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GENERAL BACKGROUND

While Kyrgyzstan remains among the poorest of the former Soviet states, the Kyrgyz economy experienced its best year in 1996 since the collapse of the Soviet Union. In addition to real GDP growth of 2 percent, the country's budget deficit was reduced from 12.8 percent of GDP in 1995 to an estimated 6 percent in 1996. On the downside, Kyrgyzstan has had great difficulty attracting foreign investment, while politically the country has been threatened with destabilization by the Tajik civil war, growing social unrest, and divisions between the country's ethnic Uzbek and Kyrgyz populations. In the face of its economic and political problems, Kyrgyzstan has tilted back towards Moscow, particularly in the economic sphere. Among other measures, Kyrgyzstan on March 29, 1996 joined a customs union with Russia, Kazakstan, and Belarus.

Kyrgyzstan was heavily reliant on Soviet economic subsidies, which it lost when the Soviet Union fell apart. Kyrgyzstan has partly recovered this loss through financial assistance from the World Bank and the International Monetary Fund (IMF). Since Soviet subsidies to Kyrgyzstan represented approximately 12% of the country's GDP, the economy suffered severely when these funds were removed. Among the more damaging was the sudden removal of fuel subsides, which seriously hurt industrial activity.

Kyrgyzstan receives significant amounts of international assistance and advice ($680 million pledged by the end of 1996), including an IMF Enhanced Structural Adjustment Facility program which runs through 1997. In early November 1996, a group of 24 countries pledged $450 million in aid during 1997 to help Kyrgyzstan balance its finances as well as for technical and investment support. Kyrgyzstan also has looked to Far Eastern countries for investment and assistance.

Such assistance has helped Kyrgyzstan launch a series of economic reforms which have promoted (albeit haltingly) economic reform, privatization, price liberalization, and a stable currency -- the som. In October 1996, President Akayev ordered the establishment of a securities market commission and a single system of clearing payments between the National Bank and commercial banks. Also, on June 1, 1996, Kyrgyzstan's new Civil Code, which establishes freedom of contract and association as the basis for commercial activities, came into force.

In the long-run, the government's economic development plan (unveiled in late 1996) calls for, among other things, 8 percent annual real GDP growth through 2005 and a reduction in inflation to 8 percent annually. The plan also targets small- and medium-sized enterprises, industrial exports, foreign direct investment, and the exploitation of natural resources as the main engines of growth.

OIL

Kyrgyzstan has two major electric power plants, a 1.2 gigawatt (GW) hydro plant at Toktogul, and a 0.76 GW thermal plant at Frunze, with plans for a major 6.8 GW hyropower station to be built by 2010. Electricity is Kyrgyzstan's major export, although it has had difficulty receiving world-market prices from its main customer, Uzbekistan.

COUNTRY OVERVIEW

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File last modified: December 19, 1996

Contact:

Douglas MacIntyre
dmacinty@eia.doe.gov
Phone: (202) 586-1831
Fax: (202) 586-9753