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Situation Update
Given that the Kyrgyz Republic is a country dependent on food imports and remittances, external factors continue to influence the food security of the population. This is particularly the case for poor households, who spend most of their income on food and remain vulnerable to high inflation and income volatility, which undermines their resilience in the event of new economic or other shocks caused by climate change or conflict. Despite stable wheat imports to the Kyrgyz Republic, wheat export prices from the Russian Federation increased by 2% in July 2023. The suspension of the Black Sea Initiative, with Ukrainian crops from the imminent new harvest not reaching world markets and the fertilizer sector vulnerable to new trade and energy shocks, results in further upward pressure on prices for grains and oilseeds on global markets, which will lead to higher prices for staple foods.
At the same time, the Gross Domestic Product (GDP) of the Kyrgyz Republic continued to grow and increased by 3.9 percent, adding 453 billion KGS ($5.2 billion) to the economy in January-June 2023 compared to the same period last year. This growth was primarily driven by the improvements in the services sector and industry. The IMF forecasts a slowdown in annual GDP growth to 3.5 percent as the impacts of the global crisis begin to affect the Kyrgyz economy in 2023. In June 2023, inflation reached 10.5 percent compared to June 2022 (NBKR). The annual inflation rate remains second highest in the EAEU region. Domestic food price inflation is one of the drivers of the overall inflation, which also remains high.
In January-June 2023, the Consumer Price Index (CPI) for staple foods increased by 12 percent, compared to the same period in 2022. In this regard, rising food prices reduce the purchasing power of the most vulnerable who cannot afford nutritious food.
Consequently, the cumulative effect of previous years’ socio-economic challenges continues to affect the recovery from the impact of crises by the vulnerable population, reducing the resilience of households. According to the June 2023 mobile vulnerability survey carried out by WFP, 10 percent of the country’s population is acutely food insecure, while half of the population remains to be only marginally food secure and continues to apply asset depleting coping strategies (labour migration, reduction of expenses for agriculture needs, selling livestock and seeds, and using savings, borrowing money for essential food). The provinces with the highest level of food insecurity were Talas (16 percent) and Osh (15 percent). The key factors hindering purchases of both food and non-food items was economic accessibility (lack of money) and affordability (high food prices).
As global wheat markets remain volatile, this creates possible risk to the stability of the Kyrgyz domestic market, since the Kyrgyz Republic has a low level of self-sufficiency in terms of domestic production: sugar (only 59 percent), wheat products (only 58 percent) and oil (only 20 percent). To stabilise the market and support local sugar producers, the Government has introduced Zero VAT for the import of sugar, raw sugar, grain and vegetable oil from January until December 2023. On 30 March 2023 the Council of the Eurasian Economic Commission initiated the duty-free import of raw sugar at preferential prices until 31 December 2023. The approved tariff aims to support the development of domestic sugar production and provision of raw materials to enterprises in the EAEU countries.
For domestic production, a key challenge is the significant increase in the price of agricultural inputs in recent years, in particular fuel and fertilizers. While fuel costs in the Kyrgyz Republic have been more or less stable, IFPRI is concerned about fertilizer: prices are historically high and the sector remains vulnerable to further shocks from uncertain global market conditions, and the cancellation of the Sea Black Initiative is expected to affect fuel and fertilizer supplies.
In the Kyrgyz Republic, the harvesting of winter wheat and barley crops began in June 2023 and the planting of spring crops (wheat, maize) continued under drier conditions across the country. The 2023/24 output of wheat is expected at 570,000 mt, that is 1.8 percent higher than the five-year average for 2018-2022 due to a larger area planted. According to International Research Institute Climate Forecasts, rainfall during July-September 2023 is likely to be near-average (40-60 percent possibility of exceeding the median rainfall) across the country, while air temperature is likely to be above the normal conditions in the Kyrgyz Republic.