New head of Kyrgyzstan National Bank presents his vision of development

BISHKEK (TCA) — The parliament of Kyrgyzstan this week approved Kubanychbek Kulmatov for the post of the country’s National Bank head, after the previous chief banker, Tolkunbek Abdygulov, was appointed Deputy Prime Minister late in August.

From 2010 to 2013, Kulmatov headed the State Customs Service, and from 2014 to 2016, he was the Governor of the Chui oblast, and then Bishkek Mayor and an advisor to Kyrgyzstan’s President. Until recently, he headed the Russian-Kyrgyz Development Fund.

Kulmatov’s candidacy caused a lot of debate not only in the Parliament, but also in the society. His candidacy seemed strange to many people, since Kulmatov is historian by education and had never led a bank, so during the consideration of his candidacy in the Parliament MPs asked him many questions about the secret of his advancement up the career ladder.

The secret of career

Kulmatov is known not only as a representative of the urban intelligentsia, but also as “erke bala” (the darling of fate in Kyrgyz). “My secret is simple – working hard,” Kulmatov responded, adding that calling him “the darling of fate” is inappropriate.

“I’m interested in a difficult job,” Kulmatov said. He considers himself a crisis manager. “No one fired me from the Customs Service, I resigned myself. We achieved high results there,” he said. For two years that he headed the Customs Service, revenues to the state budget raised from 14 billion soms to 38 billion soms.

However, not all deputies believe that it was Kulmatov’s merit, because the customs revenues increased due to increased prices for the cargoes carried through the customs.

During his work in the Bishkek municipality, the Bishkek development strategy was developed and it is now being implemented. During his tenure as Mayor, the Bishkek municipality never asked funds from the national budget, Kulmatov said.

Russian-Kyrgyz Development Fund

Kulmatov told MPs about the results of the Russian-Kyrgyz Development Fund (RKDF), saying that when he came to the RKDF, its capital was only 126 million soms, and it has increased manifold by now.

However, MPs criticized the RKDF work which, in their opinion, does not ensure the development of the country’s economy and entrepreneurship, but creates conditions for local banks. The RKDF’s policy provides for support for the financial market in the country, Kulmatov explained.

Deputies said that the Fund had allocated only $276 million for two years and that it has not allocated funds for large-scale production.

According to Kulmatov, the Fund’s remaining money is in various liquid securities, for example, $50 million is in the Kyrgyz Government’s short-term bonds, which can be converted into cash in a few days.

The RKDF does not finance trade or procurement operations, Kulmatov said. “Our target money is for the purchase of fixed assets and means of production. The Fund follows the policy set by the governments of Kyrgyzstan and Russia,” he added.

Before the RKDF was established, the interest rates on loans were rather high, but they have been reduced from 7% to 4%. This was done because the dollar is the main currency in the Fund.

The Fund is young, and in addition to organizational issues, the rules for granting loans were developed. “We feared to become competitors of commercial banks but we have now 13 partner banks,” Kulmatov said.

Among the RKDF’s largest successful loans are the projects with the Manas International Airport, Kaindy-Koshoy sugar processing plant, and Kyrgyz Temir Jolu (Railway State Company) project. In total, 248 million soms have been spent for these projects.

Farmers often complained that it is impossible to get a loan from the RKDF, as its requirements are much more complex than in commercial banks, MPs said.

The Russian-Kyrgyz Development Fund is not a charitable organization, Kulmatov explained. It allocates money to businesses to implement projects on the condition that this money will be returned.

This spring, the RKDF allocated a $17 million loan to Rita Birbayeva, the wife of MP Omurbek Babanov, leader of the Respublika — Ata-Jurt parliamentary faction, for the construction of Asia Mall shopping center in Bishkek.

Earlier, the spouse of ex-Prosecutor General Kubatbek Baibolov, Nurjamal Baibolova, received an RKDF loan for the construction of a logistics center. The RKDF allocated 50 million soms through the Aiyl (Agricultural) Bank and $916 thousand through Commercial Bank Kyrgyzstan.

For the recent year and a half, the RKDF has financed 770 projects and allocated loans worth $248 million.

National Bank policy

The main objective of the National Bank is to maintain the economic and financial stability in the country and to ensure efficiency of the banking system, Kulmatov said. As for the loan interest rates, the National Bank has many instruments to make commercial banks to lower them.

By 2025, the creation of a single financial market in the Eurasian Economic Union is expected, Kulmatov said. Then international banks from Russia, Kazakhstan, and possibly from other countries will start entering Kyrgyzstan’s financial market. Therefore, Kyrgyzstan has to think of how its financial and banking sectors will work under new conditions.