Overview

Strategy

The World Bank and the Kyrgyz Republic

Since the Kyrgyz Republic joined the World Bank in 1992, the Bank’s financial assistance has amounted to over US$1.5 billion.

World Bank support has helped the country to maintain macroeconomic stability, invest in strategic infrastructure, and improve access to social services.

To enhance the impact of the sizable external assistance that the country enjoys and avoid duplication of effort by donors, the World Bank Group, through its convening role, worked closely with the Government to help improve broader donor coordination in the country and link it more directly to identified national priorities.

World Bank–supported programs have delivered important development results in many areas, including health care, education, rural development, irrigation, water supply and sanitation, transport infrastructure, and public financial management.

Key Engagement

The strategic focus of the World Bank’s program as highlighted in the 2019–22 Country Partnership Framework is to assist the Kyrgyz Republic in promoting diversified, export-oriented, inclusive, and sustainable growth.

World Bank engagement for the next several years will be built around three focus areas:

First, strengthening the foundations for inclusive private sector–led growth, focusing especially on fiscal stability, improvements to the regulatory environment for business, and risk reduction.

Second, boosting overall productivity and building greater connectivity through support for the development of promising natural resource sectors and greater digital and physical connectivity.

Third, expanding economic opportunities and building resilience through investments in human capital, efforts to decentralize and support regional development, and better adaptation to environmental and climate risks.

Support for these areas will be provided through concessional International Development Association (IDA) lending, supplemented by trust fund financing and intensified Advisory Services and Analytics that emphasize practical, problem-solving advice.

Economy

Recent Economic Developments

Real GDP growth slowed to 3.5 percent in 2018 from 4.7 percent in 2017. Inflation fell to 0.5 percent by end-2018 from 3.7 percent at end-December 2017, driven mainly by a decline in food prices.

The fiscal deficit narrowed to 1.6 percent of GDP in 2018, down from a deficit of 4.6 percent of GDP in 2017, on account of strong tax collections coupled with the under-execution of the investment program.

Tax revenue rose to 25.4 percent of GDP in 2018 from 23.9 percent in 2017, thanks mainly to higher import tax collections.

Due to lower non-tax revenues and grant support, however, total revenues fell to 31.8 percent of GDP (from 32.6 percent in 2017). Total spending declined to 33.4 percent of GDP (from 37.2 percent a year earlier).

The current account deficit widened to 12.2 percent of GDP (from 6.6 percent a year earlier), reflecting a larger trade deficit of 40.9 percentof GDP in January–September 2018.

The current account deficit was financed by foreign direct investment, a debt write-off of US$240 million by the Russian Federation, and a drawdown on foreign exchange reserves.

Economic Outlook

Real GDP growth is projected to accelerate to 4.3 percent in 2019 and stabilize at around 4 percent thereafter.

This scenario reflects the gold production forecast and assumes moderate growth in Russia and Kazakhstan, which will benefit the Kyrgyz economy through remittance and trade channels.

Assuming exchange rate stability and no significant adverse shocks to global food prices, inflation will remain below the central bank’s target range of 5–7 percent over the medium term.

The current account deficit is projected to remain elevated at about 10 percent of GDP. The authorities are committed to reducing the deficit to 3 percent of GDP by 2020. In 2019–20, tax revenues as a share of GDP are projected to rise following the implementation of measures to expand the tax base.

Meanwhile, recurrent expenditures are forecast to decline on the back of efforts to streamline non-priority purchases and reduce the wage bill as a share of GDP. Public investment spending is expected to decelerate slightly.

With the growth in the agriculture and construction sectors expected to remain modest, further increases in remittances will support rural poverty reduction.

Social transfers and a scheduled pension increase will also support the most vulnerable. The poverty rate is projected to decline to 18.8 percent in 2019.

All Projects

Highlighted Project

The Kyrgyz Early Education Project (2014–18)

Teachers note a remarkable improvement in children’s language and cognitive development skills. (Photo: Barchynai Kydykeeva)

The Kyrgyz Early Education Project has led to improvements in the quality of preschool education and in children’s readiness for learning. There is now more equitable access to preschool education, and a full-year school preparation program for 6-year-old children has achieved nearly universal enrollment.

Cost-effective preschool models have also been introduced. The results of a learning assessment revealed a remarkable improvement in children’s language and cognitive development skills, which are known to play a crucial role in overall attainment at later stages in life.

“Thanks to the Early Education Project, the disadvantaged children in the program were catching up developmentally to their relatively more advantaged peers. It is very important that the project helped decrease the social and demographic inequalities as compared by age, single parenthood, mother’s education, parental incomes, and school language.” – says Minister of Education Gulmira Kudaiberdieva.

The project results demonstrated a more efficient alternative use of the education budget. Throughout the country, both school preparation classes and community-based kindergartens for 10,000 children are operating at already existing schools or other suitable facilities and are focused on the learning process.

Equitable access to preschool education was achieved through reaching out to the most disadvantaged regions and providing them with quality teaching and learning materials, furniture, sanitary facilities, and equipment.