Starting 2022, prices of some staple foods have jumped up to 15 per cent, which has caused a commotion among Kyrgyzstanis. This fact has been reinforced by a variety of factors, including global crisis, military conflict between Russia and Ukraine, rise in the American currency.
Taking into account that the republic is an import-dependent country, the question of food security in the country came up amid latest events as the key component of national security. However, it turned out that the country is not equipped with own production to the full and depends on other countries, which causes concern.
Kyrgyzstan determined 9 staple foods to assess the level of food security in due course: bread and cereal products, potato, fruits and berries, vegetables and gourds, sugar, vegetable oil, milk and dairy foods, meat and meal products, eggs.
However, despite the fact that the republic was an agrarian country and agricultural GDP in general volume was always leading – nearly 24 per cent, the country is still the import-dependent country on various 24 per cent, the country was the import-dependent on many articles of food. This is a list of staple foods: flour, cereal, sugar and vegetable oil.
From March 14 to June 30, Russia imposed a temporary ban on the export of crops and sugar in order to protect. And later on this restriction was removed. According to the information from the National Statistical Committee, this is where Kyrgyzstan is import-dependant on Russia. According to the National Statistical Committee, Kyrgyzstan is import-dependant on Russia in these positions.
Kyrgyzstan fails to provide itself with staple food
Among 9 staple foods, according to the Ministry of Agriculture, today Kyrgyzstan fails to provide itself with 5 items, including:
- Vegetable oil,
- Sugar,
- Meat and meat products,
- Bread,
- Eggs.
These kinds of agricultural produce are imported from Russia, Kazakhstan, Belarus, Uzbekistan, Ukraine, China and European countries. Meanwhile, the Ministry of Agriculture claims that these foods are not in short supply today.
According to the National Statistical Committee, imports of wheat in 2021 was 220.1 thousand tonnes for 51.4 million dollars, while Russia has nearly 60 per cent.
As to sugar, last year’s imports were 48.9 thousand tonnes for 25 million dollars.
According to Bakyt Turdubaev, head of Kyrgyz Sut Association, the reason why the country cannot provide itself with staple foods is the lack of processing industry.
“For example, we provided humanitarian aid during the pandemic to the people in the form of dairy products. We had an agreement with milk processors, namely large plants – our farmers supplied milk free of charge, and plants gave it back as finished goods. But then we hit a dead end because of border closures. For example, if city districts feel the shortage of milk, farmers discarded milk 20 kilometres away from the city – in Kant or Sokuluk because they did not have containers to store it. In turn, containers are supplied from Russia and Kazakhstan. Back then, the borders were closed and plants stood idle,” Turdubaev said.
According to him, the country cannot provide itself with food because it simply depends on packaging materials.
“No matter how much they say that our products are organic it isn’t worth a pin as long as we don’t fix the supply chain. For example, we produce meat, but the point is do we have technology that will enable us storing food for a long time? It’s the same about wheat or corn. We buy corn, soya and bean seeds. And what if we are isolated again, like during the pandemic? We won’t have our own seed base. This is very dangerous,” Turdubaev said.
Another agriculture expert Bakyt Mamytkanov said that farmers should be supported to ensure food independence.
“This year, the government is doing its best. This year, we have allocated more money for agriculture, and clusters of chicken meat, beef, sugar and milk are being organised. Of course, we’ll see the result later, but I think we can meet the challenges,” he said.
Mamytkanov noted a great potential of Kyrgyzstan in terms of both food security and food exports.
“Kyrgyzstan has 1 million 270 thousand hectares of farm lands. The Netherlands with 940 thousand hectares of land is on the second place in the world, and it is the second after the United States by the agricultural exports. So, we have a little more land than the Netherlands. If farmers have preferences, we can provide ourselves with food and even export it,” he said.
Demand is equal to supply
The global situation and rise in the American currency caused a temporary panic buying of some foods in grocery stores. As a result, the antimonopoly body has decided to sell no more than 1 kilogramme of sugar to one person. Nevertheless, the price of sugar and sunflower oil increased by 15 and 9 per cent, respectively, since the beginning of the year. The antimonopoly body did not introduce government regulation of prices because according to the rules intervention is allowed only in case of price rises by 20 per cent within a month. According to the explanations of the state body, the price rises were caused by the following:
- Sharp increase in foreign currency rates;
- Republic’s dependence on imports of particular socially significant goods is almost 75-80 per cent;
- Restriction of export goods supplies from supplying countries, namely finished goods and raw materials.
Meanwhile, according to the Antimonopoly body, today the following work is being performed to stabilise the market situation:
– daily monitoring of prices of socially significant goods;
– analytical work of price situation, study of other countries’ experiences;
– work as part of the Eurasian Economic Commission, strengthening interaction with antimonopoly bodies of other countries;
– organisation and holding working meetings with producers/suppliers and large-scale retail chains regarding price control and prohibition of unreasonable price rises;
– agreement with domestic sugar importers, Kaindy Kant and Koshoi, as well as with retail chains was signed. The latter promised to sell sugar at promo price of 67 som per kilogramme or 0.78 dollars not more than 1 kilogramme per person a day at discount cards;
– work with the use of “soft law” – issue of warnings.
According to TD Narodny LLC and Globus chain of hypermarkets, the company always applies restriction “per person” to purchases.
“We have practised such methods for over 3 years. Such measures are required as they help to avoid panic buying and repurchases. Currently, we don’t see any speculative demand for sugar, flour and sunflower oil,” according to the message.
No short supply of food in the country
According to the Ministry of Agriculture, currently there is no short supply of food in the market of Kyrgyzstan. Staple foods are produced under orders on ensuring food security as well as under agreements between the member states of the Eurasian Economic Union, and there is no need to worry about the short supply of socially significant goods.
The government, in turn, has taken the following measures to avoid food price rises:
1) The VAT rate was fixed at 0 per cent for imported grain crops and flour before August 1, 2022.
2) Preferential rates for imported white sugar and cane raw sugar will apply until August 31 to 70 thousand tonnes supplied through quota from third countries.
3) Agricultural imports shall be exempted from VAT.
4) Zero VAT shall apply to imports of particular goods.
Meanwhile, according to the Ministry of Agriculture, Kyrgyzstan exports only 3 staple foods of 9, and may veto their exports during crisis:
- potato,
- vegetables and gourds,
- milk and dairy products (in equivalent of milk).
These kinds of agricultural products are exported to the countries of the Eurasian Economic Union, Uzbekistan, China and European countries.
Food prices rise not only because of the dollar
According to Gulnara Uskenbaeva, head of the Association of Suppliers and Distributors, food price rise is based on a few factors: price rise at suppliers, dollar rate and transportation costs.
“Prices rise not only because of the dollar. This is only one of the factors that affects the food price hikes. In addition to this factor, there are other moments, for example, staple foods are exchange commodities, i.e. their prices form at raw exchange markets,” Uskenbaeva said.
“Flour, legumes, vegetable oil, sugar are the exchange commodity and you can see that stock prices have increased 1.5 times in currency,” the expert said. “How can we have reduced prices if they have increased in currency? We are now fully integrated into the global economy. We are facing the global food crisis now.”
Meanwhile, Gulnara Uskenbaeva leaves open the possible speculation in food prices.
“There are indecent people who want to make a good hand of other people’s misfortunes. However, prices have really increased significantly in the world: Italy, America, Germany and other countries. Why should not they increase here? When our state orders to “control prices”, how can we do it? Our suppliers are residents of other countries and they sell at their prices,” she said.
Bakyt Turdubaev, head of the Kyrgyz Sut Association, has another opinion. He specified an expressly speculative moment in food price rises.
“Because of the recent conflict between Ukraine and Russia food prices have jumped and our population have felt it. Illicit dealers made a good thing of it. It was a clear speculation. Goods are delivered from large plants of Russia to Kyrgyzstan within 7 to 15 days, but after the war was declared prices went up immediately. Marketing has nothing to do with it,” he said.
According to Turdubaev, the state does not have a working mechanism of actions in such force majeure situations.
Top 5 main food security issues in Kyrgyzstan
Food security and nutrition are ensured by available and affordable food, quality and safety of food for all groups of people.
Back in 2019, the government of the republic adopted the Food Security Programme, which identified 5 key issues in addition to main measures:
No. 1. Pace of agricultural growth in Kyrgyzstan is below the economic growth pace given the higher population growth rates.
No. 2. The country does not have food independence from sugar and pastry, vegetable oil, berries and fruit, bread and cereal products.
No. 3. The population of the republic eats not enough meat and meat products, fruits and berries, eggs, sugar.
No. 4. Small agricultural commodity production because of the shortage of large-scale agricultural associations. This fact reduces the staple foods productivity.
No. 5. Stable supplies of water resources should be ensured to develop agricultural industry.
Farmers’ support as a guarantee of food security
According to Gulnara Uskenbaeva, the Association of Suppliers has repeatedly raised the question of farmers’ support to ensure food security of the country. Since the country is dependent on imports of many staple foods, it’s the domestic producer who can help resolve this issue.
Bakyt Turdubaev agrees with her.
“Kyrgyzstan is 99 per cent dependent on foreign suppliers in terms of food security. No matter how much we produce, as long as we don’t have proper marketing and supply chains, we won’t be able to ensure our food security,” he said.
However, the country needs investments to develop agriproduct processing.
“When applying to a bank, it demands a collateral. But a plant costs a lot. The Kyrgyz-Russian fund must finance such progressive directions, but the fund behaves like a bank and allocates little money to start-ups. On the one hand, the fund thinks about the repayment, but on the other hand, nothing venture, nothing gain,” said expert Bakyt Mamytkanov.
The state has taken a range of measures to ensure food security, including:
- Concessional lending of farmers programme is approved annually. Thus, almost 5 billion som (59.8 million dollars) is provided for 2022. In total, the state allocates 474 million som (5.6 million dollars) to cover the expenses of participating banks. Loans will be granted at 6 per cent per annum.
- Zero VAT is provided for imported wheat.
- Tariff preferences are provided for imports of white sugar and raw sugar.
- From 2021, 6 leasing projects are being implemented. They allow leasing of agricultural equipment and irrigation machines. According to conditions, banks participating in the projects shall hand over agricultural and processing equipment as well as drop irrigation equipment to agricultural commodity producers on concessional terms for 10 years at the rate of 4.5 per cent.
- Prices of socially significant goods are monitored every week. In case of price rise by 20 per cent within a month, the government shall introduce government regulation.