There is an assumption that most of the income of Tajiks is spent on food. Is this really true, and what does this have to do with world crises? Freelancer Zoir Sayfurov and economist Muslihiddin Gaipnazarov analyzed the dynamics of family budget expenditures of Tajiks in recent years.
On what do the Tajik people spend their money – food, clothing, or accommodation?
There is an assumption that most of the income of the Tajik people goes on food. Is this true, and what does the world crises have to do with it?
What’s more in the basket?
In the late nineties and early noughties, food for one person in the family accounted for about 85% of all expenses, while spending on non-food items and services did not exceed approximately 10% and 5%, respectively. This sharp contrast in percentages can be attributed to the process of post-conflict recovery.
But over time, this indicator began to decline. However, after reaching 52% in 2018, it rose again in 2020, this time to nearly 62%. At the same time, the indicators of expenditures on non-food items and services were falling during this period.
At the same time, spending on non-food items and services decreases by 3% and 6%, respectively, reaching 27% (non-food items) and 11% (services). That is, even less was spent on services in 2020 than in 2006.
The graphic also shows that from 2008 to 2020, the shares of spending on goods and services have remained roughly the same. Could this be related to the income of the population?
Income of the populationThe more prosperous a country’s population lives, the less money it spends on food and the more it spends on other goods and services, such as movies and theaters, charity and education, technology and accommodation. Conversely, the poorer the population, the greater the share of spending on food in the total expenditure of citizens. For example, the share of Kazakhstan’s population spending on food in 2019 was 49%, while in Uzbekistan it was 47%. At the same time, in the city-state of Singapore, people spent only 8% of their total expenditures on food.But this is only its nominal term – the amount that was paid officially. It does not take into account inflation and other factors that affect the purchasing ability of the currency. 100 somoni in 2000 and 100 somoni in 2020 are different in their capacity, although nominally they are equal.
During this time, the prices of food and other goods and services have also risen. Therefore, indicators of nominal wages should be converted to real wages. This will show the purchasing power (PP) of the currency, and hence the possibilities of the Tajik people themselves.
Obviously, we see a different picture, with ups and downs. We can distinguish the years 2009, 2014, and 2020, after which there were declines in the value of the somoni against the dollar. If in 2008-09 there was a global financial crisis, in 2020-21 years – The COVID-19 pandemic broke out, in 2014-15 there was nothing obvious that could affect the Somoni and the dollar. One can only assume an indirect impact of the crisis around the Crimean peninsula. And the impact was serious, since so far the average wage cannot return to the level of 2014. This question should be studied separately.
Just after these three crises the value of 1 somoni in dollars fell, as well as the growth of wages. So after the year 2008 the growth rate of average wages fell to 26% in the year 2009, and in 2010 it even fell to almost 5%. After the year 2014, wages fell first by 4%, then in the year 2016 by 19%, and in the year 2021 by almost 7%.
Significant reductions in spending on food and increases in other goods and services were observed only until 2006, when the value of 1 somoni was above $0.3. After the year 2006, this figure fell within the $0.2 range, from the year 2014 – 0.1, and from the year 2020 – 0.08. Yes, in dollar terms the total amount of wages is rising, but the value of one somoni to the dollar has been falling steadily for 20 years, since the year 2002.
What do we eat?
Let us consider the average wage in terms of the purchasing power of the population – PPP, to the basic products of the consumer goods basket. The main foodstuffs in the consumer basket of the average citizen of the Republic of Tajikistan are bread and meat products, plant oil, vegetables and fruits.
Let’s analyze 4 types of the most consumed products, the data on the price of which is available. The highest PPP is observed for bread products and potatoes. Although the highest wages in dollars were in the year 2014, the highest PPP for these two products were in the years 2019 and 2016, respectively, because the prices were lower. For example, from the year 2002 to 2022, the price for potatoes was lowest in the year 2016 – then the average citizen could buy 530 kilograms a month for his entire, 19% fallen salary. And in 2022, he could buy 30% less – only 368 kg, although his salary was higher than in the year 2016.
The purchasing power of the population relative to average monthly wages in U.S. dollars for basic foodstuffs in 2002-2022.
The PPP indicators for vegetable oil and meat are more stable. The only thing that can be highlighted is the sharp increase in the ability to buy oil from the years 2011 to 2014. Then for 4 years – until 2014, there was a 16% to 25% increase in the average wage. When wages go down, there’s a decrease in the PPP to vegetable oil until the year 2016. Then there is a rise in the PPP again, but it is already slow. And after the pandemic, the figure fell to the level of 2014.
Also, the presented data show that the PPP to bread, vegetable oil and potatoes in its peak increased by 8 times, while for meat only 4. The explanation is given by prices. Yes, meat prices were higher initially, but the price of oil was also almost the same, but the difference in growth. The price of bread, potatoes, and oil increased 2-2.5 times from the years 2002 to 2022, while the price of meat increased 5 times.
Among these 4 products, the purchasing power of the population for bread and vegetable oil is sensitive to the rate of wage growth. Potatoes and meat are also affected, but to a much lesser extent. At the same time there is common for them – the growth/decline rate of wages from +13% to -6% does not give a visible increase in the purchasing power of the population in any of the products and they all remain susceptible to one or another external crisis.
On the background of fluctuations in real wages, all these years one thing remains unchanged – the share of spending on food in the family budget of our citizens continues to lead and accounts for more than half of all expenditures.
Previously analyzed data showed a clear relationship between the growth rate of wages and consumer spending of the population. The absolute leader in the food category is bread and bread products, in different years the indicators of which vary from 52% to 29%, the second place is occupied by meat and meat products, and after vegetables, vegetable oil and fruits, which are approximately at the same level.
The expenditure curve for meat and meat products behaves in the opposite way. From 2000-2007, there is a sharp increase in spending on meat products from 6% to 16%, respectively. Then there is a slight decline in 2008-2009, after which there is a gradual increase until 2020. However, it was possible to return to the level of consumption in 2007 only three years later – in 2012.
At the same time, the expenses for vegetable oil have remained approximately at the same level since 2002, without being subject to strong changes in the growth rate of wages, although the purchasing power of the population for this product is growing at the same rate as for bread.
Expenses on fruit, though insignificant in percentage ratio, show sensitivity to fluctuations of wage growth rates. So up to 2006 expenditures on fruit more or less showed themselves tangibly, there were visible jumps, drops. But after 2006 the expenditures remain approximately at the same level, relative to other main products – low. Presumably this is due to the fact that after 2006 the value of 1 somoni fell below $0.3. When wages fell by 4% in 2010, fruit expenditure continued to fall for about 1.5 years. When the growth rate of the average monthly wage stabilized again from 16% to 25% annually – fruit expenditures increased by 2 times. But in 2015, wages dropped again – fruit expenditures decreased as well.
The common factor is the connection with wages in dollar equivalent. As the average wage shows a steady annual increase of 16% to 25%, spending on bread and bread products decreases, while spending on vegetables, fruits, meat, and meat products increases. Vegetable oil also responds, but remains in the same range of 7% to 11%, even during periods of large increases in average wages.
Expenditures on meat and meat products grow all the time, despite periodic small declines and, relative to other products, lower purchasing power of the population.
In years of decreasing average wages, expenditures on bread and bread products grow, expenditures on meat and meat products slightly decrease, and people start to spend less on fruits and vegetables.
That is, if wages are lower the population eats more bread products and less everything else.
Spending on clothing is an important part of the family budget.
Although food is the main expenditure of the Tajik people, we also spend part of our budget on non-food items. Most of what we can’t eat, we buy clothes.
The interesting thing is that spending on household goods rose sharply in 2005 from 12% to 35% in 2008. Then by 2010 there was a drop in spending on this subcategory to 13% and after that until 2019, spending remained around 11-14%. But by 2020, spending on housewares has dropped to 3%. Referring back to wages, it was from 2005 to 2010 that had the highest rate of growth, 27-40%. It was also the period when the population growth rate was low at 1.82-2.03%. By the way, the same rate of population growth was in the 90s.
Spending on building materials has steadily increased from 7% to 20% from 2002 to 2013, and after that it drops to 14% by 2019.
Our spending on drugs until 2008 behaved smoothly, and afterwards there is a gradual increase. Perhaps this is due to the global financial crisis of 2008. The population often has a hard time with crises, and after crises the growth rate usually goes down, as it was in 1998-1999 (the lowest growth from 1961 to 2021 was 0.65% and 0.53%), and the number of illnesses goes up. And this is the era of advertising, including pharmaceuticals.
Fuel – since 2007 expenditures on it began to grow gradually. In 2020, spending on fuel increased sharply from 4% to 15% – probably due to a sharp rise in prices, because other non-food expenditures were in decline. Household goods and building materials suffered a sharp decline in spending. This is probably due to the fact that most of them are exported, and in conditions of strict border control, due to the pandemic, their number decreased.
On the background of the decline in spending on food in 2014-2017 – at that time, spending on clothing, medicines, construction materials and household goods increased, but after 2016 they decreased again.
Spending on services
The main part of expenditures on services is spent on transportation and housing and communal services. At the same time, if the expenditures on transport are falling, the expenditures on housing and communal services, in general, are growing.
Another service spending item that shows dynamic growth is communications. With the increasing access to communication services, the expenditures on this subcategory are also growing. Approximately since 2004 a gradual increase in the share of spending on communication services began, overtaking spending on education, households, services of cultural institutions and others. Notably, this coincided with the introduction of the 3G generation in Tajikistan, which provided the Tajik people with a revolutionary, by the standards of that time, opportunity to make video calls. This influenced a sharp increase of interest in mobile communications. A small increase can also be seen in the years of the pandemic – the percentage of communications grows in a closed environment, and with it, so do the costs.
According to statistics, spending on the services of cultural institutions is the lowest in this category of the sum of consumer spending throughout the period under consideration – from 1998 to 2020, rarely exceeding 1% of the total sum of spending on services.
Between 2014 and 2017 there was a sharp rise in spending on household services from 7% (2014) to 32% (2016), and then an equally rapid decline to 9% in 2017. At the same time from 2014 to 2016 there was a decline in spending on housing and communal, transportation, education, and communication services, which, unlike household services, rose in 2017. However, the growth was not as huge as in the case of household services. The growth was more or less evenly distributed.
That is, while spending on all major subcategories of food (except vegetable oil) declined in 2014-17, spending on clothing, medicine, construction materials, household goods, and household services rose until 2016. However, when spending on these non-food items and services fell after 2016, spending on housing and communal (here there was a sharp rise from 25% to 35%), transportation, education, and communication services rose almost evenly.
Thus, 2014 can also be attributed to the year, which had a tangible impact on the expenditures of the population.
Conclusions
Thus, the expenditures of the population on food, non-food products and services are closely related to the growth rate of wages, the economic situation in the world and exports. This is how the global economic crisis of 2008 had a big impact, running through all the statistics and changing them. After this crisis, the growth rate of wages and salaries has not yet been able to return to the pre-crisis period, and expenditures constituting basic foodstuffs began to fluctuate approximately in the same range up and down together with the growth/decline rate of average monthly wages in US dollar equivalent. That is, the proportion of the population’s expenditures on food, non-food products and services has remained approximately the same for 10 years. In addition, exactly after this year there was a sharp increase in spending on housing and communal services, although before that they were decreasing.
The year 2014 was also a crisis year, which also affected the proportion of average expenditures of the population and led to a decrease in average wages for two years. For instance, in 2016, wages decreased by almost 20%. Between 2014 and 2017, spending on bread and bread products increased again and, as usual, decreased on meat and vegetables.
The COVID-19 pandemic had a noticeable impact on expenditures on non-food products – there was a sharp decrease in expenses for construction and household products. It is possible that the supply of these products decreased due to the strict control of checkpoints or the suspension of construction work due to increased sanitary and epidemiological measures. The pandemic has also had a big impact on education spending – it has declined. In 2020, there is a sharp drop of 6.37% in expenditures. It is likely that these funds should have been spent on education abroad or with the school year ending prematurely.
That is, the economic situation in the country, as well as the income/expenses of the population remain subject to external economic and political conjuncture, which must be minimized.
As noted, the growth rate of wages has a great impact on the shares of the components of the consumer basket. At low rates, consumption of the more accessible goods, which gives a feeling of satiation – bread and bread products – begins to increase. There is simply no money left for the rest.
Thus, the population of Tajikistan still devotes most of its income to food, clothing, and the satisfaction of basic services, while its other needs, such as aesthetic, cultural, and cognitive, are still limited or ignored.