Informal Economy in the Kyrgyz Republic

Informality remains a major structural challenge in the Kyrgyz Republic, constraining productivity, inclusive growth, revenue mobilization, and social protection. It reflects a combination of weak human capital, institutional shortcomings, fragmented tax regimes, labor market rigidities, and limited access to finance. This paper argues that reducing informality requires a gradual and comprehensive reform strategy centered on private-sector-led growth. Policy priorities include strengthening governance and institutions, improving the business environment, enhancing tax policy and administration, modernizing labor market and social protection systems, investing in education and skills development, and expanding access to finance while preserving financial stability. Well-sequenced reforms would support sustainable formalization and stronger long-term growth.