…UNLESS ECONOMY RECOVERS QUICKLY.

These troubles represent quite a change for Kyrgyzstan, which was one of the most rapid reformers and fastest growing CIS economies during 1996-1997, recording almost 10 percent GDP growth in these years. This growth, however, brought about both a correspondingly rapid rise in imports and very large trade deficits financed by borrowing, primarily from the International Monetary Fund (IMF) and the World Bank. Kyrgyzstan’s debt ballooned further after the August 1998 Russian financial crisis, as traditional Kyrgyz export markets in the CIS collapsed. The Kyrgyz som depreciated by nearly 50 percent following the August 1998 ruble crash, which led to a severe contraction in imports (about 27 percent) in 1999. GDP growth slowed to 1.8 percent in 1998, and fell to 0.1 percent during the first half of 1999.

Fortunately, Kyrgyzstan’s economy seemed to bounce back sharply in the third quarter of last year, when preliminary estimates indicate that GDP grew by some 10 percent. Monthly inflation rates fell from an average of 4.8 percent during the first half of 1999 to only 0.8 percent during July-November. This helped stabilize the exchange rate: The som has barely moved from US$1 = 43 in May 1999 to US$1 = 46 in January 2000. Kyrgyzstan’s trade deficit has also dropped sharply, from US$322 million in 1998 to only US$71 million during the first three quarters of 1999.

Such improvements in the economic picture, should they continue through 2000, would help Kyrgyzstan solve its foreign debt servicing problem. So would additional assistance, if not debt restructuring from Kyrgyzstan’s international creditors. But the IMF and World Bank do not seem to have any talks planned with the Kyrgyz government until later this year. In the meanwhile, Kyrgyzstan will hold parliamentary elections on February 20. Until then, it is difficult to say whether Kyrgyzstan will avoid replaying the Russian scenario.

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