The economy of Kyrgyzstan: indicators, characteristics and development

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:55

A small Central Asian country with beautiful scenery and low-income population, Kyrgyzstan was annexed to Russia in 1876 and became an independent state in 1991. In 2017, for the first time since independence, the country's president resigned after serving his full term under the Constitution. And he was replaced by former Prime Minister Sooronbai Jeenbekov, elected in democratic elections. The economy of Kyrgyzstan is based on agriculture, mining and remittances from citizens of the country working abroad. The country, with the help of foreign consultants, quickly carried out market reforms, which did not help its economy much.

Reforms

After gaining independence, Kyrgyzstan began to actively change the legislation, carried out land reform and privatization. The country was the first in the post-Soviet space to join the World Trade Organization in 1998. The economy of sovereign Kyrgyzstan was transferred to market rails in the shortest possible time. The government has privatized state shares in most enterprises. Decollectivization of agriculture was carried outfarms now dominated by peasant farms.

Former collective farm land was distributed among the peasants in proportion to the number of family members. Despite the reforms, there was a sharp drop in industrial production and hyperinflation began. About 50% of the population was below the poverty line. At the same time, there was a mass departure of the Russian-speaking population, as a rule, these were highly qualified specialists. Only closer to the year 2000 did stabilization begin and economic growth began to take shape. The growth rates of the economy of Kyrgyzstan were mostly positive, only in 2009 the country experienced a crisis associated with the collapse of the ruble. The influence of Islamic finance on the economy of Kyrgyzstan is insignificant, projects are being implemented in the country with the Islamic Development Bank, another local bank (CJSC EcoIslamicBank) operates on Islamic principles. The share of assets of financial institutions offering Islamic banking is 1.6%. The main efforts of the country are now aimed at reducing the influence of the state on the economy, administrative barriers, and reducing regulatory bodies. The youngest economy minister of Kyrgyzstan, 30-year-old Artem Novikov, will carry out further reforms. He received his appointment in 2017.

General characteristics of the Kyrgyz economy

The main sectors of the country's economy are agriculture and the service sector, which together provide about 70% of GDP. Cotton is almost the only agricultural export product that is in good demand on the world market, but the countryproduces little, and the price of raw cotton fluctuates wildly, depending on supply and demand in India and China.

Another export industry is mining, the main ones being gold, mercury, uranium, tungsten, natural gas. Kyrgyzstan also supplies electricity to neighboring countries from its hydroelectric power plants on the Naryn River. A significant contribution to the economy of their native land of Kyrgyzstan is made by labor migrants working in Russia and other more prosperous countries of the post-Soviet space. In some years, their transfers amount to a third of GDP. A significant problem is the budget deficit, which is 3-5% of GDP, and external borrowing is needed to service it. The influence of the world economy on Kyrgyzstan is actually a direct action, price fluctuations in the global market almost instantly affect the country's income. GDP in 2017 was $7.11 billion.

Joining the EAEU

In 2015, the country joined the Eurasian Economic Union, hoping that joining this single market would stimulate economic growth. The removal of barriers to the movement of capital, labor resources and goods, according to the government of the country, should have attracted investment in Kyrgyzstan. So far, only labor migrants have benefited, who have been given the opportunity not to obtain work permits in Russia and Kazakhstan, the main points of their migration. Investment and trade are growing slowly, which alsoassociated with non-tariff restrictions on traditional exports. Russia's economic slowdown and falling commodity prices prevent the country from taking full advantage of the EAEU common market.

Mining

Kyrgyzstan has large deposits of gold, antimony, mercury, uranium, zinc, tin, tungsten, lead, and rare earth metals. The country produces relatively small amounts of coal, oil and natural gas. The largest deposit is Kumtor, the third largest gold deposit in the world and the highest mountain mine. The deposit is owned by the Canadian company Centerra Gold Inc., the share of Kyrgyzstan in which is 33%. It is expected that the government will increase its share to 50%, but so far the negotiations are difficult. The development of the mine was carried out from 1993 to 1997, and already in 1998 the first million ounces of gold was smelted. In addition, gold is mined at the Zheruysky deposit and Shyralzhy with money received from Japan. Mercury and antimony are mined at the Khaidarkan deposit by the state company Khaidarkan Mercury Joint Stock Company. Mercury and its compounds, as well as antimony and fluorspar concentrates are exported. Tungsten is mined at the Trudovoye and Meliksu deposits.

Industry

Industry is represented mainly by light and food industries. The country has a sufficient number of enterprises (dairy, fruit and berry, alcohol) to provide the population with basic productsnutrition. Light industry in the economy of Kyrgyzstan is the most developed processing industry. More than 200 enterprises produce various types of clothing and footwear, which are exported to neighboring countries and Russia.

Energy

There are 17 power plants in the country, including 15 hydroelectric power plants, which provide 80% of electricity. The power plants were built during the Soviet period. In 2012, Kyrgyzstan and Russia agreed to build the Kambarata HPP-1 together, but the project was not implemented due to the fact that the Russian side did not provide funding. The country annually exports up to 2.5 billion kWh of electricity to Uzbekistan, Kazakhstan and Tajikistan.

Agriculture

Agriculture is one of the leading sectors of the Kyrgyz economy. The country was the first among the CIS countries to introduce private ownership of land. Most of the agricultural products are produced by peasant farms (31,000). Animal husbandry is a traditional occupation of the Kyrgyz; sheep and yaks are bred on mountain pastures. In the flat areas, poultry, pigs and cattle are bred, vegetables, berries, legumes, and nuts are also grown here. The main agricultural products are cotton, meat, wool, cereals, vegetables, and sugar. Cotton is the main export crop, almost completely goes to Russia, which also receives a lot of vegetables, fruits, and meat. Due to non-tariff restrictions, the supply of meat and milk to neighboring Kazakhstan is difficult.

Foreign trade

The country in terms of exports ranks 95th in the world ($1.42 billion), gold accounts for almost half of its exports (49%), followed by precious metals (4.8%) and dried legumes (3.9%). The Kyrgyz economy is heavily dependent on gold exports. The country sells about $700 million of this metal a year, most of it through Switzerland, which is the largest importer of goods from Kyrgyzstan.

Next on the list of top destinations for Kyrgyz exports are Kazakhstan ($151 million), Russia ($145 million) and Uzbekistan ($125 million), according to 2017 data. The largest import items are petroleum products (8.6%), rubber footwear (5.3%), synthetic fabrics (2.9%). Petroleum products were purchased for $328 million, rubber shoes - for $202 million, synthetic fabrics and medicines - for about $110 million for each item. In 2017, Kyrgyzstan supplied ferrous metals to Russia for $45.3 million, food - for about $35 million, clothing and other consumer goods - for $25 million. Oil products worth $557 million, equipment - $52 million and electrical machines - $38 million were delivered from Russia in 2017.