Overview Of Kyrgyzstan And Its Economy Economics Essay

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Kyrgyzstan is a poor, mountainous country with a dominant agricultural sector. Cotton, tobacco, wool, and meat are the main agricultural products, although only tobacco and cotton are exported in any quantity. Industrial exports include gold, mercury, uranium, natural gas, and electricity. The economy depends heavily on gold exports , mainly from output at the Kumtor gold mine. Following independence, Kyrgyzstan was progressive in carrying out market reforms, such as an improved regulatory system and land reform. Kyrgyzstan was the first Commonwealth of Independent States (CIS) country to be accepted into the World Trade Organization. Much of the government's stock in enterprises has been sold. Drops in production had been severe after the breakup of the Soviet Union in December 1991, but by mid-1995, production began to recover and exports began to increase. In 2005, the BAKIEV government and international financial institutions initiated a comprehensive medium-term poverty reduction and economic growth strategy. Bishkek agreed to pursue much needed tax reform and, in 2006, became eligible for the heavily indebted poor countries (HIPC) initiative. The government made steady strides in controlling its substantial fiscal deficit, nearly closing the gap between revenues and expenditures in 2006, before boosting expenditures more than 20% in 2007-08. GDP grew about 8% annually in 2007-08, partly due to higher gold prices internationally, but slowed to 2.3% in 2009. The overthrow of President BAKIEV in April, 2010 and subsequent ethnic clashes left hundreds dead and damaged infrastructure. Shrinking trade and agricultural production, as well as political instability, caused GDP to contract about 3.5% in 2010. The fiscal deficit widened to 12% of GDP, reflecting significant increases in crisis-related spending, including both rehabilitation of damaged infrastructure and bank recapitalization. Progress in reconstruction, fighting corruption, restructuring domestic industry, and attracting foreign aid and investment are key to future growth.

Economic problem in Kyrgyzstan

Land and climate.

The Tian Shan and Alay Mountain cover most of the Kyrgyzstan. About three quarters of the country lies at an altitude of more than 1500 meters above the sea level. Peak Pobedy, the country’s highest mountain, rises 7349 meters in the Tian Shan along the border with China. Only about 15 per cent of Kyrgyzstan is below 915 meters above sea level. These areas include plains and mountains valley. Most of the people live in this relatively low place

Temperatures in Kyrgyzstan vary with altitude. Summers are very warm and dry in the valleys and plains, and cool in the mountain. July temperature average 16-24 c in the valleys and plains and 5c in mountains. Winters are chilly in lowlands, but extremely cold in the mountains. January temperatures average -5 to -14c in the lowland and 28c in the mountains.

High wage policies

I believe there is no High Wage Policy in Kyrgyzstan. In fact, the standard of living for an average citizen suggests the "As Low as Possible Wage Policy'. GNI per capita in 1999 was recorded at US $300 or US $25 per month. This income cannot provide for decent living which includes being able to pay for a place to live, cover all the utility bills with utility prices climbing up every month, enough food and some necessary clothing and occasional medical expenses. In the Kyrgyz Republic, poor people's wellbeing seems to be spiraling downward, and many face increasingly desperate situations. In their daily struggles they see the state as more of an obstacle than an ally, and they are forced to rely heavily on family, relatives, and friends. These social networks, however, also have limited resources and are showing signs of strain. By most recent estimate available, percent of the population living below national poverty line is 52%. There are no laws enforcing a minimum wage for skilled labor teachers, doctors, engineers therefore a lot of highly trained professionals are working better paid jobs waiting the tables at restaurants or as bodyguards to local businessmen. Such waste of brainpower cannot be beneficial for the country's economy.

Central Bank

The financial sector of Kyrgyzstan consists of the National Bank of Kyrgyzstan (NBK), three large commercial, nine small commercial banks and the Savings Bank (SB). The system emerged from the institutions that operated under the previous regime. The laws that currently govern the banking system were passed in June 1991, and consist of the "Law on State Bank" and the "Law on Banks and Banking. In February 1992, the State Bank was replaced by NBK, which inherited the legal rights and responsibilities of the State Bank and acts as the central bank of the Republic. NBK is responsible for all monetary affairs and the banking sector, acts as the economic agent of the Government, and manages relations with other CIS and foreign central banks. It extends credit to the commercial banks, holds their reserves, and provides clearing services for interbank transactions. Even though The National Bank is not run by the Government, Bank's five board members and the Chairman are nominated by the recommendation of the country's President. Kyrgyz National Bank is still reliant on the Government.

Government debt

Since the break-up of the Soviet Union in 1991, the Kyrgyz Republic has accumulated a large portfolio of external liabilities, which as of the end of 1998 totaled an estimated US$1.5 billion or 96 percent of GDP. Servicing this debt has been difficult but, until recently, manageable partly due to a number of short term debt rollovers granted by Russia and Turkey. Debt service levels have so far been relatively low given a large amount of concessional external financing that came with long grace periods. The debt service burden, however, is expected to surge substantially in 2000-2005, when practically all non-concessional debt twins to 50 percent of the total will need to be repaid and grace periods for concessional loans end. It was estimated by the World Bank that budget debt service to revenue ratio to be in the 40-50 percent range after the year 2000.

At current deficit levels there is little doubt that Kyrgyzstan's debt is developing in an explosive way, without or with rescheduling. The debt-output ratio expanded in the period 1993-98, to reach a very high level of around 96 percent in 1998.


After declaring its independence, Kyrgyzstan continued the legacy of Soviet-era education system the main idea of which was to educate all of its citizens. General education in Kyrgyzstan is financed from district budgets, and the college prep and higher education programs are financed by the national budget. State sponsored education is made available for those with qualifying academic record. Admissions policies are skewed towards applicants of Kyrgyz ethnic descend putting Russian applicants at an extreme disadvantage. In the past decade a few private universities arisen. Typically the tuition of these private institutions is out of reach of average family. But even though the education is available to most, the quality of it is low. One of the most usual reasons is low pay for instructors. Teachers educated during soviet times usually have the knowledge but lack motivation to effectively impart that knowledge to their students. Currently there is a bran-drain where brightest people are trying to leave the country.

Protection of public health and safety

During Soviet times Kyrgyzstan belonged to one state-wide health system that insured an adequate free health care for every citizen of the Soviet Union. Kyrgyzstan’s post-Soviet financial crisis has significantly reduced government's financial support of such health system. The current funding crisis has caused a series of changes that impact on all levels of the health system, many of which have reduced the quality of the service provided and seek to undermine both the health workers' and general public's confidence in the system. It has been noted that the population's health seeking behavior has changed in the last few years with people visiting health facilities less often, later in the illness, or not at all. The health system is collapsing due to lack of drugs and supplies, particularly at the primary health care level. In the current situation most patients must provide bedding, food, drugs and syringes for themselves and cover the costs of transport. This collapse is further worsened by the use of outdated treatment regimes, which often include poly pharmacy and long periods of unnecessary hospitalization.

One of the biggest health problems in Kyrgyzstan is tuberculosis. The number of cases is steadily growing -- from 15,032 cases per 100,000 populations in 1998 to 17,780 cases per 100,000 in 2000. Ongoing tuberculosis prevention campaign is not bringing noticeable results partly due to lack of finances.

Political Effectiveness

There are so many examples that can be talked about when one is trying to figure out how effective Kyrgyzstan's politics are. But doe to the current situation in the world, one example especially draws attention.

Kyrgyzstan was one of the first Central Asian countries to welcome American and ally's troops to its land, which really upset Russia. This agreement brought Kyrgyzstan over US $4 million which could greatly benefit the country. Also Kyrgyz Government hoped that if the country takes an active part in US led war on terrorism, America will close its eyes on huge harms of human right in Kyrgyzstan. Now it's becoming apparent that even though Kyrgyzstan is a useful ally in the war, principles are still principles, and is Kyrgyz government mistreats its citizens, it has to be brought up by the western community.


In last but not least, we come to know that kyzargstan is a very slow economic growth country. It need lot of improvement economic sectors. The government need to shape up the country in many factors.