The National Bank of the Kyrgyz Republic, which has raised its rate by 500 basis points since July 2014 to curb inflationary pressures from a depreciation of the som currency, said the country's economic growth was still being affected by the slowdown of its major trade partners and its policy was geared toward achieving inflation rates of 5-7 percent in the medium term.
As of mid-April Kyrgyzstan's inflation rate eased to 7.8 percent from 10.5 percent at the end of 2014 and 8.5 percent in March and a year-high of 11.6 percent in January.
High economic growth in the first quarter of 7.0 percent was mainly due to output from the Kumtor gold mine, with real Gross Domestic Product excluding Kumtor of 3.4 percent.
The Kyrgyzstani some began depreciating in August 2014 and hit a year-low of 63.9 to the U.S. dollar in early April but has risen since April 21. Today it was quoted at 61.1, down 3.6 percent since the start of 2015.
On April 8 the International Monetary Fund (IMF) approved a 3-year, US$92 million extended credit facility to the Kyrgyz Republic to help its government reduce economic vulnerabilities stemming from "a weak regional environment and dependency on gold and remittances."
The IMF said the Kyrgyz central bank would continue focusing on price stability and limit foreign exchange interventions to "smoothing excessive volatility without resisting exchange rate trends," with a strong communication strategy considered essential to the success of monetary policy.
The IMF forecast total GDP growth of 1.7 percent this year, down from an estimated 3.6 percent in 2014, with non-gold GDP growth of 2.7 percent in 2015 compared with 4.6 percent in 2014. Inflation is seen averaging 10.7 percent this year, up from an average 7.5 percent in 2014.
The National Bank of the Kyrgyz Republic issued the following statement:
"On April 27, 2015, the Board of the National of the Kyrgyz Republic decided to keep the policy rate unchanged at the level of 11 percent.
Analysis of economic situation indicates that, on the one hand, there is slowdown in growth of consumer price index; on the other hand, economic development of the country is still affected by external factors.
Economic situation in the countries – major trade partners has still been affecting slowdown of economic growth in our country through the channels of foreign trade and remittances.
As of the middle of April, inflation rate in annual terms decreased from 10.5 percent to 7.8 percent at the end of 2014. High indicators of economic growth in January-March 2015 (7.0 percent) were primarily conditioned by growth of output at the enterprises of the Kumtor gold mine. Growth rate of real GDP excluding Kumtor constituted 3.4 percent (in January-March 2014 – 4.4 percent).
Taking into account risks of slowdown in external and internal demand, as well as dynamics of inflationary tendency, the National Bank of the Kyrgyz Republic will continue monitoring the situation in the economy of the country and consistent with the statutory mandate will take appropriate measures of monetary policy. The monetary policy will be focused on achievement and retention of inflation rates at the level of 5-7 percent in the medium term, which is stipulated by the Main monetary policy guidelines of the National Bank of the Kyrgyz Republic for the medium term, as well as contribution to sustainable economic development.
The next meeting of the Board of the National Bank of the Kyrgyz Republic which will consider the issue of the policy rate, is scheduled for May 25, 2015. "