$419 million to combat inflation: Kyrgyzstan expects 15% inflation

Central Asia Column “Steppe Ahead,” by Thomas Baier

Kyrgyzstan is mobilizing 36.6 billion som to combat inflation, equivalent to 419 million U.S. dollars. On August 21, the cabinet in Bishkek discussed a price stabilization plan for 2026 and 2027. At the same time, the government revised its inflation forecast downward: Instead of 9%, it now expects inflation to reach 14 to 15% by the end of the year. The economy is growing at a double-digit rate, but prices are spiraling out of control.

Plan Relies on Agricultural Subsidies and State Reserves

First Deputy Prime Minister Danijar Amangeldiev presented the plan to the Cabinet, according to the Kyrgyz news portal Open.kg. The livestock population is set to grow by more than 20,000 animals. Agricultural enterprises will receive preferential loans for this purpose. Dairy and poultry producers will receive subsidies. Warehouses with a capacity of 18,000 metric tons are being built in seven regions. The government will also purchase an additional 20,000 metric tons of wheat from local farmers for its reserves. In addition, 68,000 metric tons of seeds and mineral fertilizers will be provided for agriculture. The government is aiming for self-sufficiency in wheat. Ongoing price monitoring is intended to prevent unjustified markups in the retail sector.

The government also intends to establish direct supply chains from the field to retailers, bypassing middlemen. According to Open.kg, government officials are personally responsible for implementing these measures. The plan’s goal is to keep inflation at 7%, in coordination with the National Bank. The government’s own forecast already contradicts this target.

Double-digit growth is driving up prices

Kyrgyzstan’s economy grew by 11.9% in the first half of the year, driven by construction and industry. This was reported by the Chinese news agency Xinhua, citing the National Bank. The central bank kept its key interest rate at 12% at the end of July, following several hikes over the course of the year. Annual inflation stood at 11.3% in July, and consumer prices have risen by 6.5% since the beginning of the year. The National Bank’s target range is 5 to 7%. According to the National Bank, the tightened credit conditions are intended to cushion external price pressures, encourage savings, and bring inflation back within the target range.

Demand is fueling price increases. Nominal wages rose by 27.5% in the first half of the year, and by 15.3% in real terms. The average wage reached 53,759 som, or about 615 U.S. dollars, according to the regional business publication *Times of Central Asia*. Purchasing power is thus growing significantly faster than the supply of goods. Food prices rose the most: lamb cost 23.1% more than a year ago, beef 14.2%, and horse meat 16%. Fresh fruit also became 16% more expensive. Fuel prices also rose. By mid-August, the price of AI-92 gasoline had increased by 6% to 88.24 som per liter, or about 1 U.S. dollar. AI-95 gasoline rose by 12% to 109.24 som, or about 1.25 U.S. dollars. Diesel cost 102.08 som per liter, a 5% increase. About 95% of the fuel comes from Russia—roughly 2 million metric tons per year—according to Deputy Energy Minister Nasipbek Kerimov. “Prices on world markets are creeping upward, which of course also has an impact,” Kanatbek Eshatov, president of the Kyrgyz Association of Oil Traders, told the Times of Central Asia. No one should hope for any noticeable relief in August and September.

Target and Forecast Are Far Apart

The plan promises 7% inflation, while the forecast puts it at 14 to 15%. This gap is the real message behind the cabinet’s decision. The measures are aimed almost exclusively at the supply of agricultural products. The country’s dependence on Russian fuel and strong domestic demand remain unaddressed. Previous interventions have yielded little: A six-month ban on livestock exports has been in effect since March, and price caps on beef and mutton expired in early May. Inflation accelerated nonetheless.

In April, the Asian Development Bank projected inflation of 10.3% for 2026 and 8.5% for 2027. Even then, the forecast was above the National Bank’s target range; it now significantly exceeds the government’s new projection. The Development Bank cited strong domestic demand, planned rate hikes for electricity and heating, and exchange rate effects as factors driving prices. It projected growth of 8.9% for 2026 and 8.4% for 2027. The actual growth rate in the first half of the year was another 3 percentage points higher. For trading partners, the plan has two implications. The government is buying more wheat, seeds, and technology, which creates sales opportunities. At the same time, the risk of new market interventions—ranging from export bans to price caps—is growing. Subsidies and government purchases totaling $419 million are also pumping fresh money into an economy that is already overheating. Details on financing are currently missing from the published resolutions. The National Bank’s next interest rate decision will show whether monetary policy will be tightened further.

Source: Times of Central Asia, Open.kg, Xinhua, ADB (all in English)