KYRGYZSTAN FACES RAMPANT INFLATION FOR FOOD PRODUCTS
Publication: Eurasia Daily Monitor Volume: 4 Issue: 164
In the past few weeks Kyrgyzstan has endured steadily rising food prices. According to estimates by the Kyrgyz parliament, roughly 500,000 people, the poorest stratum of the population, are directly affected by increased prices for bread and other basic products. The Kyrgyz government blames neighboring Kazakhstan and Russia for raising prices for wheat, but some critics think that the food crisis is caused by corruption, the government’s inability to foresee inflation, and the lack of a coherent economic strategy in Kyrgyzstan.
Despite President Kurmanbek Bakiyev’s promises that Kyrgyzstan’s GDP would increase by 7% this year, the 10% raise in pensions and public salaries cannot keep up with 30% inflation for food products. The cost of bread in the Kyrgyz capital, Bishkek, has increased from an average of six soms to nine soms (24 cents). Bread prices have been increasing rapidly, refusing to respond to government measures to control inflation. The mayor of Bishkek tried to stanch the rampant inflation by selling 15,000 tons of wheat reserved for emergency situations. However, this measure failed to stabilize prices. Kyrgyz Prime Minister Almazbek Atambayev ordered the use of an additional 1,900 tons of emergency wheat reserves. These reserves will be distributed in Jalalabad, Osh, and Batken oblast, the poorest parts of Kyrgyzstan.
In its efforts to control prices, the Kyrgyz government is threatening to shut down illegal bakeries. Over the course of just a few days the government discovered dozens of bakeries that might be potentially closed down if they sell bread for higher prices. According to Deputy Mayor Ilya Klimenko, only 10% of bakeries in Bishkek, out of a total of 300, are legally registered. But some experts claim that small-scale businessmen are benefiting from the hype around shortages of wheat reserves and intentionally increasing prices.
According to Kyrgyz Minister of Agriculture, Akhmdzhan Makhammadov, the government is considering temporarily canceling the VAT for wheat imported from Kazakhstan. However, he also notes that the activities of the Bishkek mayor are not coordinated with other government structures. The parliament, in turn, is blaming the government for failing to foresee inflation, and some MPs even insist on sacking the prime minister. Increased food prices could contribute to society’s dissatisfaction with the regime and mobilize crowds against the government this fall.
Meanwhile, on September 5 the mayor began destroying buildings illegally constructed of clay and stones by migrants working in Bishkek. Roughly 200 small houses, some fully built, were wiped out en mass in the city’s suburbs. Some 500 to 1,000 people were affected. Most of these illegal residents came to Bishkek from all parts of the country seeking work. Although the government warned them about its plans to destroy illegal structures, it did not provide any alternative accommodations for these people. Illegal construction projects boomed after the Tulip Revolution in March 2005, as the general economic situation worsened in the country and the efficiency of law enforcement agencies decreased.
Difficulties with controlling bread prices prompted the Ministry of Agriculture to encourage wheat cultivation in Kyrgyzstan by reducing fruit and vegetable farming. The rapidly increasing bread prices have revealed how deeply dependent Kyrgyzstan’s economy is on Kazakhstan. The Kyrgyz Ministry of Finance blames a “global financial crisis” for infecting Kyrgyzstan via Kazakhstan. Following the increase of bread prices, the Kyrgyz government decided to establish a committee on food security that would monitor global trends in food production and sales.
Aside from that theory, the government does not have an official explanation for the sudden outbreak of inflation, nor is it able to forecast short-term trends in food prices. Public transportation is expected to become more expensive as well this fall. Atambayev warns that food and fuel in Kyrgyzstan are likely to be as expensive as they are in Kazakhstan and Russia, despite the differing economic situations among these countries. Although the Kyrgyz government is blaming external factors for domestic inflation, it is clear that it failed to foresee the price jumps. Currently, the government needs to create the necessary regulations to stabilize the domestic market.
(24.kg, Akipress.kg, Tazar.kg, September 1-5)