With the approach of spring, Kyrgyzstan’s traditional season for airing public grievances, food prices are skyrocketing. Many now fear that rapid inflation could spark fresh instability and street protests. While some officials want to impose price controls, economists warn that such action could foster shortages.
Though caused by factors beyond Bishkek’s control, such as a drought in Russia, a leading wheat supplier, and a bad harvest in Kyrgyzstan last year brought on by political and social instability, the rise in prices is presenting a formidable challenge for Kyrgyzstan’s shaky coalition government. The price of wheat has jumped 54 percent since last June, according to the World Bank. The United Nations Food and Agriculture Organization has identified Kyrgyzstan as one of the countries most burdened by the price hikes.
As an emergency measure, on February 17, Deputy Prime Minister Omurbek Babanov 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. The State Antimonopoly Agency wants to take efforts further, controlling prices on essential foodstuffs, as well as on cement, coal, some medicines and petroleum products.
Controls are necessary, argues the head of the State Antimonopoly Agency, Baburbek Jeenbekov, to battle collusion between importers and wholesalers. Price manipulation, Jeenbekov suggested, was one of the factors that are driving up consumer costs.
Under current legislation, “the only thing we can do is speak to wholesalers and suppliers and kindly ask them not to raise prices. Ideally, since prices for petroleum products have decreased, the prices for foodstuffs should decrease at least a little bit,” Jeenbekov told EurasiaNet.org, referring to the recent decrease in gasoline prices in Kyrgyzstan after the Kremlin lifted a tariff on petroleum products bound for Kyrgyzstan. Since the removal of tariff, prices have continued to rise.
Outside government, economists are aghast at the idea of fixing prices. Keeping prices artificially low will cause international suppliers to seek markets elsewhere, leading to a decrease in imports, shortages, and even hoarding, all of which will drive prices up further, they warn. Similar moves in neighboring Tajikistan, where Dushanbe police are patrolling markets to enforce bread prices, will not have the desired effect, economists there fear.
Azamat Akeleev, director of Promotank HQA, a market-research outfit in Bishkek, believes the Antimonopoly Agency is hampered by the opaque economy. The government must improve its understanding of markets in order to take action to break the influence of cartels, involving suppliers, distributors and retailers, Akeleev said. At the same time, he acknowledged that government intervention could easily cross a line, harming the public interest. “They [officials] should carry out their direct responsibilities using better analysis and market intelligence,” he said. “There is no legal basis for controlling grocery prices in the market. In my opinion, any regulation of prices will bring us shortages.”
Seventy percent of Kyrgyzstan’s economy operates in the shadows, estimates economist Aiylchy Sarybaev of the Kyrgyz National University in Bishkek. “Kyrgyzstan’s market is wild, without regulations. The government doesn’t have any instruments for this, doesn’t even have information about how many companies and firms are supplying flour, oil, sugar, how many companies are intermediaries,” he said. The system, “serves corruption.”
Meanwhile, bakers say they are operating at a loss because they are forced to sell through middlemen that, they assert, the government is afraid to touch. On February 22, Akbar Atakeev, chairman of the Kyrgyz Bakers' Union called on the State Antimonopoly Agency to help bakers set up shops to distribute the bread directly to consumers. “We work hard, but we are now at a loss without any help from government,” he said. “How long can we suffer?”
Jeenbekov from the Antimonopoly Agency says these tough times require radical measures to ensure the supply of food, most of which is procured abroad. In 2010, Kyrgyzstan produced half as much wheat as it did the previous year, he said, citing political instability as the root cause of the decline. He suggested Kyrgyz officials should work with their counterparts in Kazakhstan to fix prices on Kazakhstani imports bilaterally, rather than letting individual traders or the market decide.
While parliament tries to decide what to do, prices continue to soar. On February 24, local news agencies reported that the price of bread had shot up 10 percent in a single day. In Osh, the epicenter of ethnic violence last summer, Mayor Melisbek Myrzakmatov warned on March 2 of increasing “public discontent” due to break prices, Interfax reported.
“The economic situation is very hard; social tension is very strong. The government must take urgent measures to reduce tension in the society” -- Temir Sariyev, the interim government’s former finance minister, told EurasiaNet.org -- “even if it is necessary to distribute bread free of charge to some poor families.”
Cholpon Orozobekova is a Kyrgyz freelance journalist. She was formerly the editor-in-chief of De Facto, an independent newspaper in Bishkek.