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Central Asia: Coronavirus Affects Changes in Food Prices

Despite the officials’ statements, there are problems with availability of certain items and price gouging in each of the countries of the region.

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“Sorry, have the product prices increased?” I ask the saleswoman in a private store in Kostanay, a city in northwestern Kazakhstan.

“For sugar, it seems, the price has risen,” young lady seller replies with a bit of doubt, simultaneously asking her colleague: “Aliya, did the price go up for sugar?”

 “275 tenge (0.62 US dollars) is our price,” she replies.

“And what was it before?” I inquire.

“It was 195 (0.44 US dollars). The price has almost doubled, although there are places where they sell even for more,” the sales lady states.

“And how come?” I want to find out the reason.

“Well, the border was closed, and this virus. Before that, people used to come, buy everything, thus creating a demand for goods. For the products people take, prices increase,” Aliya notes.

“A buckwheat is in demand, right? I used to buy for more than 300 (about 0.7 US dollars), but now it is about 500 (about 1.1 US dollars),” I remark.

“It will rise in price, as well as garlic,” the seller replies.

Three days ago, the price of garlic in the very same store was 2000 tenge (4.5 US dollars), today it is 2700 tenge (6.08 US dollars).

“It is not us who raise prices, these are suppliers. There will still be an increase in price,” the sales lady predicts.

Photo: CABAR.asia
Photo: CABAR.asia

Food prices soar across Kazakhstan. The coronavirus pandemic fuss and the unprecedented demand for essential goods raised the cost of these goods. Moreover, both imported and local products are becoming more expensive.

In Aktobe, potato went up in price, in Kostanay – sugar, in Taraz – flour, and in Petropavlovsk – dairy products. At the same time, according to the government, they have everything under control.

Since March 15, a state of emergency has been introduced throughout Kazakhstan due to the spread of coronavirus. It is forbidden to hold public events; shopping and entertainment facilities were closed.

The country’s authorities asked the Kazakhstanis not to create a rush potentially causing an increase in food prices. However, a part of the population rushed to the shops, buying up food and toilet paper.

“People are standing in lines and actively buying goods, which is not a necessary thing to do. They themselves provoke a rise in prices through their actions. These are normal market conditions – increased demand creates additional supply and enables suppliers to make money on it,” noted Yerkebulan Orazalin, Head of the Almaty Entrepreneurship and Investment Department, in an interview to Tengrinews.

An excessive demand for food was observed in all cities of Kazakhstan. According to a resident of Kostanay Gulmira, people bought food products in bulk.

“I saw people leaving the store with several carts after shopping for groceries. I don’t understand, why was this done? Now everything has risen in price many-fold,” the Kazakh resident complains.

Inflation Keeps Growing

On March 16, Kazakh President Kassym-Jomart Tokayev signed the decree “On Further Measures to Stabilize the Economy”. According to it, the government has the right to set marginal tariffs and prices for food and other goods, as well as determine the procedure for import and export of products.

Kazakhstan: The Reverse Side of the Coronavirus

Starting March 22, during the state of emergency, a ban was introduced on the export of certain socially important goods: buckwheat, wheat and wheat-rye flour, sugar, potatoes, carrots, turnips, beets, onions, cabbage, sunflower seeds and sunflower oil.

But regardless of the measures taken by the government, the food product prices still increased.

According to the estimates of the Applied Economics Research Centre, the annual level of consumer inflation in Kazakhstan by the end of the year may increase from the current 6% up to the range of 8.1-9.0%. That is, 4-6% higher than the target set by the National Bank. At the same time, as the Managing Director of the Center Olzhas Tuleuov notes, the main reason for the increase in inflation will be associated with an increase in the price of imports against the backdrop of the 15% depreciation of the tenge against the US dollar.

Olzhas Tuleuov. Photo from personal Facebook page
Olzhas Tuleuov. Photo from personal Facebook page

According to him, in Kazakhstan, the share of imports in the consumption of food products is about 25%, and in the consumption of non-food goods – more than 60%.

“At the same time, the factors that will restrain a more active increase in consumer inflation will be the fall in industrial inflation due to lower energy costs, the expected slowdown in the growth of real incomes of the population and, in general, a decrease in consumer activity against the backdrop of coronavirus quarantine, as well as government regulation of prices on socially important goods, which is introduced as part of the state of emergency,” Tuleuov said.

According to him, in general, the increase in food prices was caused by the fuss Kazakhstanis created because of the coronavirus. In this regard, some food products are sold in limited quantities, as there is a risk that food supplies may not last throughout the period of emergency.

Kyrgyzstan: “There Is No Reason to Worry About Products”

In Kyrgyzstan, the rush for food products subsided only after the introduction of the state of emergency and the government’s urgent recommendation for people not to leave homes. After the news of the appearance of the first coronavirus infected in the country, people rushed to supermarkets and bazaars, buying full carts and bags.

Sadir Shermatov. Photo: CABAR.asia
Sadir Shermatov. Photo: CABAR.asia

A resident of Batken city Sadir Shermatov has been closely monitoring market prices in recent days. According to him, the cost of flour is growing the fastest, and it simply cannot be found in some stores.

“Today I visited market – food prices increased, there was no flour left, people are ready to buy it even at an inflated price. However, there is an acute deficit. Vegetable oil, pasta, potatoes, onions and other food products have also risen in price,” says Shermatov.

Photo: CABAR.asia
Photo: CABAR.asia

According to a seller Abdygany Pakyrov, the flour stocks were in sufficient quantities, but they were bought up almost in a couple of days. And now the price per kilogram of flour of the first grade is 35 soms (0.44 US dollars), and the highest grade is 40 soms (0.5 US dollars).

Abdygany Pakyrov. Photo: CABAR.asia
Abdygany Pakyrov. Photo: CABAR.asia

“There was a lot of flour, the container was full. But, as soon as information reached the people that the borders would be closed, they bought everything in a couple of days. Now I have no flour. They wanted to bring it from Osh, but unfortunately there is not enough there either,” says Pakyrov.

To prevent price gouging and a shortage of goods, the Kyrgyz government introduced state regulation of food prices. For each region of the country, the maximum price levels were established for essential commodities – flour, sugar, bread, eggs, milk, meat, rice, etc.

The representatives of local authorities and the State Agency of Anti-Monopoly Regulation conduct raids in the markets and monitor the cost of products. The financial police also organized working groups that check places with massive sales and high prices around the clock.

Reportedly, a number of pre-trial proceedings have already been initiated against entrepreneurs attempting price gouging by artificially overvaluing the goods.

Photo: CABAR.asia
Photo: CABAR.asia

“In Batken, market prices are stable. People do not panic, as observed in Osh and Bishkek. Food products are sold in almost all retail outlets,” says Emil Mazhitov, a spokesman for the State Agency of Anti-Monopoly Regulation in Batken Oblast.

According to the information on the coronavirus pandemic provided by the government’s representative office in the region, large retail outlets, food and livestock markets are closed throughout the region. People buy goods in small stores and there is an increase in food prices.

For example, if in January and February the price of one liter of vegetable oil was 80 soms (1 US dollar), it is now 100 soms (1.25 US dollars), a kilogram of meat a month ago was sold for 330 soms (4.14 US dollars), and now – for 350 soms (4.4 US dollars). Potatoes, carrots and onions were sold at price ranging from 25 to 35 soms (0.31-0.44 US dollars).

Government spokesman in Batken oblast Alisher Abdrakhmanov said government has been negotiating with private entrepreneurs; the flour, for which demand has risen sharply, is delivered to every village and regional center.

He notes that in addition to a panic purchase demand, the prices for some goods may also rise due to the growth of the dollar. However, merchants who raised food prices without any economic reason will face measures defined by law.

“There is no steady increase in food prices. Despite the fact that all roads are closed due to the coronavirus, food business operators can move around unhindered. So, we have no reason to worry about food yet,” says Abdrakhmanov.

At a government briefing on March 16, the Head of the Cabinet Mukhammedkalyi Abylgaziev also reported there was no shortage of goods in the country, and 400 million soms (about 5 million US dollars) were allocated from the budget for flour and other products. Commercial banks have allocated the same amount.

“800 million will be spent on the import of flour and wheat. In addition, the Material Reserves Fund has 600 thousand tons of flour and wheat. We will deliver all this to where there is not enough. They will be sold in the markets at the prices that we will set,” Abylgaziev said (quote from kloop.kg).

Situation in Tajikistan

Tajik businessmen forecast a probable increase in prices due to the devaluation of somoni and a decline in imports due to restrictions associated with the coronavirus. Buyers say the increase in prices is already visible.

One of the sellers at the capital’s “Sahovat” market Abdurahim Mavlonov, told CABAR.asia that because of a rush demand in early March, flour prices rose. But, according to him, the situation has now stabilized. For example, in markets, the price for a bag of first-grade flour from Kazakhstan ranges from 190 to 210 somoni (approximately 19-21 US dollars).

Citizens talk about rising prices for some products. Photo: CABAR.asia
Citizens talk about rising prices for some products. Photo: CABAR.asia

According to him, the price was about the same before the “panic” with coronavirus. Mavlonov says that as long as businessmen sell reserves, there will be no price increase.

“But they can grow when the reserves run out and businessmen start dealing goods at the new dollar exchange rate,” Mavlonov said.

However, Muslima Karimova, a resident of Dushanbe, said that recently, there has been an increase in prices for potatoes, buckwheat, sugar and flour.

“Even the price of garlic was raised to 5 somoni for one bunch. Insolence transcends all limits,” she said.

On March 4, 2020, after еру rumors of a possible outbreak of coronavirus in Tajikistan, residents of the capital rushed to buy food. This led to an increase in prices, primarily for flour.

Amid rumors of a coronavirus, residents of Dushanbe rushed to buy food. Photo: ozodi.org
Amid rumors of a coronavirus, residents of Dushanbe rushed to buy food. Photo: ozodi.org

On March 5, the Antimonopoly Service under the Government of Tajikistan made a statement that the price increase was caused by “false rumors” and “there are enough food supplies in the country’s markets.” On March 6, the Ministry of Internal Affairs reported on its official website that “the rumors of some groups about coronavirus are groundless, the Ministry is taking all possible measures to identify and arrest these persons.”

On March 18, the government developed a risk mitigation plan that provides for an increase in the volume of food products and the provision of markets. A number of government bodies stated there is no shortage of products in Tajikistan. According to Shodikhon Jamshed, Deputy Minister of Health and Social Protection of the Population of Tajikistan, Agency of State Material Reserves under the Government of Tajikistan has sufficient food reserves to support the population for two years.

Tajik economist Abdumannon Sheraliev believes that in current situation, a possible increase in prices in the markets will be associated with a fall in the exchange rates of somoni and ruble. He noted that the devaluation of ruble led to a reduction in the volume of money transfers from Russia to Tajikistan measured in US dollars.

Abdumannon Sheraliev. Photo from personal Facebook page
Abdumannon Sheraliev. Photo from personal Facebook page

“And there is no hope that the volume of currency transfers will recover soon. On the contrary, analyzes show that the situation will continue worsening for at least another two months,” said the economist, drawing attention to the decline in business activity in Russia.

Sheraliev believes that in order to reduce the intensity of price growth, the authorities should declare a universal tax holiday.

Another Tajik economist Sobir Vazirov agrees that inflation will be difficult to contain. At the same time, he opposed “unjustified” control of prices by the state.

“Tajikistan’s many years of experience also show that any unjustified control over the prices of goods and government interference in market activities can have a negative impact,” Vazirov said.

Uzbek Authorities Urge Not to Panic

The food market, like the entire business as a whole, has taken a wait and see attitude in connection with the COVID-19 virus epidemic. Following the appearance of the first coronavirus infected and the introduction of quarantine, Uzbek retailers experienced an unprecedented influx of customers. Antiseptics, sugar, groats and hygiene products vanished from the shelves. Medical masks cannot be found in pharmacies.

At bazaar stalls, prices for essential goods jumped up high. The State Tax Committee urged not to succumb to panic, assuring compatriots there was enough food in the country even under the most unfavorable scenarios of the development of the situation.

Photo: CABAR.asia
Photo: CABAR.asia

In just a week, the tax authorities received 1,635 complaints from citizens about an unjustified increase in retail prices in Uzbekistan. In general, people complained about rising prices for potato, flour, and vegetable oil.

To dispel the rumors of an impending food crisis, the Customs Committee revealed data on food reserves in commodity and raw material warehouses. Moreover, customs, despite quarantine, continues to accept deliveries of food products from abroad. There are no import restrictions.

As of today, the essential goods are available in all regions. Significant price increases are not observed. Price fluctuations are associated with seasonal factors.

The tax authorities and employees of the Department on Combating Economic Crimes under the General Prosecutor’s Office have created a special command unit to constantly monitor market prices.

The experts suggest that the inevitable increase in prices may not affect some essential goods: potato (the first crop will appear on the country’s markets in April), pasta, eggs, milk.

There has been an increase in meat prices in Tashkent. Photo: ozodlik.org
There has been an increase in meat prices in Tashkent. Photo: ozodlik.org

The situation with meat is much more complicated. Over the year, there has been an increase in prices for beef, lamb and poultry. Until recently, Kazakhstan was the largest meat supplier to Uzbekistan, but demand was so high that Kazakhstan’s consumers suffered. As a result, Nur-Sultan banned the export of cattle.

Today, the price for a kilogram of beef in Uzbekistan starts at 50 thousand soms (5.5 US dollars). Amid high demand, the price of chicken meat grew up to 30 thousand soms (3 US dollars). And the growth trend may continue if the government does not start subsidizing meat prices.

According to economist Khaetkhan Nasreddinov, a stable dollar primarily guarantees the stable prices. Over the entire period of quarantine, the dollar has practically not grown in relation to the national currency of Uzbekistan, unlike as it happened in neighboring Kazakhstan and Kyrgyzstan.

“It will not be possible to keep the som rate for a long time, and it will become volatile. Then, perhaps, prices will soar up,” Nasreddinov said.

This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project.

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