BISHKEK (TCA) — The coronavirus outbreak has had a tremendous impact on the economies of all countries, including Kyrgyzstan. Businesses are suffering, companies are going bankrupt, and business activity is falling significantly.
While China, where COVID-19 began to spread from, has already begun to return to normal life and most enterprises have resumed production, Kyrgyzstan has just begun to introduce tough preventive measures.
A state of emergency and curfew were imposed in the country from March 25 to April 15 in the cities of Bishkek, Osh and Jalal-Abad, as well as in several regions in the south of the country.
Public transport stopped working, entertainment facilities, large markets (except for food departments) closed, and all catering facilities switched to food delivery.
As of March 27, 58 cases of coronavirus infection were recorded in Kyrgyzstan. The Healthcare Ministry announced the first coronavirus case on March 18.
Protective measures under the state of emergency will affect the welfare of the population of Kyrgyzstan and the economy as a whole, but they cannot be avoided.
The Kyrgyz economy is highly dependent on foreign markets. The import is three-fold higher than export. The economy is shrinking and the people have to tighten their belts, experts say.
In the current situation, civil servants are in a better position than private sector workers.
For public sector employees, the state keeps paying salaries for the emergency period and promised to pay pensions and social payments on time.
But what about the private business engaged in trade, tourism, entertainment, hospitality and event services, passenger transportation and many other areas?
Thousands of people and their families have been left without earnings. There are more than two thousand fixed-route minivan taxis in Bishkek, dozens of taxi companies, and hundreds of private taxi drivers, plus market traders and workers in many small private firms. Not all business owners are able to pay their employees for the period they do not work during the state of emergency.
To fight coronavirus, an account has been opened for voluntary contributions and gratuitous funds from individuals and legal entities. As of March 26, there were more than 35 million soms ($1=80 soms) on the account. According to local media, Kyrgyz President Sooronbai Jeenbekov was among the first to transfer his salary for March in the amount of 53 thousand soms.
In addition, 1.686 billion soms will be provided from the state budget.
Based on the current difficult economic situation, the Government will develop work algorithms for small and medium-sized businesses in special conditions. A “green corridor” should be provided for essential goods suppliers.
It is necessary to temporarily abandon inspections of enterprises, President Jeenbekov said in his address to the nation after the introduction of the state of emergency.
The government decided to extend the terms for repaying loans by entrepreneurs suffering losses and suspend fines, the President said.
If the efforts of state bodies are not supported by every citizen, it will be impossible to succeed in preventing the further spread of infection. “Respect for discipline is the civil duty of each of us in these difficult days,” the head of state concluded.
The Kyrgyz government cannot support the economy and business as Russian or Kazakhstani governments do. They have financial resources that allow abolishing taxes for a certain time.
“We must reasonably evaluate our financial capabilities,” Kyrgyz Deputy Prime Minister Erkin Asrandiyev told a briefing in Bishkek on March 26. He heads the Country’s Coronavirus Operational Office.
The government is developing an anti-crisis action plan, and soon it will be announced. Proposals from business, parliamentarians, and the experience of other countries are taken into account, Asrandiyev said.
The National Bank of the Kyrgyz Republic will not charge penalty on loans not paid in due time. The deadlines for submitting the Single Tax Return and tax reporting have also been postponed, Asrandiyev said.
According to the Economy Ministry and the Finance Ministry, the state budget losses may amount to 27-28 billion soms in 2020.
The newly established Business Ombudsman office proposed introducing tax holidays and exempting business entities whose activities were suspended due to COVID-19 for 90 days.
The anti-crisis package also includes the extension of the moratorium on conducting inspections of business entities by state bodies until January 1, 2022 (with the exception of those related to health and safety of citizens), the granting of an amnesty visa and exemption from penalties for foreign businesspeople whose visa and registration period expires during the pandemic.
The Business Ombudsman office is concerned about the pressure on business from some state bodies and calls for dialogue, proposing to act as a mediator.
The International Business Council based in Bishkek also submitted to the Country’s Operational Office its proposals on industries that are most likely to suffer or have already suffered from the economic downturn. These are air transportation, tourism, hotel and restaurant business, trade, and others.
“The share of these industries in the budget revenues is not decisive, but it is important to keep them viable and afloat because they have great potential,” said Askar Sydykov, IBC Executive Director.
Many of IBC recommendations are not related to the possible loss of tax revenue such as simplifying the access of domestic producers to retail chains, but they will help protect domestic producers and ensure food security.
The Russian-Kyrgyz Development Fund’s anti-crisis measures include a delay in repayment of the main debt with a simultaneous extension of the loan term. For example, tourism enterprises in the investment phase, as the most at risk borrowers, will receive a delay of up to 12 months. Enterprises conducting export and import operations will have a delay of up to six months. During the moratorium, fines for late payments and non-fulfillment of financial requirements for collateral will not be applied.
MP Dastan Bekeshev proposed to review the laws related to business that contain bans.
“After the coronavirus and currency inflation, we will have to develop our economy. We’ll have to take unpopular measures for the sake of the population, namely to allow everything that we have banned over the last ten years,” the MP said on social networks.
He proposed to increase lending of agricultural producers, urgently using the funds of the Russian-Kyrgyz Development Fund.
The government must be allowed to purchase medicines through international organizations because it will be cheaper and quality will be guaranteed.
Time is running out. “We have to think about how to help the population survive under conditions of forced unemployment,” Bekeshev concluded.
On March 26, the International Monetary Fund (IMF) Executive Board approved the first request for emergency financial assistance to help its member countries address the challenges posed by COVID-19.
The approval of the request from the Kyrgyz Republic will make available US$120.9 million to the authorities to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic, to help catalyze donor support and free resources for essential COVID-19-related health expenditure, the IMF press release said.
This is the first IMF emergency loan worldwide since the outbreak of the pandemic.
The Asian Development Bank (ADB) and the EU Delegation in Kyrgyzstan also promised to consider the possibility of finding funds to assist Kyrgyzstan in the fight against the coronavirus.
On March 26, President Jeenbekov asked ADB Country Director in Kyrgyzstan Candice McDeigan to consider the possibility of providing financial assistance for the effective implementation of anti-crisis measures in Kyrgyzstan.
A request for emergency financial assistance was received from the Kyrgyz government, Ms. McDeigan said. The ADB has begun an assessment of potential risks to the country's economy. Consultations will be held with other development partners to find additional funds to support the health system in the state of emergency.
President Jeenbekov also met with the Head of the EU Delegation to Kyrgyzstan, Ambassador Eduard Auer. Information on the economic situation in the country and the necessary support has been submitted for consideration to the EU headquarters, Ambassador Auer said. The EU will consider the best options for providing financial support to Kyrgyzstan, he added.
The EU also provides funding to combat the coronavirus through the World Health Organization.
The results of a survey conducted by the research company M-Vector show that nearly half of respondents believe that the Kyrgyz government is doing poorly with tackling the COVID-19 outbreak. About 58% of the respondents doubt that the country’s resources and capabilities are sufficient to protect the population from mass infection.