Kyrgyzstan: growing poverty and poor state budget

BISHKEK (TCA) — The Kyrgyz Government has recently put forward several initiatives aimed at replenishing the state budget at the expense of ordinary citizens. The Government offered to raise the tariffs for cold water and fines for violation of traffic rules, as well as to introduce mandatory paid registration of mobile phones. These suggestions caused a negative reaction of the society.

Earlier, the Government appealed to citizens asking them to help pay the country’s foreign debt. The total amount of Kyrgyzstan’s external debt amounted to $4.8 billion, or 53.9% of GDP at the end of 2017.

Low living standards

According to various international ratings, Kyrgyzstan has extremely low living standards of the population. Scanty budgetary expenditures on education, healthcare and social payments do not cover the real needs of citizens, and on average, every fourth Kyrgyz lives below the poverty line.

In Kyrgyzstan, there are the lowest average wage ($216.3) and the highest outflow of labor migrants among the Eurasian Economic Union member countries. According to the Russian National Research University at Higher School of Economics, only Tajikistan has the worse situation with $137 wages while it is $670.9 in Russia followed by Kazakhstan ($459.1), Belarus ($421.9) and Armenia ($363.1).

According to the Focus Economics Group’s rating of 127 countries based on GDP for 2018, Kyrgyzstan is among the ten poorest countries in the world. Kyrgyzstan’s GDP per capita was $1,081 in 2016, projected at $1,222 in 2018 and at $1,446 in 2022.

“Having experienced considerable political and social instability with weak governance and high corruption since gaining independence in 1991, the country’s current democracy is a far cry from those days. Nonetheless corruption is still pervasive in the public sector, which constrains the country’s economic growth potential. The Kyrgyz economy is also vulnerable to external shocks due to its overreliance on its massive gold mine, Kumtor, which accounts for about 10% of GDP, as well as remittances, which amount to about 30% of GDP,” Focus Economics Consensus Forecast panelists say.

Number of poor growing

The number of citizens living below the poverty line has increased in Kyrgyzstan. According to the National Statistical Committee, the share of low-income citizens increased from 25.4% to 25.6% over the past year. The total number of the poor reached 1.6 million, 40 thousand people more than in 2016.

That especially affected the population of the southern regions of the country. In the Batken province, the poverty level increased from 37% to 40.5%, and in Osh, the second largest city of the country, from 24.6% to 33.5%.

Some experts do not believe official poverty statistics because poverty is underestimated. Last year, the poverty level was 2,674 soms per month per person, which is almost half of the subsistence minimum (4,900 soms). The extreme poverty line was even lower – 1,456 soms per month ($1 now costs 68 soms).

The calculation of the poverty level is based on a methodology that is beneficial to the state, and does not give a real picture, experts say. In any case, it is difficult to imagine how one can live even on that income.

Another problem of the country is the growing dependence of citizens’ well-being on remittances from labor migrants. Last year, migrant workers transferred $2.48 billion to Kyrgyzstan, or 34.3% of the country’s GDP.

Expert calculated that if this source of income disappears, the poverty rate would jump from 25% to 34% in the country, and in some regions much more especially in the southern Batken, Osh and Jalal-Abad provinces which are the main sources of labor migration.

The level of social problems in the country can be assessed by such indicators as the use of child labor, the main reason of which is poverty. According to the research of the International Labor Organization (ILO) in Kyrgyzstan, more than 580 thousand children, 39% of the total number of 1.5 million children aged from 5 to 17 years are forced to work. Of these, 66.7% are engaged in hazardous work that harms the children and adversely affects their health.

Access to clean drinking water

When offering to raise tariffs for cold water, the Government explained that the population underpays for cold water supply even to the level of its cost price. Meanwhile the Government should pay more attention to the fact that residents of some areas do not have access to clean drinking water while Kyrgyzstan has huge water resources.

There are more than 40,000 rivers and streams in the country with the flow of about 47 cubic kilometers of water per year. The main source of water in the rivers is thawed water from numerous mountain glaciers.

According to the report of Kyrgyzstan’s Ombudsman Institute, about one million people remain without access to clean drinking water in the country, and 1125 villages do not have access to the central water supply system and residents have to use water from open sources.

Water pipelines were built before the 1960s in 267 villages, and there are no water pipes at all in 396 villages.

Traffic rules violation fine

The Ministry of Internal Affairs intends to raise fines for violation of traffic rules. Raising fines in a country with extremely corrupt road patrol officers is completely pointless because the fines will go mainly to the pockets of corrupt officials of all levels. In the current situation, the increase in fines will be particularly beneficial to corrupt patrol officers while ordinary citizens will suffer from increasing amount of bribes.

It is much more difficult to eliminate the causes of road accidents including poor quality of roads, poor lighting in the dark, which leads to frequent accidents, as well as driver’s license issue system, when drivers were either poorly trained or not trained at all, and just bought their licenses from corrupt officials.

Caring for the poor?

To show that the State cares about poor citizens, the Social Fund, “in order to ensure the protection of pensioners”, proposed raising the amount of pensions and introduced for public discussion a bill on indexing the sizes of insurance parts of pensions. Taking care of low-income elderly people who have a pension below the subsistence minimum, the Social Fund (if the Parliament approves the bill) will add 100 soms ($1.47) from October.

About 40% of pensioners receive a pension below the subsistence minimum in Kyrgyzstan.