Kyrgyz National Bank proposes to limit dollars loans
By Sara Rajabova
Kyrgyzstan’s National Bank has proposed to limit its lending in dollars to individuals.
“We plan to bring to the discussion a bill that would limit the issuance of loans to individuals in dollars. If the bill is passed, citizens will be able to get a loan in dollars, on the condition they issue inquiry on receiving incomes in dollars,” said Tolkunbek Abdygulov, Kyrgyzstan’s National Bank chairman.
He added that in order to stabilize the financial situation in the country the ministry of economy is developing a medium-term monetary plan, whereby the National Bank regulates the interest rate and the rate of mandatory reserve requirements for commercial banks.
The dollarization is also one of the biggest problems for Kyrgyzstan’s economy. This occurrence is quite common among emerging nations, where the dollar is more stable in its value than the domestic currencies.
Kyrgyz chief banker also said at a press conference on March 10 that the market rate of Kyrgyzstan’s national currency, the som, had been determined against the dollar.
Abdygulov said six foreign exchange interventions had to take place to the value of $108 million since the beginning of the year. As of February 4, the som's rate exchange against the dollar has been set.
He added Kyrgyzstan's international reserves amount to $ 1.8 billion.
“Now, there is no demand for the dollar in Kyrgyzstan. One indicator of excessive demand for any currency is a large margin between buying and selling. At present, it is minimal,” Abdygulov said.
However, he also noted that from the beginning of the year the som's exchange rate value fell for 4.5 percent.“A stronger dollar is a global trend, this year it rose by 4.5 percent or 58.89 to 61.55som,” Abdygulov said.
Recently, Abdygulov told EurasiaNet.org that the fallout from Russia’s economic downturn has forced Kyrgyzstan to spend its limited reserves to fend off speculators and ease pressure on its currency.
Abdygulov said banks had to increase their som capitalization. He also added that he would like to close thousands of poorly regulated currency exchange shops, which he accused of sustaining the shadow economy and spreading panic monetary speculation.
As other Russian-related economies, Kyrgyzstan is also suffering from the economic slowdown in Russia, intensified by European sanctions.
“This slowdown will particularly affect the country in terms of transfers from Kyrgyz expatriates in Russia, which account for the equivalent of 30 percent of Kyrgyz GDP. Their reduction will have a knock-on effect on household spending and will push down demand,” according to the economic study by the COFACE organization.
Moreover, studies also predicted a slight growth in 2015, in comparison to 2014 year.
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Sara Rajabova is AzerNews’ staff journalist, follow her on
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