Introduction to Kyrgyzstan:

Kyrgyzstan is a Central Asian country whose territory became part of the Russian Empire in the
mid-19thcentury and the Soviet Union in the early 1920s. The Kyrgyz Republic gained
independence in 1991 after the dissolution of the Union of Soviet Socialist Republics (USSR).
Kyrgyzstan is a multi-national country with members of over 100 nationalities co-exists in the
country including Kyrgyz, Uzbeks, and Russians.

Midst the Central Asian states, the Kyrgyz Republic has been one of the most in need of on
foreign aid since acquisition its independence. The country has continuously received more than
$9 billion in foreign loans and grants twenty eight percent for development in the last 25 years.
As of 2017, Kyrgyzstan keeps nearly $4 billion to global economic institutions such as the World
Bank, Asian Development Bank, International Pecuniary Fund, European Bank for
Reconstruction and Development and to foreign states.

Development in Kyrgyzstan:

Kyrgyzstan is a lower middle-income country with a lesser economy controlled by minerals

extraction, agriculture, and confidence on remittances from citizens working abroad. Kyrgyzstan
has taken large steps since gaining independence. Overall, the macroeconomic context in
Kyrgyzstan is improving, however, its sincerity to trade and its reliance on its fellow citizen
leaves it weak to events outside its borders (OECD, 2018). In recent years, Kyrgyzstan has
maintained a strong development schedule to reduce poverty through comprehensive economic
growth.

After the downfall of the Soviet Union in 1991 and the succeeding turn into an independent
democratic state with a mixed presidential-parliamentary political system, Kyrgyzstan practiced
extreme economic transformations. The abrupt liberalization of the economy, the loss of
economic transfers from the Soviet Union, and the interruption of trade flows between individual
republics, among other factors, led to a gigantic economic downturn and insolvency of
population (UNIDO, 2018). The economic development of Kyrgyzstan in the post-Soviet era
was also repeatedly stunned by political disorders such as those in 2005 or 2010. The main
factors counting for poor development included:
Loss of Industrial base:

In the result of freedom, Kyrgyzstan experienced a lifelong and deep recession practically
leading to an almost complete loss of its industrial base. However, a steady growth path detected
since the early 2000s, allowed the country to regain its 1991 GDP per capita level in 2011.
Moreover, it has recently progressed from a low to lower-middle income group (LMIC)
according to the World Bank cataloging (Choi, Portugal Perez, &Myburgh, 2014). Despite this
positive show, Kyrgyzstan remains the second poorest country in Central Asia after Tajikistan.
The strong dependence of the Kyrgyz economy on three major but highly volatile sources of
revenue namely, the mistreatment of natural resources, remittances and foreign aid and loans,
places it in a very weak position relative to external shocks.

Inflation:

In the early 1990s, increase was a grave problem, as the rate reached 700 percent in 1993. Except
for a brief spike caused by the Russian financial disaster of 1998, the government has controlled
inflation much improved in the late 1990s and early 2000s. In 2004 the inflation degree was 3.2
percent, and in 2005 it was 5.2 percent.

Environmental Factors:

The main problems are incompetent use and pollution of water resources, land squalor, and
improper agricultural practices. Gold and uranium mining operations have clean toxic chemicals
into soil and water in the eastern half of the country, and salinization is a difficult along the
eastern sectors of the NarynRiver. Automobile use rise that leads to increase the level of air
pollution mostly in urban centers. Misappropriation of forest reserve is another big issue that
wrecks the environment. In 2004 an abnormally high number of floods, and landslides were
attributed to the melting of glaciers in the eastern mountains. The Ministry of Ecology and
Emergency Situations is the national operation agency for environmental policy, which is
summarized in the National Environmental Action Plan. However, that plan is profoundly
backed and engaged by international givers, and the president’s strong role in environmental
policy has politicized some issues.
Economic Growth:

About 70% of the work force is tangled in informal or non-observed economic activities, making
only about 28% of the total value added. Pervasive casualness across all key Kyrgyz segments,
such as agriculture,light industry and trade results in significant barriers to productivity growth,
and thwarts the achievement of minimum efficient production scales (UNIDO, 2018), while tax
circumvention reduces the state budget income.

The reforms ongoing to pay off in the second half of the 90s and the Kyrgyz economy grew
constantly, with the GDP growth averaging about 5.1 % per year during 1996-00. By 2000 the
rise decreased to single digit level, the trade balance generated a modest surplus and the foreign
reserve location has been strengthened. The Kyrgyz Republic stems about a half of its GDP from
agriculture. The most important industries that are also the leading exporters are gold and
hydropower followed by tobacco and cotton fiber.

The economic development of Kyrgyzstan in the post-Soviet period was also repeatedly stunned
by political disorders such as those in 2005 or 2010, the slender product composition of the GDP
and exports also reduced the country vulnerable to exterior shocks. Medium term progress
prospects are mixed since the country still faces a number of important difficulties, including
weak predictions for major export growth, low private asset levels, unreformed civil service,
weak public finance, foreign balance overhang, high level of poverty, rapidly worsening human
capital.

Kyrgyzstan was one of the first previous Soviet republics to implement economic changes and
move toward a market-based economy. In 2010, the country implemented a new constitution and
became a parliamentary democracy. Yet there have been many gaps between philosophy and
implementation, and a number of basic structural issues persist. Prevention with slow, unstable
economic growth and economic differences are among the causes of social discontent and
political discontent, which are considered the main risks to the economy. Reviving inclusive,
stable, and sustainable economic growth is a priority for the Government of Kyrgyzstan.
Asian Development Bank 2012:

This report is part of an Asian Development Bank (ADB) strategy and advisory technical
backing project, Support for Strategic Assessment of the Kyrgyz Economy to Promote Inclusive
Economic Evolution, which was launched in 2012. The report identifies strategic priority
measures to promote inclusive growth by inspecting the factors constraining the growth of
economic opportunities and the “inclusiveness of growth,” or the capability of all groups to
access these chances.

Kyrgyzstan has rich endowments in agriculture, and tourism. The Kyrgyz economy is vulnerable
to outer shocks owing to its reliance on one gold mine, Kumtor, which accounts for about 10%
of GDP, and on worker payments. The Kyrgyz economy appears to have recovered from the
2014-2015 external shocks. Over the first nine months of 2017, real Gross Domestic Product
(GDP) expanded by 5%.The Kyrgyz economy performed robustly over 2017. Macroeconomic
policies were supportive to growth, but the fiscal stance has declined significantly and rise has
tilted upwards. Growth is estimated to have decelerated toward the end of 2017, but is probable
to pick up in 2018.

Co-operation in Field of Assistance:

economic sector:

Fiscal consolidation remained a significance under the International Monetary Fund (IMF) 3-
year (2015–2018) Extended Credit Ability program. Fiscal deficit averaged 2.0% of GDP in
2013–2017, supported mainly by official development assistance (ODA) and public borrowing.
The government spends 14%–15% of GDP on education, health, and social safety, but the
efficiency could be increased by improving service delivery and targets. Share of loan raise from
50% during 2011-2014 and from 30.8%during 2007-2010.The proportion of public and publicly
guaranteed external debt to GDP was 56.0% in 2017, making the economy’s debit servicing
capacity vulnerable to future external and internal shocks. The balance of expenses continues to
be worried because of the narrow export base, the attention of trade with a few countries, large
trade deficits financed mainly by workers’ payments, and low foreign direct investment.Foreign
exchange reserves are assessed at $2.2billion equivalent to about 4.4 million of import cover at
the end of 2017.
In 2015, the Russian government approved the formation of a Russian-Kyrgyz development fund
worth US $1 bn. The fund’s purpose is to promote economic collaboration between the two
countries, modernize the Kyrgyz economy and familiarize it to the norms of the Eurasian
Economic Union.

Social sector

Between 2015 and 2017, ILO, in association with the Ministry of Labor and Social Development
and the United Nations agencies in Kyrgyzstan, evaluated the social protection system in the
country, which is called the Assessment-Based National Dialogue (ABND) on social defense.
The main purpose of conducting the ABND was to examine the present system compliance with
the social protection floors and to formulate a set of policy approvals by identifying the priorities
of actions with mid/long-term perception to improve the national social protection floor in
Kyrgyzstan. This report provides a planning and valuation of existing social security and social
protection policies and programmes; identifies coverage gaps and execution issues; develops
priority scenarios to fill the gaps; presents a rapid appraisal exercise to estimate the costs for each
consequence and policy recommendations to extend social protection to inaugurate a national
social protection floor. Despite implemented measures, the social protection system in
Kyrgyzstan continues to endure as one of the deepest developed in the Government of
Independent States (CIS) region. Therefore, Kyrgyzstan strives to make additional improvements
to extend social protection analysis and improve the system.

On December 15 2017, the Executive Board of the International Monetary Fund (IMF)
completed the fourth and fifth evaluations of Kyrgyzstan’s economic presentation under the
three-year Extended Credit Facility (ECF) arrangement.

trade sector:

The insignificant gross domestic product of Kyrgyzstan in 2017 was 7.6 billion US dollars the
annual GDP growth rate usual over the last five years was 5.5% (World Bank, 2018)

Kyrgyzstan records a adverse trade balance (World Bank, 2018); a particularly generous
disparity is detected in trade with China. While import levels are comparatively low, they are
growing fast as local demand is artificially enhanced by the arrival of foreign aid and loans.
The overall weight of the industrial sector relative to GDP was 26% in 2017. The most
important industrial activities include basic metal and complete metal products (mainly gold),
food and tobacco manufacture, and rubber, plastic and other non-metal products, coke and
developed petroleum products, and textile, cloths, footwear and leather.

In 2015 and 2016, Russian Government aid equaled US $521.6 m, making Russia the largest
joint donor to the Kyrgyz Republic. According to the development fund’s website, the majority
of assistance was expended as soft loans, to private companies working in the profession sectors.

Industrial sector:

Kyrgyzstan takes financial aid and loans from international donors including the World Bank,
the International Monetary Fund, the Asian Development Bank, the Eurasian Development
Bank, the European Bank for Reconstruction and Development (EBRD), the Islamic
Development Bank, and many others (Achkabar, 2016). Other financial support stems from
special funds, particularly the Russian-Kyrgyz Development Fund (RKDF). In June 2018, the
contract on the establishment of the joint Kazakhstan-China Eurasian Nurly (Bright) Investment
Fund was signed (Qayaq Times, 2018). In 2010-2015, Kyrgyzstan received 3.51 billion US
dollars, of which 86% were loans and 14% were grants; a large quota of the foreign support goes
into the social sector, to cover budget shortages and to modernize infrastructure,(Achkabar,
2016). Growing public debt increases the country’s default threats and decreases the country’s
attraction for investors.

Education sector:

in the period 2010-2016 Germany provided a total of US $260 m in ODA loan support, grant aid
and technical collaboration to the Kyrgyz Republic. The largest expenditures were directed to the
education sector, mainly in the area of professional training.

The education sector has promoted from a US $46.2 m support programme, that purposes to help
the government implement its Education Sector Strategy. Moreover, the EU puts specific focus
on the achievements of female learners and improving provision for children with special needs.

Asian development program:The program is aimed at secondary policy reforms in the education
sector. The funds are used to shelter the budget deficit and support the country's stability of
payments. The main activities include the validation of the school funding system; education
planning and management; ability building in educational institutions and education organization
bodies; income generating activities for educational institutions; supporting another providers of
education; and creating social mechanisms to ensure education is available to children from
disadvantaged families. Other organizations also working in the education sector UNESCO,
UNICEF, Agha khan foundation and British council.

Kyrgyzstan is relatively strong in its human center. Notably, the primary, secondary and tertiary
education registration rates are very high – 98%, 92% and 47% correspondingly.Despite the high
registration rates at all stages of education, the quality of education at all stages is low.

Transport Sector:

The Asian Development Bank is the largest multilateral institution providing financial support to
the Kyrgyz Republic. According to the OECD Database, developmentaid expended to the
Kyrgyz Republic by ADB, over the period 2010-2016, is estimated at US $461 m. The sector
receiving the most funding is road transport, which accounted for US $173 m. ADB reformed
portions of the Bishkek–Osh road, the main road joining the north and the south of the country,
and promoted the Bishkek–Torugart road,which serves as the main road linking the Republic
with the People’s Republic of China.

Osh Bazaar in Bishkek, the Kyrgyz RepublicPhoto: neiljs, 2018Top 3 donors by Multilateral
OrganisationsThe World Bank is the 2nd largest polygonal donor in the Kyrgyz Republic. The
total assistance, for the period 2010-2016, reached US $436 m in the form of grants and highly
concessional credits, with no attention. The strategic focus of the World Bank, in the Kyrgyz
Republic, has been in supporting the country’s efforts to improve power and investing in key
economic sectors, such as transport, agriculture and energy.

Value of assistance to the Kyrgyz Republic by main donors ($, m) 2010-2016

Main strategy for Kyrgyz development:

These are the some policies that include in the development of Kyrgyzstan.

National Strategy for Sustainable Development of the Kyrgyz Republic for 2018-2040.

The targets include economic good of people, social wellbeing, security and fair environment for
living.

Development Program of the Kyrgyz Republic unity trust and creation for the period 2018-2022.

The Unity, Trust, Creation program sketches a set of reforms concerning the public
administration, the development of an economic foundation of people’s wellbeing, ensuring a
fair environment for living, the achievement of instruction economic and financial stability, the
development of small and medium-sized businesses.

Concept of the Regional Policy of the Kyrgyz Republic for the period 2018-2022.
The main objective of the regional policy of Kyrgyzstan is to guarantee an accelerated socio-
economic development of regions to improve the well-being and quality of citizen’s life.

Concept of Development of Organic Agricultural Production in the Kyrgyz Republic for 2017-
2022.

Its aim to generate favorable conditions for the development of biological agriculture by
improving monitoring legal acts and adopting other measures supporting the maintainable
development of the agricultural sector and increasing the affordability of organic products.

REFERENCES

[1] https://events.developmentaid.org/attachment/ce1d8bd8-d82a-445a-a907-
60db0b82f951/Kyrgyzstan%20Report%202018%20-
%20Donor%20Assistance%20to%20the%20Kyrgyz%20Republic.pdf