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Moody’s: Kyrgyzstan’s economy is vulnerable to gold mining, remittances

Credit profile of Kyrgyzstan underlines the vulnerability of the economy to fluctuations in gold production and remittances. Credit analysis of Moody’s Investors Service says.

According to it, the loan portfolio of the republic also shows a significant debt burden of the government. The institutional framework of the country is weak, especially in the fight against corruption and the rule of law, while domestic political tensions pose a risk, despite stabilization in recent years.

According to Moody’s estimates, the debt load of the Cabinet of Ministers reached 57 percent of GDP in 2018.

The agency considers such a level of state debt as relatively high for a small economy with limited access to market financing.

The findings of Moody’s are such that the economic strength of the country is rated as low, institutional strength — as very low, fiscal strength — as low, and risk exposure — moderate.

«Financial assistance from international financial institutions was the main support for the credit profile of Kyrgyzstan. Technical assistance and the International Monetary Fund program in the form of an extended credit facility, approved in April 2015, made the budget policy more transparent and predictable. Moreover, the high availability of government debt (90 percent is financed on concessional terms) partially reduces the risks associated with high debt burden,» the agency’s experts say.

However, they are confident that the future prospects of state cooperation with international financial institutions are less obvious, since the IMF program was completed in April last year.

«The stable outlook for B2 rating balances the benefits associated with sustainable economic growth, current reforms, a large revenue base and low cost of concessional financing, and the risks associated with potentially more unfavorable changes in fiscal indicators, in particular, if financial consolidation and structural improvements including those that stimulate energy and transport infrastructure significantly delayed,» statement says.

Moody’s can raise the country’s rating if fiscal consolidation leads to a reduction in government debt burden and a steady inflation growth. But a downgrade may be caused by the cessation of donor support, an increase in funding needs, combined with a deterioration in the debt structure and / or economically destabilizing social and political tensions.

Recall, Moody’s Investors Service agency assigns a sovereign credit rating to Kyrgyzstan. The republic has B2: stable rating, which is considered as highly speculative. The rating has remained unchanged since December 2015, when it was first assigned to the country. At the same time, the rating of the Kyrgyz Republic is closed, therefore, it is impossible to examine the data why experts assigned the state a such ranking.