The National Bank of the Kyrgyz Republic continued to maintain a tight monetary policy stance over the first nine months of 2013, according to the report of the International Monetary Fund prepared for the fifth review under the Extended Credit Facility following the discussions with the Kyrgyz government officials. Reserve money growth gradually declined from 22 percent year-on-year in January to 14.6 percent in September 2013 . The National Bank increased sterilization efforts via its notes, but the volume was not sufficient to keep reserve money growth within the indicative targets for March and June (albeit missed by a small margin). The indicative target for September was met. The National Bank intervened in the foreign exchange market only once to smooth excess volatility of the som, which has depreciated by 2.9 percent against the U.S. dollar and appreciated by 3.4 percent against the Russian ruble since the be ginning of the year (cross exchange rate). The NEER has depreciated by 0.5 percent, while the REER has depreciated by 1.7 percent since the beginning of the year. The banking sector remains relatively stable and well capitalized, but credit growth has been strong. Credit to the private sector increased by 36 percent year-on-year at end-September. The main drivers are loans in som with a maturity over six months to agriculture, trade, and industry. Following the strong credit expansion, capital adequacy and liquidity ratios have declined, but remain well above the thresholds.
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