OREANDA-NEWS. September 03, 2014. The government of Kyrgyzstan is mortgaging much of its expenditures in the upcoming years on expectations of state income boosts.

With gross domestic product having grown by 3.3 per cent year-on-year in the first seven months of the current year (as opposed to 7.7 per cent on-year in the same period of 2013) to the amount of 185.527 billion som (1 US dollar is equivalent to around 52 som at current exchange rates), such expectations might well have to be corrected downward.  For the entire year, Kyrgyzstan expects its GDP to reach 391.2 billion som – an increase of 6.3 per cent from 2013, according to the latest information from the national statistics agency.

“According to preliminary data, the expenditure of the national budget from January to July (without special tools, and taking into account the public debt) performed at 53,752.1 billion soms or 91.5 percent of the plan, which is 58,765.7 billion som,” a report by 24.kg published last week was to read. “In 2013 this indicator amounted to 48,839.7 billion som. Compared with the same period last year, total expenses increased by 4,912.4 billion som or 10.1 per cent. In terms of GDP, the total expenditures of the republican budget amounted to 30.7 per cent, which is 1.3 percent less than last year's indicator, a [government] statement read.”

“Protected” and “unprotected” expenditure
The report distinguished “protected” from “unprotected” expenditure – probably referring to routine costs and risk-bearing state investments respectively. “On protected expenditure from the state budget from January to July 2014 about 40,122.2 billion som was spent,” the news item reads further down. "By unprotected expenditure [the state] financed 40.93,900 billion soms or 85.9 percent of the plan. Compared with those of 2013 the funding decreased by 389.3 million som.”

In an earlier report [http://www.eng.24.kg/economics/170989-news24.html] published in June this year, the agency quoted Kyrgyz Finance Minister Olga Lavrova as putting the budget deficit of Kyrgyzstan in 2014 at 9,430 billion som – or 2.4 per cent of the budget. According to plan, state revenues will amount to 107.110 billion som in 2014, with expenditures amounting to 116,553 billion som.

Both income and spending in upcoming years for the state of Kyrgyzstan are expected to increase significantly – meaning that future state expenditure is heavily mortgaged by income expectations. “Revenues of the state budget of Kyrgyzstan will grow up to 117 billion soms in 2015, forecasts made by the government [indicate],” the same news agency wrote in a separate report published on August 6 this year. “According to [the forecast], in the medium term rising revenues will continue. Revenues will grow from 117 billion som in 2015 up to about 143 billion in 2017.

However, their share in the GDP in 2017 will be reduced by 1.8 percent and 24.7 percent. This is because of a decrease in non-tax revenues and official transfers. At the same time, state budget expenditures for 2015 amount to 131.5 billion som, and by 2017 will increase up to 155.4 billion. The budget deficit for 2014 is 9.4 billion som. In the future, it is predicted to decline. It should be noted that as on May 31, 2014, the public debt amounted to 187 billion som, including external - 174.2 billion, domestic - 12.8 billion som. Dynamics of changes in the volume of public debt for the next 3 years will depend on the development of new loans and borrowed loans. However, according to the government, the amount of foreign debt will not exceed 60 percent of GDP.
 
“Urgent need to raise wages”
"The Republic’s budget revenues increased by 3 times during 7 years, and expenses by 3.3 times," the Kyrgyz Prime Minister Dzhoomart Otorbayev was quoted by the agency [http://www.eng.24.kg/economics/171690-news24.html] as declaring at a public hearing on the national draft budget held the same day. “According to [Otorbayev], from 2007 to 2014, the revenue of the budget increased from 31.2 billion up to 93.5 billion som. At the same time expenditures for the period increased by 3.3 times - from 18.9 billion up to 65.8 billion som.” "Despite the increase of expenses under the item "salary" from 6 billion up to 29.4 billion soms, there is an urgent need to raise wages to certain categories of state and municipal employees," Otorbayev was quoted as adding.

Kyrgyzstan's GDP made up for 185.5 bln som during the first seven months of 2014, while industrial output in the country over the same period was valued at 75.6 bln som. The government recently reported a lump sum of 40.5 bln som of investments in fixed capital over the first seven months of 2014.
 
Inflation under control
The wild card within the entire scheme remains purchasing power and money valuation. For the moment, inflation remains under control. “The inflation rate in Kyrgyzstan was recorded at 7.80 percent in July of 2014. Inflation rates in Kyrgyzstan averaged 8.41 per cent from 2003 until 2014, reaching an all time high of 32.45 per cent in July of 2008 and a record low of -0.54 per cent in June of 2012, as reported by the National Statistical Committee of Kyrgyz Republic,” the specialised global newsreel Trading and Economics reported in its latest update as of August 17.

“In Kyrgyzstan, the main components of the consumer price index are: food and non-alcoholic beverages (46.7 per cent of the total weight); clothing and footwear (14.1 percent) and alcoholic beverages and tobacco (12 per cent). Housing, water, electricity, gas and other fuels account for 8.2 percent; transport and communications for 5.8 percent and household appliances and equipment for 3.8 per cent. Others include: miscellaneous goods and services (2.9 percent); health care and education (2.5 per cent); restaurants and hotels (2.4 per cent) and leisure and culture (1.4 per cent). The CPI reflects the prices and spending patterns registered in the 8 main urban areas of the country.”