AKIPRESS.COM - The banking sector remains liquid and well capitalized, but the heightened uncertainty calls for supervisory vigilance, according to the statement released by the IMF staff mission after visit to Kyrgyzstan.

Non-performing loans (NPL) increased to 12.8 percent of banking system loans in September 2022 and may weaken further if the economy slows.

The National Bank of Kyrgyzstan should develop a non-performing loans resolution strategy and be ready to provide liquidity support to solvent banks, as needed.

The increasing domestic borrowing by Government could crowd out private sector credit, but banks appear resilient to interest rate shocks as most government bonds are held to maturity.

The isolation of major Russian banks from the western financial system raised costs of correspondent banking but does not seem to pose a major challenge for cross-border payments.