In a region dominated by autocrats, Kyrgyzstan is relatively democratic – which results in regular political instability fuelled by a power struggle between various political parties, ethnic divisions and a deadlock over border delimitation with Tajikistan and Uzbekistan. On the international side, the country turned to Russia after years of more balanced international relations.

On the economic side, despite good performances under previous IMF programmes, the main macroeconomic indicators have deteriorated. Indeed, the regional economic slowdown hit the country hard. In particular, remittances dropped sharply as did exports of goods to the Commonwealth of Independent States and to a lesser extent gold exports. Even if they are expected to recover slightly as of 2016, the current account is expected to remain in a rather deep deficit in the forthcoming years, partly due to investment-related imports. At the same time, large public external borrowing – driven by investment projects aimed to close critical energy and infrastructure gaps – has significantly increased the level of external debt and to a much lesser extent the debt service ratios as public external borrowings are mainly at concessional terms. Last but not least, non-performing loans in the banking sector have increased, threatening the financial sector’s stability.

Taken into account the continued deterioration of the macroeconomic indicators, Credendo Group decided to downgrade Kyrgyzstan’s MLT political risk classification to category 7 and to go off cover for non-payment and non-transfer risks related to MLT credit transactions.