Kyrgyz Republic (Kyrgyzstan)

Slower growth in migrant remittances

Growth was strong until 2025 and was supported by rising remittances from Kyrgyz expatriates in Russia. Growth has slowed markedly this year as these flows normalise. Nevertheless, it still remains robust, as remittances continue to support household consumption, while investment and gold exports are expanding. The gold sector, whose output has been recovering this year, remains a major yet volatile component of GDP. Kumtor, the country's largest gold mine (formerly owned by Centerra Gold and nationalised in 2022), accounted for 46% of total gold production in 2025 and represented close to 8% of GDP. It generated approximately USD 546 million in taxes and dividends for the state, equivalent to 27% of budget revenues. However, fluctuations in gold prices make both exports (35% of total exports in 2025 and 66% in 2026) and public revenues highly volatile. Growth is also being driven by construction activity (+60% year-on-year in Q1 2026), particularly in the energy sector, as illustrated by the Suusamyr-Kokomeren (USD 3.3 billion) and Kazarman (USD 6 billion) hydropower cascades, the Kambarata-1 dam project (USD 4.5 billion), and the commissioning of thirteen small hydropower plants in 2026. Construction of the China-Kyrgyzstan-Uzbekistan railway is also continuing.

Since the outbreak of the war in Ukraine in 2022, growth has also been supported by the expansion of re-exports to Russia, primarily of Chinese goods but also European products. Owing to its membership in the Eurasian Customs Union, these flows are not officially recorded by the authorities. In doing so, Kyrgyzstan is believed to be bypassing Western sanctions. Around 40% of imports (excluding fuels), mostly originating from China, are estimated to be re-exported to Russia, generating direct activity (labelling, assembly) and indirect benefits (customs revenues and transport services). However, under the anti-circumvention mechanism, the European Union tightened restrictions in April 2026 on certain dual-use goods, such as radio equipment and remote-control devices. Export-related revenues are therefore expected to weaken, which will contribute to this year's slowdown.

Private consumption remains a key growth driver (around +24% in 2025), supported by rising real wages (estimated at around 18%), rapid credit growth (+49% to the private sector in 2025), and durably elevated remittance inflows. However, consumption is expected to moderate this year as a result of higher energy prices and tighter monetary policy. Domestic prices, which are highly sensitive to external conditions due to the large import component in the consumer basket and to strong domestic demand, are rising. Inflation is expected to remain elevated throughout 2026 and 2027. In response, the National Bank of the Kyrgyz Republic (NBKR) increased its policy rate by 100 basis points, from 11% to 12%. However, given the limited transmission of policy rates, the central bank primarily relies on tighter liquidity management. At the same time, despite substantial foreign-exchange interventions to stabilise the som, international reserves have risen sharply on back of gold accumulation and valuation gains to reach the equivalent of around seven months of imports in July 2026.

Rising expenditure and lower gold revenues widen imbalances

The fiscal balance is expected to return to deficit this year due to weaker gold-related revenues, accelerating investment expenditure (35% of public spending) and wage increases. Salary adjustments have reached as much as 50% for certain professions, including teachers, doctors and civil servants, which has pushed the wage bill to 37% of total expenditure. Despite a relatively low tax burden, the country continues to be confronted with a very large informal economy, estimated at 19% of GDP and employing 65% of the workforce. A formalized system is essential to broaden the tax base, although tax revenues already amounted to around 22% of GDP in 2025.

The trade balance records a large deficit, which weighs on the current account and reflects the economy's limited diversification. Kyrgyzstan mainly exports gold, precious stones and refined petroleum products. Gold exports declined sharply in 2025, and no gold exports were recorded between November 2025 and May 2026. Export growth is restricted by the country's landlocked geographical position and mountainous terrain. At the same time, Kyrgyzstan remains heavily dependent on imports of manufactured goods, which account for almost 70% of total imports, particularly machinery, vehicles and consumer goods sourced mainly from China, as well as petroleum products imported from Russia, Kazakhstan and Uzbekistan. Imports are expected to increase moderately in both 2026 and 2027. The services balance is likely to remain slightly negative as revenues from tourism, transport, and regional trade only partially offset payments for foreign services. Remittances from expatriates rose by 16% in 2025, supported in part by the appreciation of the rouble. The current account deficit is financed through external borrowing, trade credit and institutional funding, while foreign direct investment remains modest at around 1.5% of GDP. Last, despite significant sales of US dollars to support the som, foreign-exchange reserves have increased markedly through gold accumulation and price revaluation to reach approximately seven months of import cover in July 2026. The persistence of fiscal and external deficits is resulting in higher indebtedness. A challenging business environment limits FDI inflows, which consist mainly of Chinese and Russian investment or projects focused on the gold sector.

Domestic debt, which accounts for 40% of total public debt, increased from 11% of GDP to 16% between 2024 and 2025 through the issuance of local-currency securities purchased by domestic commercial banks. Meanwhile, the country issued its first sovereign Eurobond in 2025 (USD 700 million), followed by a USD 300 million Eurobond issued by the state-owned Eldik Bank. Financing is predominantly external. External public debt consists mainly of multilateral concessional loans (34% held by the Asian Development Bank) and bilateral loans. Chinese creditors hold 28% of total external debt. Debt servicing costs are increasing and represented around 12% of public revenues in 2025.

Consolidation of presidential power and continued dependence on Russia and China

In the early 2000s, Kyrgyzstan was often portrayed as the region's democratic model. However, the succession of revolutionary episodes in 2005, 2010 and 2020 reflects persistent public dissatisfaction with recurrent authoritarian tendencies. In 2020, President Sooronbay Jeenbekov resigned under pressure from demonstrations protesting against allegedly fraudulent parliamentary election results. Sadyr Japarov subsequently won the presidential election held in January 2021. In April 2021, he amended the Constitution to strengthen presidential powers at the expense of Parliament and to allow the president to seek re-election, replacing the previous single six-year term with two possible five-year terms. Since then, he has sought to consolidate his control over political life by introducing legislation restricting media freedom and by pursuing opposition activists and journalists. The snap parliamentary elections of 30 November 2025 were marked by a voter turnout of only 36% and the absence of any meaningful opposition and resulted in a sweeping victory for pro-presidential candidates, who secured 83 out of 90 seats. Japarov is widely expected to win the January 2027 presidential election following the withdrawal of long-time ally Kamchybek Tashiev after his conviction for attempting a coup.

Kyrgyzstan belongs to three major regional organisations: the Eurasian Economic Union (EAEU), the Russian-led Collective Security Treaty Organisation (CSTO), and the Shanghai Cooperation Organisation (SCO), an economic and security organisation in which China and Russia play dominant roles. Membership in these organisations reflects the country's close ties with both Beijing and Moscow. As a former Soviet republic, Kyrgyzstan remains highly dependent on Russia for remittances and fuel supplies. Russia also maintains important cultural and military influence through its airbase near Bishkek and its insistence on preserving the status of the Russian language. At the same time, cooperation with China continues to deepen through initiatives aimed at strengthening connectivity and trade, thereby increasing Kyrgyzstan's economic and political dependence. In December 2025, the China-Kyrgyzstan-Uzbekistan railway project, a flagship Belt and Road Initiative corridor, reached a major milestone with the signing of a USD 2.3 billion financing agreement, which is part of a total project cost estimated at USD 4.7 billion.

Conversely, relations with Western countries are comparatively cooler. The European Union had sought to strengthen ties with Bishkek through the Enhanced Partnership and Cooperation Agreement (EPCA) signed in 2024. However, under a new sanctions package against Russia, the EU introduced measures affecting Kyrgyz entities directly, targeting a Kyrgyz bank, cryptocurrency platforms and several companies suspected of facilitating sanctions circumvention. Last, Kyrgyzstan maintains close economic relations with Kazakhstan and Uzbekistan, which host Kyrgyz migrant workers and have become important fuel suppliers. Relations with Tajikistan have historically been tenser owing to recurring border disputes in the Ferghana Valley. Nevertheless, an agreement signed in March 2025 is expected to provide a definitive settlement to the demarcation of the two countries' shared border.

Last updated: August 2026