IMF Executive Board Concludes 2026 Article IV Consultation with Kyrgyz Republic

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the Article IV Consultation for the Kyrgyz Republic.[1] The authorities need more time to consider the publication of the Staff Report prepared for this consultation.[2]

The Kyrgyz Republic continues to record strong economic performance as the economy transitions from low-income status. Since 2022, expanded trade flows, robust remittance and capital inflows, and strong construction activity supported by government spending have underpinned rapid growth. Output is estimated to have grown by 11 percent in 2025. At the same time, inflation rose to 11 percent in March 2026, well above the central bank’s 5–7 percent target range.

Growth is expected to moderate as recent trade-related gains fade but will be buoyed by large infrastructure projects over the medium term. Inflation is likely to remain high through 2027 before easing gradually if macroeconomic policies are tightened appropriately. After fiscal surpluses in 2023–25, the budget is projected to move into deficit in 2026, mainly because of higher public wages and capital spending. Public debt remains sustainable, but financing needs are sizable. Strong remittances and high gold prices are expected to support the external position.

Even though the Kyrgyz Republic has limited exposure to the war in the Middle East, sustained high oil prices could add to inflation pressures. With heightened global uncertainty, accelerating reforms will be key to enhance resilience, strengthen policy buffers, and support inclusive growth.

Executive Board Assessment

Executive Directors agreed with the thrust of the staff appraisal. They welcomed the Kyrgyz Republic’s rapid economic growth and declining poverty, while noting downside risks, emerging signs of overheating, and elevated inflation pressures. In this context, Directors underscored the need for careful policy recalibration, supported by Fund capacity development, to enhance resilience, strengthen buffers, and foster private sector-led inclusive growth.

Directors underscored the need to bolster the fiscal position by strengthening revenue mobilization to create space for priority infrastructure and targeted social spending, while containing expenditure on energy subsidies and wages. They called for enhancing public financial, investment, and debt management to strengthen efficiency, resilience, and fiscal sustainability. Directors also emphasized the need to fully capture quasi-fiscal operations and SOE risks, including ensuring that the operations of the Stabilization Fund are transparently reflected in fiscal reporting and risk assessments.

Directors supported maintaining an appropriately tight and data‑dependent monetary policy stance until inflation durably returns to the central bank’s target range. They emphasized the importance of strengthening the operational framework and encouraged the authorities to strengthen the independence of the central bank. Greater exchange rate flexibility and more diversified reserves would further enhance external resilience.

Noting rapid credit growth, high NPLs and a deepening bank–sovereign nexus, Directors called for heightened financial supervisory vigilance and capacity, focusing on a risk-based approach and proactive macroprudential measures. They also noted the need for enhanced AML/CFT measures and stronger supervision and governance of virtual asset service providers.

Directors called for ambitious structural reforms to support private sector-led growth. They agreed that priority areas include SOE reform and strengthening the business environment, competition, the rule of law, and anti-corruption. Directors supported ongoing efforts to reduce informality and labor market rigidities, invest in human capital and digital infrastructure, and harness the gains of AI. Strengthening external sector and national account statistics is essential to enhance macroeconomic surveillance.

[1] Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the Executive Board.

[2] Under the IMF's Articles of Agreement, publication of documents that pertain to member countries is voluntary and requires the member consent.