Small Change From Low Inflation

Kyrgyzstan’s central national bank is to introduce the first coins since the country shifted from the Soviet rouble. NBCentralAsia financial experts say the move has been made possible by seven consecutive years of low inflation.



Marat Alapaev, the head of the National Bank of Kyrgyzstan, announced on May 10 that coins with a face value of up to five soms, or 13 US cents, will be issued from January 1 next year.



Kyrgyzstan is one of the few countries in the world that does not have coins. Small square banknotes have been used for the smallest denominations since the som, the Kyrgyz national currency, replaced Soviet roubles in 1993.



The only coins issued by the central bank have been for commemorative or collectable purposes.



Ulan Sarbanov, a former head of the central bank, told NBCentralAsia that Kyrgyzstan previously opted out of putting coins into normal circulation because over time, they would cost more to manufacture than their face value.



“You can see what has happened with coins in some other countries, how they have become devalued. Yes, of course some made fun of us for being the only country without coins, but we have to live within our means,” he said.



Kylych Kylychev, who heads the currency department at the national bank, says annual inflation has not exceeded five or six per cent since 2000, so that it is now feasible to issue coins.



“International monetary experts believe it makes sense to introduce coins provided the inflation rate does not exceed 10 per cent for a prolonged period,” he said.



Experts at the central bank estimate that coins will not cost more to make than their own face value or the cost of printing a banknote worth the same amount.



Given that banknotes only last about two years on average, but coins can be used for at least 10 to 15 years, the bank stands to save money in the long run, Kylychev said.



Sarbanov believes coins will prove popular with the public, since people will be able to use them on public transport and buy small items without having to carry a wad of low-denomination paper notes. Customers will also avoid being shortchanged because of the shortage of low-value banknotes.



The smallest-denomination banknotes are one, ten, and fifty tiyin, but very few people carry them because they have lost some much of their value over time. There are 100 tiyins to the som.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)