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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005
KYRGYZ STOCK EXCHANGE
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment:
Although small and mountainous, Kyrgyzstan
has potential for economic development.
The country has steadfastly followed the
prescribed Western reform template, but with
modest success. Like many CIS nations,
Kyrgyzstan experienced a steep decline in
industrial production by the mid-1990s as the
Soviet-era infrastructure and technology were
not competitive in world markets. With the
existing industrial sector in decline, the
government elected to emphasize the
agricultural sector, which performed
especially well in 1997-1998, for near term
growth. Kyrgyzstan also possesses
significant amounts of mineral wealth
including gold, mercury and uranium. While
lacking major hydrocarbon deposits,
Kyrgyzstan does have considerable
hydroelectric power generation potential,
much of it undeveloped, and exports
electricity from its existing facilities.
In 1994, new legislation was instituted that
abolished the existing legislature, and
replaced it with a smaller bicameral body.
Elections for positions within the new
legislature were held in 1995. At the end of
1995, a new presidential election was called;
Akayev won a commanding victory and was
effectively re-elected. In 1996, the elimination
of certain cabinet positions and a reshuffle of
posts were decreed.
PAGE 90
In recent years, Akayev's vision has been to
make Kyrgyzstan the "Switzerland" of Central
Asia. To this end, governmental transition
has continued. New changes in government
were announced by Akayev in April 1998,
cutting the number of deputy prime ministers
from three to one, disbanding one ministry,
reforming another to a state agency, and
reshuffling the principal officials.
Economic Performance:
The Kumtor gold mine, which has propped
up the economy since the middle of the last
decade, recently had its reserve estimate
substantially downgraded to a remaining
economic life of less than 10 years, forcing
Kyrgyzstan to look into other sources of
growth for the future. In 2002, a landslide at
the mine lowered production significantly,
while bad weather led to lower hydroelectric
energy production, causing a decline in GDP
growth of 0.5% for the year. This was down
from 5.3% growth in 2001. However, growth
outside of mining and energy registered
3.5% for the year, and growth in 1Q 2003
was 4.7%, led by 15% growth in the nonmining
sectors of energy and manufacturing,
especially food processing, construction
materials, and paper. To prepare the
economy for the transition into non-mining
endeavors, and to cull new sources of
revenues to combat continuing deficits of 10-
12% of GDP, the government is shoring up
Key Information Contacts
National Bank of the Kyrgyz Republic www.nbkr.kg
Ministry of Finance www.minfin.kg
State Commission on Securities Market www.nsc.kg
4.Ministry of Foreign Trade and Industry of the Kyrgyz Republic www.mvtp.kg
ECONOMIC RATIOS
Domestic
savings
Kyrgyzstan
Lower-middle-income group
Trade
Indebtedness
Investment
GROWTH OF INVESTMENT AND GDP
(%)
30
20
10
0
-10
-20
-30
97
GDI GDP
the tax base with several new tax measures
including an extension of the VAT. Strong
demand for the currency kept the 12-month
rate of inflation low relative to its regional
trade partners, at 4.1% in May 2003. This
reflected an increase from 2.3% at year-end
2002, as food prices grew.
The current account deficit narrowed to 2.6%
of GDP in 2002 from 3.3% despite a weaker
trade balance in 2001 as higher gold prices
offset declines in gold and energy exports for
the year. Kyrgyzstan has been successful,
however, in petitioning a number of its
bilateral creditors for debt re-scheduling. 1
1 Economic and Political Overview, County Watch
Incorporated, 2005
98 99 00 01 02 03
* World Bank reports