The fallout from Russia’s economic downturn is forcing Kyrgyzstan to spend its limited reserves to fend off speculators and ease pressure on its currency, National Bank Chairman Tolkunbek Abdygulov tells EurasiaNet.org. Abdygulov is using the crisis to try to strengthen rules for the Central Asian country’s under-regulated financial sector.
Abdygulov has told banks to increase their som capitalization. He also would like to close thousands of poorly regulated currency exchange shops, which he accuses of sustaining the shadow economy and of spreading panic by speculating on the som.
Kyrgyzstan is acutely dependent on remittances from migrant workers in Russia, which total the equivalent of roughly 32 percent of GDP, according to the World Bank. The net inflow of remittances, measured in dollar terms, declined by 5.1 percent last year, according to Abdygulov. Almost 97 percent of incoming remittances arrived from Russia. The decline in inflows helped push the som down 19.7 percent against the dollar last year. The ruble fell almost 50 percent.
To read the full story
David Trilling is EurasiaNet's Central Asia editor.