Nestled in the mountains of Central Asia, Kyrgyzstan has long suffered from high poverty rates and underdevelopment, but the past decade saw Kyrgyzstan’s per capita GDP rise by nearly 50%. The COVID-19 pandemic has halted progress, however, with 700,000 people in Kyrgyzstan sliding into poverty from 2019 to 2020. COVID-19 and poverty in Kyrgyzstan are interlinked in several ways.
An Economy Based on Remittances
The World Bank classifies Kyrgyzstan as a lower middle-income country with a per capita GDP of about $1,200. Much of Kyrgyzstan’s national wealth comes from remittances, especially in rural areas, from which migrants move to work in Russia, Kazakhstan and Turkey. In 2019, citizens abroad sent back nearly $2.5 billion, or 30% of Kyrgyzstan’s GDP. Official statistics show that without remittances, Kyrgyzstan’s 2019 poverty rate would have increased by more than half.
At the beginning of the pandemic, many migrant workers returned home, cutting off remittance flows that kept rural families alive. Others stayed abroad but sent family home, increasing the burden on Kyrgyzstan’s rural residents. Due to the informality of their work, many migrants lost their jobs during the pandemic and did not qualify for the government aid that other more protected workers qualified for.
Rising Food Prices
In 2019, the World Food Programme (WFP) reported that 46% of the Kyrgyz population did not meet their daily calorie needs. From June 2019 to June 2020, food prices rose by 17%, pushing even more vulnerable households into food insecurity and highlighting the correlation between COVID-19 and poverty in Kyrgyzstan. During the same period, the price of flour increased by around 30%.
Kyrgyzstan’s poverty levels have close ties to food prices. According to the World Bank, when food prices rise, Kyrgyzstan’s poverty rate follows closely behind. Rising food prices use up savings of low and middle-class people, pushing them into vulnerability.
While faltering remittances largely affected rural populations, the rising food prices have mainly increased urban poverty in Kyrgyzstan. While those in rural areas have access to farms, urban residents in poverty require assistance to meet their basic food needs. Food imports that fed urban populations fell due to Kyrgyzstan’s weakening currency, hurting low- and middle-income people in cities.
In March 2020, to combat food insecurity, the government instituted price caps, took legal action against companies raising prices and handed out food to vulnerable citizens in urban areas. In April 2020, nearly 95% of households in Bishkek received aid from the government, while in rural areas, 26% received aid. The government’s efforts mitigated the worst of Kyrgyzstan’s increased food insecurity.
Before the pandemic, informal employment accounted for 71% of all employment in Kyrgyzstan, a large cause of poverty. Informal workers, usually in the construction, trade or industry sectors, usually have no contracts with their employer, increasing their risk of exploitation. During the pandemic, as unemployment rose, informal employees found themselves without the same social protection systems and labor rights as formal employees.
The construction industry, one of the largest sectors of the Kyrgyz economy, employs an especially large amount of informal labor. Due to falling investment and government restrictions, the construction sector has suffered particularly badly, with business owners reporting major drops in employment.
The Government and World Bank Assists
Since the beginning of the pandemic, the World Bank has created three assistance programs totaling $88 million to combat the effects of COVID-19 and poverty in Kyrgyzstan. The programs target both urban and rural poverty, focusing on food insecurity, the environment and low wages.
One of the programs, the Emergency Support for Micro, Small and Medium Enterprises, is providing $25 million in microloans to small and medium-sized businesses suffering from the effects of the pandemic. With a focus on entrepreneurs, this World Bank program aims to help modernize Kyrgyzstan’s economy and workforce.
The World Bank also implemented the Social Protection Emergency Response and Delivery Systems to protect those most at risk of sliding into poverty. This response includes grants for vulnerable families with children and enhanced unemployment insurance for workers across all economic sectors. In the long run, this program will focus on developing income-generating skills in order to make the benefits of relief sustainable after the pandemic has passed.
The World Bank’s third program, the CASA-1000 Community Support Project, will fund small infrastructure projects across Kyrgyzstan. Community members will define and carry out the projects so that each locality has its needs met. The program will support projects in every sub-district, ensuring widespread impact.
The World Bank also supplied emergency funding for Kyrgyzstan’s healthcare system, with $12 million delivered as of March 2021. The funding helped the country acquire 266 hospital beds, 26 ambulances and 342 sets of breathing support equipment, along with funding for medicine, PPE and other supplies necessary for combating the pandemic.
Progress and the Road Ahead
As of July 2021, more than 2,000 Kyrgyz had died of COVID-19 and more than half a million have entered into poverty. The government, in partnership with the World Bank, has taken action to fight both the health and economic effects of the pandemic. New legislation and World Bank programs aim to bring Kyrgyzstan through the pandemic with a stronger economy and a less vulnerable population.
– Justin Morgan