The Board of the National Bank of Kyrgyzstan decided to keep the discount rate (key rate) at the level of 7.5% on September 1.
Recovery of economic activity in most countries – the main trading partners of Kyrgyzstan continues to be supported by stimulus measures. At the same time, there is an increase in inflationary processes in the context of a rapid recovery in demand and a limited supply of certain goods in world markets. Uncertainty remains high regarding the development of the global and regional economies amid the risks of the emergence of more dangerous strains of COVID-19 and, as a result, introduction of new restrictive measures, as well as the rate of vaccination of the population in the world.
Recovery of Kyrgyzstan’s economy in the second quarter slowed down – in January-July the volume of GDP decreased by 1.6% YoY.
The main constraints to the recovery of economic activity in the country are the decline in industrial production and agriculture. The dynamics of domestic demand is gradually recovering, but has not yet reached the pre-pandemic level. The inflow of remittances to the country is growing – in January-July the net inflow of remittances from individuals increased by 31.1%, reaching about $1.1 billion.
In the context of persisting inflationary pressure, the National Bank continued its policy of tightening monetary conditions.
In general, short-term money market rates had the same direction with the key rate and showed an upward trend. At the same time, money market rates remained within the interest rate corridor of the National Bank. Participants of the money market remain active, mainly in the short segment. The banking system has sufficient liquidity. Lending to the economy continued to grow along with the deposit base.
“The risks of the emergence of new dangerous strains of COVID-19, the slow and uneven process of vaccination of the population still determine the trajectories of economic development of both trading partner countries and Kyrgyzstan,” the National Bank said. “Taking into account the prerequisites for the development of the external environment and internal economic conditions, the National Bank decided to keep the discount rate at the level of 7.5%. In case of risks, the National Bank does not exclude the possibility of making additional adjustments to the ongoing monetary policy”.
The next meeting of the Board of the National Bank on the size of the discount rate will be held on October 25. (24.kg/Business World Magazine)