Kyrgyz Republic: Russian financing softens downturn
Overview:
The Kyrgyz Republic (KR) as a small and open economy has been hard hit by the global economic crisis despite generally strong economic policies supported by an IMF program. The decision of the Russian authorities to give large financial aid packages to countries in its “near abroad” at a time when its own economic situation has deteriorated dramatically has been construed as an obvious attempt to increase its geo-political influence in the region. Even so, the financial aid given to the KR will nevertheless have a major impact on the authorities’ ability to manage the adverse effects of the global financial crisis. As well as boosting the level of foreign exchange reserves significantly it will allow the government to finance larger fiscal deficits: filling a revenue shortfall but also allowing increases in capital and social spending.