03/04/2011, 00.00
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More and more people disgruntled by rising inflation

The prices of wheat, foodstuffs, coal and cement are increasingly rapidly. The government is unable to contain prices. Experts blame speculation and ineffectual government.

Bishkek (AsiaNews/Agencies) – Prices are skyrocketing in the Central Asian nation, driven by the cost of wheat and other essential staples. Kyrgyz authorities are scrambling to cushion their impact, mindful that growing poverty last year led to protests that ended in the overthrow of then President Kurmanbek Bakiyev.

Kyrgyzstan can produce 1.33 million metric tonnes of wheat to meet the needs of its population, according to figures released last month by the Agriculture Ministry. However, last year it could not harvest more than 813,000 tonnes, partly because of social unrest that divided and paralysed the country for months.

Buying abroad has thus become a necessity. According to the World Bank, the price of wheat jumped 54 per cent since last June (see Maurizio d’Orlando, “Rising food prices push up inflation significantly,” in AsiaNews, 17 February 2011, and “World food price uncertainty presents social risks,” in AsiaNews, 4 February 2011). Russia, which is Kyrgyzstan’s traditional supplier, has stopped exports because of last summer’s drought and fires.

The United Nations Food and Agriculture Organisation has identified Kyrgyzstan as one of the countries most burdened by price hikes.

The government is in great difficulty. For instance, on 21 February, Deputy Prime Minister Ibragim Dzhunusov announced in a press conference that each low-income family would get a bag of first grade flour.

As an emergency measure, on 17 February, the government sent a bill to parliament asking legislators to remove import duties on essentials such as meat, oil, flour, sugar and rice, but MPs have not yet debated the measure. A week later, the price of bread shot up 10 per cent in a single day.

Yet, price controls are necessary, argues the head of the State Antimonopoly Agency, Baburbek Jeenbekov, in order to battle collusion between importers and wholesalers. The agency told EurasiaNet that controls are needed for essential foodstuffs, as well as on cement, coal, some medicines and petroleum products.

One example illustrates best the situation. Flour made in Kyrgyzstan with Kazakh wheat costs US$ 449 per tonne, whilst in Kazakhstan the same flour will go for US$ 395-440 per tonne.

Not everyone agrees. Some fear that price controls would push foreign suppliers to sell in other markets, thus creating a black market and even higher prices, which is what happened in Tajikistan when the government there tried to implement price controls on bread.

In any event, the lack of flour and bread is an even scarier prospect for the government than higher prices.

Economist Aiylchy Sarybaev of the Kyrgyz National University in Bishkek is harsh with the government for its lack of regulatory supervision. Much of the country’s economy operates in the shadows, he said. The authorities do not even know how many companies and firms supply flour, oil, sugar, or how many companies act as intermediaries.

The system is so unfair and corrupt that Akbar Atakeev, chairman of the Kyrgyz Bakers' Union, on 22 February called on the State Anti-Monopoly Agency to help bakers distribute bread directly to consumers.

“We work hard,” he said, “but we are now at a loss without any help from government,” he added. Instead, middlemen are getting rich with high prices.

In Osh, the epicentre of ethnic violence last summer, Mayor Melisbek Myrzakmatov warned on Wednesday of increasing “public discontent” due to high prices.

“The economic situation is very hard; social tensions are very high. The government must take urgent measures to reduce tensions in society,” said Temir Sariyev, the interim government’s former finance minister, “even if that means distributing free bread free to some poor families.”

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See also
Inflation in China: perhaps 6%, twice official figures
Worst drought in a century wipes out harvests in southwestern China
Kyrgyzstan to compensate victims of June 2010 ethnic clashes
Chinese inflation remains high, economic growth slows
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