In Moody’s international credit risk rating, Kyrgyzstan this year moved from “negative” to “stable” level. The agency notes that, despite the fluctuations caused by the situation in Ukraine and its close ties with the Russian economy, the economy of Kyrgyzstan demonstrates stability. It is noted that even after the nationalization of the Kumtor mine, foreign investment in the mining industry did not decrease and remained stable.
What does this rating say and what will be the economic indicators of Kyrgyzstan in the future?
In the international credit risk rating, Kyrgyzstan again remained in the B3 category this year. However, from the previous “negative” indicator it has now moved to a “stable” level.
According to information published by the agency, the rating committee at its meeting on May 14 raised a number of issues relating to Kyrgyzstan. It has been established that the country’s economic performance has increased significantly, institutions and governance systems have not changed significantly, the financial position and with it the debt structure have increased significantly, systemic risks have not changed much, and internal and external vulnerabilities remain that contribute to the emergence of situational risks.
Moody’s rating analyzes such indicators as the financial and economic situation of the state, the strength of the national currency, budget structure, and the impact of debt. This rating is significant information for investors.
“Kyrgyzstan’s rating at B3 indicates the country’s small economy with low incomes and its dependence on the Russian economy and dependence on remittances from outside. Despite the reduction in the volume of external debt and an increase in the share of domestic financing, the burden of public debt weakens the national currency. Facilitated financing from international financial institutions has reduced the cost of debt servicing, thereby significantly strengthening Kyrgyzstan’s current position in the ranking. But political risks and external vulnerabilities still pose situational risks,” the agency said in its information.
In the rating, the volume of the national currency of Kyrgyzstan is assessed at the B2 level, and the foreign currency limit is at the B3 level. Such a gap between the two currencies reflects the significant influence of the government on the economy, the unpredictable variability of some government decisions, and the instability of the domestic political situation, which impedes long-term economic development. Also, a one-notch difference between currencies indicates the influence of factors such as weak policy effectiveness and high levels of external debt.
“The conclusion about the stabilization of the economy is controversial”
Financier Kuban Choroev noted that the government of Kyrgyzstan has done a great job in collecting taxes, increasing the tax base, and the size of the budget in the economy has increased:
“In financial terms, in recent years there have been changes in the structure and volume of the budget of Kyrgyzstan. Previously, the budget of Kyrgyzstan consisted of two parts: investment and social. Infrastructure and other large projects were implemented through external loans. Currently, internal resources are used to support infrastructure projects. In recent years, the structure of the use of external loans and internal resources has changed, mainly when attracting loans from international financial institutions. We can say that the implementation of infrastructure projects is increasing using internal resources. Fiscal changes increase the share of the government budget in the economy to some extent. We can say that as part of this, there were structural changes that affected the rating.”
Moody’s notes that, despite fluctuations caused by the situation in Ukraine and close links with the Russian economy, the Kyrgyz economy demonstrates stability.
Concerns that nationalization of the Kumtor mine would lead to a decline in both foreign direct investment and the gold sector’s performance have eased, with economic growth forecast at around 4%.
Economic expert Sapar Orozbakov noted that the information in the international ranking that “the economic situation is stabilizing” raises his doubts. He believes that funds received by the state from external and internal resources are not invested in return projects, and processing industries that bring added value to goods are not developed:
“They say that based on the results of four months, the growth of gross domestic product amounted to just over 7%. And if you look at agriculture and industry, it’s only 2%, less than three percent. The basis of the economy is industry and agriculture. What was the basis for growth? Basically trade, in other words, trade with Russia increases due to this. There is construction, various types of services. When do they develop? If the country is rich, then these industries develop. Our demand is very low. There are two types of services. Some of them develop through export. But we did not export in this direction. Only tourism and education are developing a little. However, they cannot move the entire economy forward.”
What do credit rating indicators tell you?
Moody’s ratings analyze the creditworthiness of 152 countries. Kyrgyzstan has been included in it since 2014. In the ranking among Central Asian countries, Kyrgyzstan and Tajikistan are at level B3, Kazakhstan – Baa2 and Uzbekistan – Ba3. From 2015 to 2020, Kyrgyzstan was one step higher, in category B2.
According to research methods, the level of countries’ credit ratings is measured from category “Aaa” to category “C”. Groups Aaa, Aa and A include countries with the highest credit ratings. Countries that receive categories “C”, “Ca” and “Caa” have a very low credit rating, are close to default and their creditworthiness is very low. In category B, credit risks are assessed as high. Category Baa – moderate credit risks, and category Ba – significant credit risks. Each category uses one to three additional modifiers.
An additional number of modifiers from one to three are also applied to rating categories. 1 is the highest in the rating indicator, 3 is the lowest in the group of three categories.
If you look at the rating, in category B3, together with Kyrgyzstan, there are countries such as Angola, Barbados, Bosnia and Herzegovina, Congo, Kenya, Moldova, Mongolia, Tajikistan, Togo, Uganda.
Countries with the highest credit ratings in the Aaa category are Australia, Canada, Denmark, Germany, Luxembourg, the Netherlands, New Zealand, Norway, Singapore, Sweden and Switzerland.
The lowest ranked countries in Category C are Belarus, Libya, Venezuela, Zambia, Ukraine, Sri Lanka, Ghana and Argentina.
Media source: https://rus.azattyk.org/a/32959084.html