National Bank of Kyrgyzstan again holds discount rate at 13%

BISHKEK. Feb 27 (Interfax) - The Board of the National Bank of Kyrgyzstan decided to maintain its discount (key) rate at 13%, Deputy Head of the Department of Communications and International Cooperation of the National Bank Ilyichbek Sultankulov said at a press conference on Tuesday.

This decision, he said, was made taking the trends in the development of the economic situation within the country and in the world into consideration. Economic activity in Kyrgyzstan continues to show growth.

Real GDP in Kyrgyzstan grew 7.4% in January 2024 in annual terms. Growth was driven by the industrial, services and construction sectors. Domestic consumption has been supported by an increase in real wages in the public and private sectors, an increase in consumer lending and an increase in the net inflow of remittances into the country. In the fiscal sector, the implementation of a policy of fiscal consolidation has had a restraining effect on price dynamics.

"The banking sector remains stable and is demonstrating growth in its key indicators. Current monetary conditions have contributed to the expansion of the resource base available to commercial banks, demonstrating the increased savings behavior of the population. The interbank money and domestic foreign exchange markets remain stable. In general, the banking system is maintaining a high level of excess liquidity in the national currency," Sultankulov said.

The situation on the domestic foreign exchange market remains stable. The National Bank, as part of a floating exchange rate regime, participates in foreign exchange trading only to prevent sharp fluctuations in the exchange rate. There has been only one intervention since the beginning of 2024 to sell dollars, for $23.5 million.

The growth of consumer prices in Kyrgyzstan continues to slow. Annual inflation in February 2024 was 5%, down from 7.3% in December 2023. Moreover, the rise in prices for food products continues to slow at a faster pace. Prices for non-food goods and services are showing a more moderate downward trend. Inflation is being influenced by factors such as continued increased domestic demand, as well as revisions of tariff policy, in particular for public transport services.

"Global inflation is slowing gradually as a result of tightening monetary policies by leading countries. In general, for Kyrgyzstan, external economic conditions are still associated with high uncertainty due to the geopolitical situation and price volatility on world commodity markets. t is expected that, in the short term, the overall inflation rate in the country will be within the medium-term inflation target of 5-7%. The National Bank's measures will be aimed at further reducing the rate of growth in prices for non-food goods and services and the level of core inflation in general, which at the moment still remains above the target values," Sultankulov said.

According to the National Bank, the decision made on the discount rate will help limit pro-inflationary factors and keep inflation within the target values of 5-7% in the medium term. Maintaining current monetary conditions will reduce the level of inflation expectations of the population and economic entities.

The next scheduled meeting of the National Bank's board on the issue of the discount rate will be on April 29.

The rate of 13% has been in effect since November 2022, when it was reduced from 14% per annum.