Political crisis derails economic recovery
Overview:
The dramatic events in April and June that saw the Bakiev regime overthrown and many die in ethnic violence have had a significant impact not only the political system in the Kyrgyz Republic (KR) but on the economic situation. A referendum on constitutional change has seen a shift to a parliamentary rather than presidential system but political uncertainty remains. The elections this month were won by opposition parties which oppose these changes. The economic recovery which gathered pace in Q1 has been derailed by recent events. The economy will contract this year rather than grow. The fiscal and current account deficits will be larger than otherwise. Inflation is rising and the banking system has been weakened. Emergency loans from Russia and the IMF have helped to bridge the financing gap.