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Extra info for Kyrgyzstan: the transition to a market economy
Page 1 PART I THE MACROECONOMIC FRAMEWORK Among the Commonwealth of Independent States, Kyrgyzstan was one of the earliest to start the transformation to a market economy. Prices have been liberalized for over 90 percent of all retail goods, and administered prices for other goods have been substantially increased in most cases. Privatization started in 1991, and in July 1992 Kyrgyzstan's Parliament approved an accelerated program of economic reform. However it is already apparent that the process of transition will be long and difficult, not least due to the almost total isolation from market economies and the entrenched nature of past habits.
Since a competitive market economy will be slow to emerge, care will be needed in managing the pace at which the structures of the command economy are dismantled: In instances where a rapid dismantling cannot be replaced by a workable alternative in the short run, more gradual adjustments may be called for to moderate the collapse of output. Such strategic decisions of sequencing cannot be fully anticipated at the outset of the reform, but will need to be considered as part of an ongoing process.
Delayed payments of wages and pensions are indicative of the severity of the Government's financial predicament. The budget deficit rose rapidly in the second half of the year, reflecting a partial recovery of wages, a transfer of liability for defense expenditures from Russia, relief outlays for natural disasters, a repayment of government arrears, and the cost of settling inter-enterprise arrears. Financing of the deficit in the second half of 1992 was facilitated by increased availability of cash from the CBR.