Kyrgyzstan - Economic Reforms in 1996

Introduction

In the former Soviet Union the Kyrgyz Republic was considered as one of the poorest republics and its economy was strongly dependent on the center. Nevertheless, the budget of the Soviet Kyrgyz Republic was characterized by a relatively high level of expenditures and, interestingly, by fiscal surplus (due to transfers from the budget of the Soviet Union).The collapse of the USSR and the breakdown of command and control mechanisms of the central planning system, as well as the breakdown of cooperative agreements within the Soviet economic system, was marked by a sharp decline in economic activity, fiscal problems and a rise in inflation rates in independent Kyrgyzstan. Officially recorded output in the Kyrgyz Republic dropped in 1991-1995 by 7.8%, 13.9%, 15.5%, 20.1%, and 5.4% in the respective years (in total Kyrgyz GDP dropped by over 50% in the considered period ). Since 1992, fiscal policies have aimed on compensating the loss of external budget support (i.e., transfers from the Soviet budget). Nevertheless, the fiscal deficit increased to 13.4% of GDP in 1992, 13.6% in 1993, 7.7% in 1994, and 11.8% GDP in 1995. As a result, inflation rose to 178.9% in 1991, 1,258.7% in 1992, 1,491.7% in 1993, 87.2% in 1994, 31.9% in 1995