Large unexplained flows in Kyrgyzstan’s balance of payments continue to fuel concerns about sanctions circumvention linked to Russia, according to a report by GlobalSource Partners, even as the country has taken steps to improve the transparency of its external accounts.

In a research note, GlobalSource said persistent anomalies in Kyrgyzstan’s external data suggest that unrecorded trade flows — particularly re-exports to Russia — remain significant.

“The data shows that, despite some improvements, the E&O remain uncomfortably large, suggesting that unrecorded trade with Russia continues,” he wrote, referring to the balance-of-payments category known as “errors and omissions”.

The issue has gained renewed attention after EU sanctions envoy David O’Sullivan visited Bishkek on February 26, warning the Kyrgyz authorities about growing re-exports of European dual-use goods to Russia.

GlobalSource said the trip appeared to indicate a tougher approach from Brussels. “I think that visit marks a step-up in enforcement signaling rather than routine diplomacy,” he wrote.

Kyrgyzstan’s external accounts have been heavily affected by shifts in regional trade since Russia’s invasion of Ukraine. “While Kyrgyzstan tends to run CA deficits, the external gaps exploded in 2022/2023 (around 45% of GDP) due to the large re-orientation of trade following the Russia-Ukraine conflict,” the report said.

The country’s balance-of-payments data recorded “exceptionally large and positive errors and omissions (E&O) of 35% of GDP in 2022 and 42% of GDP in 2023,” suggesting large volumes of unrecorded transactions.

According to GlobalSource, these gaps are linked to trade flows that bypass official customs declarations. “This reflects significant unrecorded (and undocumented) re-exports to Russia, which are not captured in trade statistics because trade within the Eurasian Customs Union is not subject to customs declarations.”

Authorities have attempted to address the issue. The central bank and national statistics agency have begun reconciling “customs, banking-settlement and remittance data streams quarterly instead of annually, aligning BoP compilation with IMF BPM6 standards.”

These efforts have produced some improvement, with errors and omissions falling to “a still large 17.0% of GDP” in 2024.

However, more recent data suggests the problem has not disappeared. “Quarterly data… has been quite volatile and points to some rebound in E&O,” the report said.

GlobalSource warned that renewed widening of the current-account deficit and unexplained flows in 2025 could again be linked to trade routes connecting China, Kyrgyzstan and Russia.

“Logic dictates that the worsening picture with regard to the E&O in 1H25 could be, yet again, related to issues with properly recording trade flows via the China (most likely)-Kyrgyzstan-Russia link.”

Despite the scrutiny, Kyrgyzstan’s foreign exchange buffers have strengthened significantly. Reserves rose “from US$3.3bn in Jan 2024 to US$10.2bn in Jan 2026,” supported by higher gold purchases and a $700mn Eurobond issue.

GlobalSource outlined three possible sanctions scenarios facing the country. His baseline case assumes a tightening of oversight without major penalties.

“I assign as a baseline scenario, with a 50% probability, what I describe as a targeted secondary tightening,” he wrote, under which “banking and trade flows should adjust but remain operational.”

A second scenario, with a 40% probability, could involve expanded EU sanctions against Kyrgyz intermediaries facilitating trade with Russia.

The worst-case scenario, which he assigns a 10% probability, would involve “serious sanctions escalation” with secondary sanctions targeting entities enabling re-exports and new restrictions on banking relationships.

“In this case, Kyrgyzstan faces sharp contraction in transit trade flow… External stability and financial sector confidence could be tested as the market impact would be strong,” the report said.