The National Bank keeps the discount rate at 5%

The National Bank has set the discount rate at 5% per annum. This is stated in the resolution of the National Bank.

This decision was made in accordance with Articles 24, 28 and 68 of the Law “On the National Bank of the Kyrgyz Republic, Banks and Banking Activities”.

This regulation will come into force from June 30, 2020.

In early March, due to the situation with the coronavirus in the world and other factors, the NBKR increased the discount rate from 4.25% to 5%.

The economy of the Kyrgyz Republic remains affected by the changes taking place in the global and regional economy due to the continuation of the COVID-19 pandemic. Despite some signs of economic recovery in individual countries of the world after the lifting of quarantine requirements, in general, the dynamics of real GDP in many countries remains in the negative zone. International financial organizations are revising their forecasts for the world and regional economies towards deterioration. The global economic downturn is expected to be significant in 2020.

The monetary policy measures taken amid the COVID-19 epidemic have a supportive impact on the monetary sector as a whole. The monetary environment remains stable. Short-term money market rates fluctuate within the interest rate corridor established by the National Bank, demonstrating the approach to the key rate. The progressive growth of the loan portfolio and the deposit base of commercial banks continues.

Expansion of expenditure operations in the public finance sector and active lending by the National Bank to support the real sector of the economy lead to an increase in the level of excess liquidity in the banking system. The National Bank continues to conduct sterilization operations mainly in the short segment of the money market. The domestic foreign exchange market is relatively stable.

Assumptions about the restraining effect of weakening domestic and external demand on inflation dynamics in the country remain. The National Bank maintains the previous forecasts for inflation and expects that its average value by the end of this year will be within the medium-term targets of the monetary policy within 5-7%.

Taking into account the prerequisites for the development of the external environment and the emerging internal economic conditions, the National Bank decided to keep the discount rate at 5%, taking into account the need to maintain measures to stimulate the real sector of the economy.

The National Bank regularly assesses external and internal factors affecting inflation and, depending on the economic situation, will take appropriate monetary policy measures. Should any risks arise, the National Bank has sufficient instruments to mitigate their consequences.