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The impact of dollarisation on the stability of the payment system

Nelli Akylbekova, Elmira Kuramaeva, Zhyldyz Myrzakhmatova, Saltanat Omurova, Ermek Omurov

Received 13.07.2025, Revised 08.11.2025, Accepted 10.12.2025

Abstract

Dollarisation plays a crucial role in shaping the stability of the payment system, particularly in economies with high levels of foreign currency use. High dollarisation can increase the vulnerability of the national economy to external shocks, especially to exchange rate fluctuations and changes in the monetary policy of large economies. The purpose of this study was to analyse the impact of dollarisation on the stability of the payment system in an economy with a high level of foreign currency use, with an emphasis on assessing the dynamics of the decline in dollarisation in the banking sector of the Kyrgyz Republic and developing recommendations for the formation of a balanced monetary policy that contributes to strengthening financial stability. In recent years, the Kyrgyz Republic has seen a steady trend towards a decrease in the level of dollarisation of both the loan portfolio and the deposit base of the banking sector. This paper explored the impact of dollarisation on the stability of the payment system, focusing on its influence on financial sector dynamics, liquidity risks, and the effectiveness of monetary interventions. The study also analysed the structural implications of dollarisation, including its effect on banking operations, inflation control, and exchange rate fluctuations. Special attention was given to policy measures that can mitigate the negative consequences of dollarisation while fostering a more resilient and adaptive payment system. The article discussed the positive and negative aspects of dollarisation on the stability of the payment system The findings underscore the importance of balanced monetary strategies to enhance financial stability in dollarised economies

Keywords:

external debt; foreign currency deposits banking sector; foreign currency credit; foreign currency deposits; inflation; economic stability

Retrieved from Vol. 1 No. 1. 2025

Pages 8-18

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Suggested citation

Akylbekova, N., Kuramaeva, E., Myrzakhmatova, Zh., Omurova, S., & Omurov, E. (2025). The impact of dollarisation on the stability of the payment system. Comparative Economics, 1(1), 8-18.