also severely affected. On the other hand, agriculture, which is predominantly family-run and does not involve extensive human interaction in closed environments, increased by around 1% in 2020. “
“Inflation has fallen from 3% in 2019 to around 10% in 2020, mainly due to the depreciation of the currency and the rise in the prices of imported foodstuffs. Public debt increased by 16 percentage points of GDP to reach 68% in 2020, reflecting lower output, a higher budget deficit and currency depreciation. According to World Bank estimates, poverty fell from 20% to 31% as incomes fell and unemployment rose.
“The authorities reacted quickly with a series of measures to protect public health and mitigate the economic impact of the pandemic. These included emergency health spending, scaling up the food security program for vulnerable people, temporary tax deferrals and soft loans for small and medium businesses, and liquidity support to banks. Without these measures, the economic downturn and its impact on poverty would have been much worse.
“Once the health crisis is contained, we expect life to gradually return to normal; businesses to start hiring again, the unemployed to return to work and borders to reopen to allow trade and travel. In this scenario, we expect the economy to grow 3.8% in 2021 and 6.4% in 2022. However, uncertainty remains high as the pandemic could take an unexpected turn, ”said Mr. Gigineishvili .
He said the IMF responded to the crisis with unprecedented speed, supporting member countries with finance, policy advice and capacity development. Since the onset of COVID-19, the Fund has provided more than $ 110 billion in emergency financial assistance to member countries. The Kyrgyz Republic was the first country to receive such support, receiving approximately US $ 242 million in partially concessional financing, which provided much needed budgetary resources for the crisis response, including the procurement of supplies. emergency medical. In the interest of transparency and governance guarantees, the authorities have committed to publishing audit reports and information on beneficial owners for all COVID-related contracts.
The Fund also advised the authorities on policies pursued during the crisis, the exit strategy to achieve and maintain macroeconomic stability after the crisis, and how to build resilience in the medium term. “We have also continued to assist the Kyrgyz Republic by strengthening its capacities, focusing on public finance management, monetary policy, banking supervision and public finance statistics,” Gigineishvili said.
“In addition to macroeconomic stability, the Kyrgyz Republic must support inclusive growth and job creation. It means improving the business environment; strengthen governance and fight against corruption; ensuring a stable supply of electricity by reforming the energy sector, including electricity tariffs; improving access to finance, especially for small and medium-sized enterprises; reduce non-tariff trade barriers; and strengthening professional skills and the quality of education.