Coming out of 2015, although Kyrgyzstan, like the other Central Asian countries, was facing economic problems, the country could look back on two potentially beneficial events. Kyrgyzstan had officially joined the Eurasian Economic Union (EEU) in August and then conducted an amazingly clean campaign for parliamentary elections, followed by the actual poll on October 4, which did not come off quite as clean but was still far better than elections in any of the other Central Asian states.
Forty days into 2016, neither of those things had helped Kyrgyzstan much. But it’s only been a few months, so maybe there is still a chance.
Kyrgyzstan certainly had security concerns entering 2016. There were two security operations conducted in the capital, Bishkek, in 2015, both involving escaped prisoners vaguely identified as militants. There were reports about citizens of Kyrgyzstan making their way to Syria to join Islamic State (IS) or other extremist groups.
As Kyrgyzstan started the new year, the country’s main source of power -- the Toktogul Reservoir and hydropower plant (HPP) -- had just shut down three of its four turbines for several days. An inspection determined the HPP was simply old and needed repair and upgrades. At the same time, the Kyrgyz government was preparing to scrap an agreement with Russia to construct the giant Kambar-Ata-1 HPP, a project that was supposed to push Kyrgyzstan closer to the long-anticipated goal of energy independence.
In the meantime, the sale of the state gas company to Russia’s Gazprom in 2014 for a symbolic $1 was paying dividends to Kyrgyzstan’s people, who did not have to endure another winter of severe power rationing this winter. Admittedly, the company said rate hikes would be coming, incrementally, over the coming years.
On the first day of the new year, the exchange rate was 75.89 soms to one U.S. dollar. One year earlier, on January 1, 2015, the rate was 58.89 soms to the dollar.
There was an abundance of bad economic news. On January 6, the Kyrgyz National Bank said it staged 16 interventions, spending some $37 million to prop up the som during 2015. When Kyrgyzstan’s National Bank carried out a currency intervention on January 21, Russia’s TASS news agency reported, “This is the 12th currency intervention conducted by the National Bank in January this year.” The Kyrgyz news agency 24.kg later reported the bank sold some $3.75 million on January 21 and then sold some $5.4 million the next day and during January had spent nearly $54 million.
Authorities initiated inspections of exchange bureaus to stamp out currency speculation. At least four exchange bureaus had their licenses pulled by January 18. The country’s Agency for Antimonopoly Regulations reminded on January 16 that all financial transactions in the country must be conducted in the national currency.
Kyrgyzstan is the second-most remittance-dependent country in the world. Some 700,000 Kyrgyz citizens are migrant laborers. For several years, money, sent mainly from Russia, has been equivalent to 30 to 40 percent of Kyrgyzstan’s GDP. Owing to the economic crises in Russia and Kazakhstan, with some 520,000 and 113,000 migrant laborers, respectively, from Kyrgyzstan, work remittances for 2015 dropped some 27 percent compared to 2014.
However, Kyrgyzstan seemingly will not face the dilemma of returning migrant laborers that Tajikistan and Uzbekistan seem bound to experience. Russia's Federal Migration Service reported on January 12 that while the number of Tajik and Uzbek citizens living in Russia decreased during 2015, the number of citizens of Kyrgyzstan coming to Russia increased by 2 percent.
Kyrgyzstan’s unemployment figure is unclear. During January, the Labor Ministry told Azattyk there were some 200,000 unemployed people in the country, but other government agencies put it as low as 56,000.
There were signs of social discontent. Those who took out loans based in dollars suddenly found themselves unable to repay the loans. There were protests over this, but the Kyrgyz government appeared to have headed it off, at least temporarily, by offering to calculate repayment of loans under $40,000 at the som rate of a year ago for state employees (who include teachers and medical workers). It is not clear how authorities will manage that financially.
There were also the residents of “high mountain regions.” For years, people living in Kyrgyzstan’s mountains have been given a special subsidy by the state, but in January parliament discussed cutting that benefit. Kyrgyzstan is some 90 percent covered by mountains, so a significant number of people would be affected by such a decision. Some of these people, particularly in the northeast city of Naryn, protested the plan. Prime Minister Temir Sariev ordered the draft bill withdrawn for revision on January 25, easing passions, at least temporarily.
Security remains a concern. On January 21, State Committee for National Security Deputy Director Taalaybek Japarov said there were some 500 citizens of Kyrgyzstan who were members of militant groups in Syria.
One of these, at least, returned to Kyrgyzstan and spotlighted a significant gap in domestic security. On January 18, authorities in the southern city of Jalal-Abat detained a Kyrgyz citizen recently returned from Syria and reportedly discovered that individual had a grenade launcher. Authorities quickly learned the detained person had obtained the grenade launcher from the head of the police arms depot in Jalal-Abat. Prime Minister Sariev called it an “outrageous case.”
There really was not any “great distraction” in Kyrgyzstan during the first 40 days of 2016. The country is marking the 100th anniversary of the Urkun, the flight of the Kyrgyz people into the Tien-Shan Mountains after widespread violence erupted when Central Asians resisted Russian attempts to conscript them for duty in World War I.
There is also next year's presidential election. President Almazbek Atambaev will step down, and the political jockeying is already under way and will likely only become more intense during the course of 2016.
The exchange rate on February 1 was 75.88 soms to the U.S. dollar. On February 9, it was 74.31 soms. The World Bank forecast at the start of January that Kyrgyzstan’s GDP would grow by 1 percent in 2016 and 3.4 percent in 2017, the year the country holds its next presidential election.
