According to the results of August 2024, the regulator showed a profit of 1.8 billion KGS. This is lower than the indicators of the same period last year. Nevertheless, given that for most of the year the National Bank worked with losses, this result can be considered as a significant achievement.

According to the financial statements of the National Bank of Kyrgyzstan, at the end of August 2024, it entered the profit, which amounted to 1 billion 755.6 million soms. Moreover, it also closed the loss of almost 100 million soms, which was in July.

Losses in the first half of the year

The National Bank started 2024 with a negative financial result, having received a loss of 126.5 million KGS in January. In February, this figure increased to 145.3 mln KGS. In March, the regulator was able to slightly reduce the negative balance to 127.9 million KGS, but in April the financial losses increased sharply to 352.6 million KGS, which became the most significant negative result for the month this year.

By April 30, the total loss amounted to 480.5 million KGS, almost four times higher than in March.

May was also unfavorable: the negative result increased to 509.2 million KGS. However, the situation began to improve in the second quarter. As of June 30, the National Bank managed to reduce the negative balance by KGS 426.4 million, ending the half-year with a loss of KGS 82.8 million. In July, another 15.8 million KGS were added to the June result, and as a result, the NBKR closed the seventh month with a loss of 98.5 million KGS.

At the end of August, the regulator completely closed the loss and made a profit of almost 1.8 bln KGS.

Profit is recognized in comparison

Although the main goal of the National Bank is to maintain macroeconomic stability rather than to make profit, the financial stability of the regulator is extremely important. In the conditions of external economic shocks and the need for active actions to maintain price stability, additional expenditures of the National Bank are inevitable. This makes successful management of financial resources critical for the entire banking system of the country. Unlike commercial banks, where losses may affect only the bank itself, losses of the National Bank may affect the entire financial system.

It is not quite correct to compare the National Bank's profit with commercial banks, but for the Kyrgyz banking sector, a profit of 1.8 billion KGS is a significant result. At the moment, only four commercial banks in the country demonstrate higher profits.

If we compare the results of 2024 with the previous year, the National Bank shows a significant drop in profit. At the end of August 2023, it amounted to 8 billion 242 million soms, that is, it was 4.6 times higher than the current figures.

Where did the minus sign come from

The National Bank attributes the losses to the need to maintain price stability and to use various monetary policy instruments that require significant expenditures, especially in the face of external economic shocks. To fulfill these tasks, the bank may use reserves or apply other financial instruments, which affects its financial indicators.

It should be noted that the profit or loss of the National Bank is summarized at the end of the year, after accounting for all revenues and expenses, and is confirmed by an independent audit. Thus, losses are part of the fulfillment of tasks to maintain macroeconomic stability and not an indicator of inefficiency.

However, one of the possible reasons for the deterioration of the National Bank's financial performance could be the decision to transfer 100% of profits for 2023 to the state budget

Earlier “Akchabar” wrote that international experience does not recommend transferring all the profits of central banks to the budget. Thus, the International Monetary Fund emphasizes the fundamental importance of the policy of distribution of income and dividends of regulators, as it could jeopardize capital adequacy and the objectives of monetary policy.

Despite this and arguments in favor of the fact that by all parameters of the current Law “On the National Bank of the Kyrgyz Republic” the NBKR should have kept all profits, the regulator supported the authorities' decision to transfer them to the state treasury.

In June 2024, the National Bank transferred 12.4 billion KGS to the treasury, depriving itself of a substantial financial cushion.

“Keremet Bank” and the weight of gold

Despite this, the National Bank was able to offset some of the profit transferred to the budget thanks to the sale of Keremet Bank to the Ministry of Finance for 7.1 bln KGS in late March.

In addition, the increase in gold prices became an additional source of income for the National Bank. Since the beginning of the year, gold has appreciated by 24.13%, which allowed it to revalue its reserves positively. According to accounting rules, such revaluation is recognized as income, even if there was no actual sale of gold.

Thus, the growth of gold prices also contributed to the improvement of the regulator's financial performance and helped to compensate part of the losses incurred during the year.

In addition, in recent months, the National Bank significantly reduced the volume of notes in circulation and decreased their yields. While on May 8 there were 78.4 bln KGS worth of notes in circulation, by the end of August this figure had fallen to 25.4 bln. These measures also contribute to the reduction of the regulator's interest expenses.