Monetary Policy - The Times Of Central Asia

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Inflation

Kyrgyzstan Drafts $419 Million Plan to Curb Rising Prices

Kyrgyzstan has drafted a plan worth about $419 million to curb rising prices in 2026–2027. The authorities aim to increase food production and build reserves, but fuel imported primarily from Russia remains a major source of inflationary pressure largely beyond the government’s control. The draft was presented to the Cabinet on August 21. During the first seven months of 2026, consumer prices and tariffs in Kyrgyzstan rose by 6.7% from their December 2025 level. Average annual inflation over the same period was 10.7%. Food prices rose particularly sharply, with fresh fruit up 16% and meat products 14.5%. Lamb recorded the largest increase at 23.1%. Horse meat rose by 16%, while beef increased by 14.2%. The authorities have already intervened directly in the meat market. In March, Kyrgyzstan introduced a six-month ban on livestock exports. Temporary state controls on beef and mutton prices also applied earlier this year but expired on May 2. The plan calls for increasing the productive livestock population by at least 20,000 head. Agribusinesses will be eligible for preferential loans, while the dairy and poultry sectors will receive subsidies. Storage facilities with a combined capacity of 18,000 metric tons are planned in all seven regions. Farmers are to receive 68,000 metric tons of seed and the necessary amounts of mineral fertilizer. The government also intends to ensure sufficient wheat supplies for the domestic market and purchase another 20,000 metric tons from local producers for state reserves. The draft would establish direct supply channels for agricultural products and expand the network of retail outlets operating without intermediaries. Kyrgyzstan relies on imports for almost all of its petroleum products. Deputy Energy Minister Nasipbek Kerimov said in July that Russia had supplied about 95% of the country’s annual fuel needs in recent years, with total consumption of around 2 million metric tons. This summer, Russia’s fuel shortages worsened amid refinery outages following Ukrainian drone attacks, high seasonal demand, and transport problems. Moscow tightened restrictions on fuel exports and turned to imports to support domestic supplies. For Kyrgyzstan, the decline in Russian supplies quickly became a problem. According to the National Statistical Committee of the Kyrgyz Republic, the average price of AI-92 gasoline reached 88.24 soms per liter by August 12, around 6% above the July average. AI-95 rose by 12% to 109.24 soms, while diesel increased by 5% to 102.08 soms. The government has already raised its year-end inflation forecast to 14–15% from an earlier projection of 9%, citing rising fuel costs as one reason. The National Bank of the Kyrgyz Republic kept its policy rate at 12% on July 27. Among the external inflation risks, the central bank cited volatile global food prices and possible disruptions to petroleum-product supplies through the Strait of Hormuz. Its medium-term inflation target is 5–7%. Kyrgyzstan cannot quickly replace Russian fuel, but importers have begun seeking supplies farther afield. Kanatbek Eshatov, president of the Association of Oil Traders of Kyrgyzstan, said on August 12 that reduced supplies from Russian refineries had prompted deliveries from...

TCA Interviews

Suleimenov Says Stronger Policy Framework Supported Kazakhstan’s S&P Upgrade

A stronger monetary-policy framework, a resilient banking sector, and closer coordination with the government were among the strengths recognized in S&P Global Ratings’ upgrade of Kazakhstan, National Bank Governor Timur Suleimenov told The Times of Central Asia. “S&P’s upgrade of Kazakhstan’s sovereign credit rating from ‘BBB-’ to ‘BBB’ is an important external assessment of the resilience of our economy amid continued global uncertainty and commodity market volatility,” Suleimenov said. On August 21, S&P raised Kazakhstan’s long- and short-term sovereign credit ratings to BBB/A-2 from BBB-/A-3. The stable outlook reflects S&P’s view that Kazakhstan’s ample fiscal and external buffers should help it absorb external shocks, while the non-oil budget deficit is expected to narrow further. Kazakhstan last held the BBB rating before S&P downgraded it in February 2016. Kazakhstan now carries the same BBB long-term sovereign rating as India, Indonesia and Greece. It stands one notch above Hungary, Oman and Serbia at BBB-, and one below Bulgaria and Italy at BBB+. The comparison concerns credit risk rather than economic size or development. Why S&P Moved Now S&P expects Kazakhstan’s economy to grow by 5.1% in 2026 and by around 4% to 4.5% annually in 2027–2029, a pace it says exceeds that of peer countries. It also expects a broader tax base, tighter expenditure controls and reduced quasi-fiscal activity by major state-owned enterprises to improve the country’s fiscal position. Stricter rules governing National Fund withdrawals are intended to preserve the assets available to absorb commodity-price falls and other external shocks. According to the National Bank’s account of the decision, S&P also highlighted Kazakhstan’s substantial foreign-currency reserves and strong external position. A Stronger Monetary Framework “We particularly welcome the agency’s recognition of the strengthening of Kazakhstan’s monetary policy framework and the resilience of the banking sector to macroeconomic shocks,” Suleimenov said. Suleimenov had outlined that policy course in earlier interviews with TCA. In April, he described tighter monetary conditions alongside government fiscal consolidation, while in June, after the Bank cut its base rate from 18% to 17%, he cautioned that inflation had not been defeated and said further moves would depend on incoming data. Annual inflation declined from 11% in March to 10.2% in July. S&P cited a stronger monetary-policy framework, closer government-National Bank coordination, fiscal consolidation, reduced quasi-fiscal activity and tighter macroprudential regulation. It also described the banking sector as resilient, with adequate capital and liquidity buffers. The National Bank’s response went beyond the base rate. It increased minimum reserve requirements, used operations linked to gold purchases to absorb excess liquidity and supported measures to slow unsecured consumer lending. The Bank lowered the rate again to 16.75% in July as inflation eased. Even so, inflation remains more than double the National Bank’s medium-term target of 5%. S&P’s assessment recognizes the strengthening of the monetary-policy framework, not the end of Kazakhstan’s inflation problem. “Enhanced coordination between the Government and the National Bank, together with the continued improvement of regulation and supervision, is contributing to stronger macroeconomic and financial stability,” Suleimenov said. Fiscal Reform...

International Monetary Fund

IMF Growth Forecast for Uzbekistan Warns of Inflation and Global Risks

Uzbekistan’s economy performed strongly in 2025, with the International Monetary Fund (IMF) reporting growth across sectors. Inflation fell and the fiscal deficit narrowed. The Fund urged policymakers to keep monetary policy tight and continue reforms as geopolitical tensions and global uncertainty add risks. Uzbekistan’s real GDP expanded by 7.7% in 2025, driven by strong domestic consumption and investment. The unemployment rate fell by 0.7 percentage points from the previous year to 4.8%. Growth was supported by rapid expansion in services and construction. Consumer price inflation declined from 9.8% at the end of 2024 to 7.3% at the end of 2025. The IMF attributed the improvement to the fading impact of energy price increases introduced in 2024 and the appreciation of the Uzbek som against the U.S. dollar. Tight monetary policy by the Central Bank also helped bring down inflation. Core inflation declined during the year. External balances improved as the current account deficit narrowed to 3.9% of GDP. Strong exports and remittance inflows supported the decline. High commodity prices also helped. International reserves remained at comfortable levels, equivalent to around 13 months of imports. The fiscal deficit fell to 2.1% of GDP, below the government’s target of 3%. The IMF expects economic growth to remain resilient in 2026, forecasting GDP growth of 6.8%. Continued reforms and investment are expected to support activity. Remittances and elevated gold prices should also help sustain growth. The Fund projects growth will moderate to around 6% in 2027 as domestic demand gradually slows. Despite the positive outlook, risks have increased because of the conflict in the Middle East and its potential impact on the global economy. Uzbekistan has limited direct trade and remittance links with countries affected by the conflict. However, higher oil prices and trade disruptions could affect the country indirectly through key trading partners. Weaker global growth could add further pressure. The IMF warned that inflation is likely to remain above the Central Bank’s 5% target in 2026. Higher global oil prices, combined with strong domestic demand, could slow disinflation. The Fund recommended that the Central Bank keep its policy rate at a restrictive level and tighten monetary policy further if inflationary pressures persist. The Fund advised the government to avoid spending increases beyond those already planned in the budget. Any support measures linked to the Middle East conflict should be temporary and targeted toward vulnerable groups, rather than broad subsidies or price controls. The IMF called for faster privatization of state-owned commercial banks and enterprises. It also recommended stronger corporate governance and continued work to improve fiscal transparency and debt management. The Fund highlighted labor market challenges, including low female labor force participation and skills mismatches. High levels of informal employment remain another concern. Further progress in governance reform and competition policy could help attract additional private investment. The IMF said Uzbekistan’s commitments linked to accession to the World Trade Organization could also support long-term economic growth. The country enters 2026 from a position of economic strength, but maintaining stability and continuing...

Monetary Policy

Kazakhstan Central Bank Chief Sees No Pressure on Tenge After Rate Cut

Kazakhstan’s central bank governor has sought to calm concerns over the tenge after the National Bank cut its base rate for the first time since October 2025, saying demand for local-currency assets should remain stable despite lower returns. The National Bank of Kazakhstan lowered its base rate to 17% from 18% on June 5, citing slowing inflation and an improved economic outlook. The decision was based on updated assessments of inflation risks and key macroeconomic indicators, the bank said. Annual inflation slowed to 10.4% in May from a peak of 12.9% recorded in September last year. The central bank also raised its oil price assumption for the remainder of 2026 to $90 per barrel for Brent crude. National Bank Governor Timur Suleimenov said the rate cut would lower returns on tenge-denominated deposits but would not trigger a significant shift into foreign-currency assets. “Interest rates on tenge deposits remain substantially higher than returns on foreign-currency deposits,” Suleimenov told reporters. “A one-percentage-point reduction will not fundamentally change the attractiveness of deposits or other tenge-denominated assets such as corporate bonds and government securities.” Suleimenov said demand for local-currency assets is expected to remain stable, limiting pressure on the exchange rate. He acknowledged that the tenge could face seasonal pressure during the summer because of increased demand for foreign currency linked to overseas travel and dividend payments by Kazakhstani companies listed on international exchanges. However, he said Kazakhstan’s economic fundamentals remain supportive of the national currency. “Oil prices are rising, while metal prices have increased by an average of around 17%, with some commodities gaining as much as 40%,” Suleimenov said. “If there are no major external shocks, I see no reason for any significant weakening of the tenge.” The central bank also revised its inflation forecast for 2026 downward to a range of 9%-11%, compared with a previous estimate of 9.5%-11.5%. Its inflation forecast for 2027 remains unchanged at 5.5%-7.5%. Suleimenov said the bank expects inflation to approach its long-term target of 5% by 2028 as external inflationary pressures ease and government and central bank measures take effect. “The slowdown in inflation during April and May gave us room to lower the base rate,” he said. “But it would be premature to say inflation has been defeated. Future decisions will depend on incoming data and our assessment of risks.” The official exchange rate stood at 487.4 tenge per U.S. dollar on June 7. The outlook remains cautious. As previously reported by The Times of Central Asia, S&P Global Ratings forecast that the tenge would average around 540 per dollar in 2026, reflecting expectations of a weaker currency over the medium term.