AKIPRESS.COM - Fiscal deficits are expected to increase considerably, IMF said in the concluding statement of the 2022 Article IV Consultation Mission following visit to Kyrgyzstan.

The general government deficit, including lending to energy sector SOEs, is estimated to widen to 5.2 percent of GDP in 2022 from 0.8 percent last year and remain slightly under 5 percent of GDP in the medium term.

The authorities’ exceptional tax administration efforts substantially improved revenue collection in 2022, but expenditure has increased much more due to the significant increase during the year in public wages, pensions and public investment.

From 2023 onwards the full year impact of the wage and pension increases will keep the deficit elevated despite the planned reduction in domestically financed investment spending. The latter could undermine growth in view of the large infrastructure investment needs.

At the same time, given limited foreign financing, raising around 4 percent of GDP per year in a shallow domestic bond market to close the fiscal deficit could be a significant challenge and costly. The authorities should proactively seek external concessional financing. IMF mission said.