The National Bank believes that the crisis in Kyrgyzstan slowly recedes. The recovery in domestic consumption begins. To stimulate the further growth of the economy, the National Bank of the Kyrgyz Republic reduced the discount rate to 5.5 percent.
National Bank Chairman Tolkunbek Abdygulov told how it would help the economy and why it is worth to keep savings in gold.
The lower rate - the less interest on loans
Earlier, to support the economy, the National Bank has lowered the discount rate. In March, it decreased from 10 to 8 percent, in May it dropped by another two percent. The current decline by another 0.5 percent will support the real sector, taking into account the small inflationary costs.
Lowering of the discount rate of the National Bank reduces interest rates on the interbank foreign exchange market.
At present, interest rates on interbank loans are in the corridor between the discount rate and the rate on overnight deposits. But one shouldn't expect the effect of reducing the discount rate on the economy no earlier than in six months.
When prices will rise
Today, deflation in Kyrgyzstan is 0.7 percent. Mainly food products became cheaper. In recent months, prices of non-food products began to fall either.
At the end of 2016 the National Bank expects that inflation will be in the near-zero indicators. Over the next year, the rise in prices is projected at 5-7 percent.
Currency calm in Kyrgyzstan
Situation on the foreign exchange market is stable now. From the beginning of the year, KGS has appreciated by nine percent. Foreign exchange interventions are carried out only to smooth short-term exchange rate fluctuations.
From the beginning of 2016, the National Bank has carried out 25 interventions by selling foreign currency ( $160.94 million). Other 26 times NB KR bought dollars ($191,187,000).
Since the beginning of the year, the volume of international reserves grew by $163 million - $1, 947 billion.
Remittancies grow, trade balance falls
The net inflow of remittances in January-October increased by 20.4 percent - up to $1.4 billion.
"However, external demand for Kyrgyz products remains weak. The foreign trade turnover for the first 9 months formed in the amount of $3.8 billion. This is 8.3 percent less than in 2015," Tolkunbek Abdygulov said.
Exports decreased by 13.5 percent, import - by 6.7 percent. The deficit of trade balance is estimated at $1.5 billion.
Invest in gold
Since May 7, 2015, the National Bank has sold 122 kg of gold (at 340 million soms). The most popular among the population are ingots weighing 100 grams, 1 ounce (31.1 grams) and 10 grams.
"We have an ambitious goal that every citizen of the country to keep some of the savings in gold bullion. Remember that the National Bank not only sells the bars, but also buys them back," Tolkunbek Abdygulov campaigns for a new form of investment.