Economy

Despite the backing of major Western donors, including the International Monetary Fund (IMF), the World Bank and the Asian Development Bank, the Kyrgyz Republic has had economic difficulties following independence. Initially, these were a result of the break-up of the Soviet trading bloc and resulting loss of markets, which impeded the republic's transition to a free market economy. In 1990, some 98% of Kyrgyz exports went to other parts of the Soviet Union. Thus, the nation's economic performance in the early 1990s was worse than any other former Soviet republic except war-torn Armenia, Azerbaijan, and Tajikistan, as factories and state farms collapsed with the disappearance of their traditional markets in the former Soviet Union. While economic performance has improved considerably in the last few years, and particularly since 1998, difficulties remain in securing adequate fiscal revenues and providing an adequate social safety net.

The government has reduced expenditures, ended most price subsidies, and introduced a value-added tax. Overall, the government appears committed to the transition to a market economy. Through economic stabilisation and reform, the government seeks to establish a pattern of long-term consistent growth. Reforms led to the Kyrgyz Republic's accession to the World Trade Organization (WTO) on December 20, 1998.

Agriculture

The principal sector of the economy in Kyrgyzstan is agriculture, which contributes about 34.5% of the GDP and 55% of employment. The republic possesses a mountainous terrain, which accommodates livestock rearing, the largest sector within agriculture. The main crops are cotton, hemp, tobacco, vegetables and fruit. By the early 1990s, the private sector provided between one-third and one-half of some harvests. Wool, leather, and silk also are major products, and much of the industrial sector is devoted to agroprocessing, the most attractive proposition for foreign investors.

The position of the country geographically works to its disadvantage. The region is prone to harsh climatic conditions and is in an earthquake zone. In 1992 there were earthquakes and mudslides, and in 1998 two mudslides also occurred in southern Kyrgyzstan.

Industry

With respect to Kyrgyzstan's potential for mining and energy extraction, the Republic is rich in mineral resources but has negligible petroleum and natural gas reserves. Among its reserves are substantial deposits of coal, gold, uranium, antimony and other rare metals. The main barrier to development has been the inaccessibility of many of the potential resources. The government has actively cultivated foreign cooperation in processing and extracting gold while building up the nation's own reserves in the process. OPIC has recently been involved in the establishment of two joint ventures in Kyrgyzstan with Western gold companies.

Kyrgyzstan's plentiful water resources and mountainous terrain have enabled it to export hydroelectric energy (6.4 billion kWh in 2004). However, Kyrgyzstan imports petroleum and gas (890 million cubic metres in 2006).

Trade

Kyrgyzstan's principle exports, which go overwhelmingly to other CIS countries (plus UAE and China), are nonferrous metals and minerals, woollen goods and other agricultural products, electric energy, and certain engineering goods. In turn, the Republic relies on other former Soviet states, China and Turkey for petroleum and natural gas, ferrous metals, chemicals, most machinery, wood and paper products, some foods, and most construction materials.

A large amount of local commerce occurs at bazaars and small village kiosks. Commodities such as petrol are often sold road-side in gallon jugs. A significant amount of trade is unregulated. There is also a scarcity of common everyday consumer items in remote villages. Thus a large number of homes are quite self-sufficient with respect to food production.