What are the main reasons for the rise in food prices in Tajikistan?
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Throughout 2020, food prices in Tajikistan grew rapidly, complicating the socio-economic situation of the country.
In this article, we will try to understand how the rise in prices affect the population of Tajikistan, consider the main reasons for the rise in food prices, analyze solutions and figure out what to expect from 2021.
The negative consequences of false rumors
Last year, Tajikistan was in the list[1] of the 20 countries with the highest food prices relative to average income (along with Haiti and 18 African countries). According to the United Nations (UN), a Tajik citizen needs to spend about 13% of his daily earnings on one plate of simple food, which, for example, is 12.4% more than in New York.
In a country where most of the population lives below the poverty line, the unemployment rate is high, and people receive their main income from seasonal work, even a small jump in prices is perceived very painfully. Moreover, the closure of borders, limiting the departure of labor migrants to work, and the decline in remittances caused by the coronavirus pandemic, negatively affected the welfare of the population.
The first jumps in food prices in Tajik markets were observed in early spring 2020. Despite the fact that the presence of coronavirus in the country was not officially recognized until the end of April last year, due to the closure of borders, the introduction of restrictive measures in neighboring countries and various publications questioning the statements of the authorities, people began to massively stock up on food. Due to the increase in demand, suppliers have raised the prices of goods. According to the data[2] of the World Food Program (WFP), compared with February 2020, in April 2020 the price of flour increased by 11%, vegetable oil by 5.6%, cottonseed oil by 6.7%, peas by 9%, and potatoes by 66.7%.
The Antimonopoly Service of Tajikistan quickly reacted to the rise in food prices and stated that the rise in prices was due to “false rumors” about a shortage of food products, and the state reserve has a sufficient amount of stocks.[3] At the same time, the General Prosecutor’s Office of Tajikistan on its official website announced that in relation to persons sowing panic, “measures will be taken, provided for by the laws of Tajikistan” and urged the population “not to succumb to unfounded rumors”.[4]
Although the coronavirus panic in Tajikistan has passed a long time ago, food prices continue to rise. In addition to the coronavirus pandemic, experts attribute the rise in food prices to a variety of reasons, including a poor harvest in 2020, a depreciation of the national currency, a decrease in remittances and food imports.
Tajik farmers or the US dollar: who is responsible for the rise in prices?
Tajikistan is a mountainous country, where only 7% of the territory is suitable for agriculture, and out of 720 thousand hectares of irrigated arable land, only 515 thousand hectares are used.[5] Despite the fact that Tajik farmers collect up to two or three harvests a year (and in 2020 the volume of food production increased by 11.6%[6]), arable land and industrial enterprises are not enough to provide the entire country with domestically produced products.
Consequently, most of the food products Tajikistan has to import. The main food suppliers to Tajikistan include Kazakhstan (wheat, flour, vegetable oil), Russia (sugar, meat products), Pakistan (sugar, potatoes), Uzbekistan (tomatoes, cucumbers, bell peppers, potatoes), and China (apple, pear, ginger, tangerines, walnuts[7]).
Since Tajikistan is an import-dependent country, the availability and cost of food products largely depends on the exporting countries. During the pandemic, due to the closure of borders and the introduction of restrictive measures, some products were produced less, which affected their price, while others did not reach the Tajik markets at all. For example, Tajikistan buys sugar from Russia and Pakistan. However, in the last months of 2020, due to the slowdown in the operation of cane sugar mills, Pakistani sugar was not supplied to the country. The situation with Russian sugar, accounting for about 83.9% of imports[8] also leaves a lot to be desired. The closure of six Russian sugar factories and a decrease in sugar beet crops by 25% reduced the production of this product, which could not but affect the amount and cost of sugar in Tajikistan.[9] In turn, prices for flour and vegetable oil increased due to a decrease in the supply of these products from Kazakhstan, and for potatoes due to insufficient imports in 2020.
Moreover, Tajikistan’s dependence on imports means that prices in the country’s markets directly depend on the dollar exchange rate and the availability of foreign currency. In 2020, the TJS against the USD rose from 9.69 TJS per USD in January to 11.3 TJS per USD in December.[10] Therefore, products purchased at the old USD rate and stockpiled in warehouses were sold at a lower price than those purchased at a higher rate. In addition to growing inflation, the purchase of imported products has become more challenging due to the constant shortage of the US dollar, which, in turn, influenced the rise in prices for these goods. Since mainly foreign currency enters Tajikistan due to remittances of migrants, the decrease in these remittances also reduced the amount of currency in the country’s banks. Entrepreneurs note that they have to stand in queues for a long time to exchange currency and, if they are lucky enough, they will be able to get up to 200 USD per person.[11] The lack of foreign currency does not allow entrepreneurs to import the required amount of products, and the high demand for limited goods automatically increases their price.
One’s own farmer: how do government agencies support the population?
Noticing the spring rise in food prices, in April 2020, the authorities urged farmers to try to produce up to three harvests, especially more vegetables and grains. In his speeches, President of Tajikistan Emomali Rahmon has repeatedly called on the population to efficiently use private and household plots, focusing on the need to stock up on basic food staples.
Moreover, to ensure food security of the country, Dushanbe banned the export of agricultural commodities such as corn, potatoes, meat, eggs and legumes.[12] Also, on December 15, at a working meeting with the participation of government members and heads of cities and regions, Rahmon ordered to increase the acreage of potatoes and grain crops and increase the volume of domestic agricultural production.[13]
To support the population during the crisis, in July 2020, the country’s authorities launched a social support program, under which low-income families received 400 TJS (35 USD at the exchange rate for March 2021) per year, as well as a one-time aid in the amount of 500 TJS (44 USD at the exchange rate for March 2021) was given to at-risk population groups.[14] In addition, the salaries and pensions of public sector employees were increased by 15%, and those of the judiciary and security forces by 10%.[15] However, against the backdrop of a non-stop rise in prices, such wage increases, and cash payments are incapable of improving the quality of life of the population, but only maintain a certain stability.
Growth and ways of regulating prices in neighboring countries
Unfortunately, Tajikistan is not the only country that has experienced a rise in the cost of food products in connection with the coronavirus pandemic. The restrictive measures imposed by the pandemic have disrupted the global supply chain for goods to markets, and the decline in people’s incomes has reduced their purchasing power. Each Central Asian country, to one degree or another, faced either food shortages or too rapid price increases, and each of them reacted differently.
In Kyrgyzstan, the largest jump in food prices was observed from early June to late July 2020. Given that it was during this period in the country that the largest number of people infected with coronavirus was recorded (in July alone, the number of infected people had quadrupled[16]), restrictive measures were introduced on movement and people began to purchase basic foodstuffs, it can be assumed that exactly the increase in demand caused a sharp jump in prices.
However, despite the fact that at the moment there are no abnormal prices in the markets of Kyrgyzstan, basic products are still growing in price. In order to prevent a food crisis amid a pandemic and a decrease in real incomes of the population, in March 2020, special groups were created in the akimiats of Bishkek to respond to an unjustified rise in prices for food and medicine.[17] Moreover, in the period from March 13 to June 13, 2020, the Antimonopoly Service of Kyrgyzstan introduced a program of temporary state regulation of prices for certain types of socially significant goods. Within the framework of the program, maximum price levels for 11 food products were established, explanatory work was carried out among entrepreneurs and the population about the inadmissibility of unreasonable price increases, and 422 violations of overstating the established prices were revealed.[18]
In Kazakhstan, by November 2020, the average increase in prices for basic food products amounted to 2.3%, while in the city of Nur-Sultan the highest growth was observed – 15.6%.[19] To keep prices at a certain level in March, April and May 2020, Kazakhstan introduced a ban on the export of wheat, vegetable oil and other essential goods.[20] Also, from March to the end of October, VAT rates were reduced for 19 socially significant goods from 12% to 8%,[21] which kept the market price from jumping.
What surprises should Tajikistanis expect from 2021?
Tajikistan is the poorest country in the Commonwealth of Independent States (CIS), where, according to official statistics, 29.5% of the population lives below the poverty line[22] (with an income of less than 1.9 USD a day), and 30.1% of the population is constantly undernourished. The increase in the prices of essential food means that the number of undernourished Tajikistanis will grow and negate the long-term work to eliminate poverty in the country.
Given the uncertainty of the coronavirus pandemic, it is almost impossible to make clear predictions for 2021. However, it is possible to assume the development of two main scenarios at the local and international level, which in their own way will affect Tajikistan.
On the one hand, the growth of the pandemic and the tightening of restrictive measures will only worsen the socio-economic state of Tajikistan, as dependence on remittances and food imports makes the country vulnerable.
On the other hand, the recession of the coronavirus, the availability of a vaccine and the start of vaccinations could be the start of economic recovery in Tajikistan in 2021. An improvement in the epidemiological situation will lead to the lifting of restrictive measures, the opening of borders, the resumption of international trade and an increase in remittances to Tajikistan. Also, according to forecasts of the World Bank, the inflow of foreign currency and the decline in import prices will reduce inflation and pressure on the exchange rate.[23] Taken together, all these factors will positively affect not only the food security of the country, but also the general well-being of the population.
Conclusion
The rise in food prices in Tajikistan in 2020 is due to a number of different reasons, including “rumors” of food shortages, the introduction of restrictive measures due to the coronavirus pandemic, border closures, a decrease in food imports, and an increase in the USD exchange rate.
To support the population and provide essential goods at an affordable price, the Tajik authorities banned the export of some agricultural products, raised salaries by 10-15%, announced the start of a social support program and paid a one-time aid of 500 TJS to vulnerable families. However, against the background of the global pandemic and the decline in real incomes of the population, these measures were not effective enough.
For a long time, ensuring food security of the country remained one of the main goals of the Tajik government. 2020 proved that the strong dependence of Tajikistan from the import of food makes this issue quite complicated. Therefore, the Tajik government needs to reconsider their capabilities and priorities to distribute resources as efficiently as possible. Thus, an increase in the area of arable land in Tajikistan and the improvement of the country’s food industry should be the first steps towards stabilizing food security. In order to reduce the dependence of Tajikistan from imports, instead of “restructuring” the capital city and the organization of large-scale celebrations, the country needs to direct the existing monetary resources for the construction of industrial enterprises and the development of the agricultural sector. Also, state bodies need to begin providing support for labor migrants, because precisely due to their money transfers, banks receive foreign currency, which facilitates the purchase of imported goods, and their families acquire the necessary products.
The coronavirus pandemic tested the strength of Tajikistan’s food security and the very first months of the rush showed that the country was not prepared to handle crisis situations. However, the country also identified weak points in the economy and public management, which should be eliminated by joint efforts of the population and government agencies as soon as possible.
This article was prepared as part of the Giving Voice, Driving Change – from the Borderland to the Steppes Project implemented with the financial support of the Foreign Ministry of Norway. The opinions expressed in the article do not reflect the position of the editorial or donor.
[1] “The cost of a plate of food 2020.” United Nations World Food Program, https://cdn.wfp.org/2020/plate-of-food/
[2] “Early warning on local food prices.” World Food Program, https://snap.vam.wfp.org/index1.php?country=Tajikistan&short=T
[3] “Central Asia: how food prices are changing due to the coronavirus.” Cabar.asia, 27.03.2020, https://cabar.asia/ru/tsentralnaya-aziya-kak-menyayutsya-tseny-na-produkty-iz-za-koronavirusa
[4] Abdukahor, Akram. “The Prosecutor General’s Office of Tajikistan has threatened with punishment for the “panic” about the coronavirus.” Present Time, 05/07/2020, https://www.currenttime.tv/a/tajik-prokuratura/30599282.html
[5] Karaev, Sayfiddin. “Why is Tajikistan doomed to eternal import of flour?” ASIA-plus, 30.10.2018, https://www.asiaplustj.info/news/tajikistan/economic/20181030/pochemu-tadzhikistan-obrechyon-na-vechnii-import-muki
[6] “Tajikistan has increased the production and import of food products.” Sputnik, 13.07.2020, https://tj.sputniknews.ru/country/20200713/1031560667/Tajikistan-uvelichil-proizvodstvo-i-import-pischevykh-produktov.html
[7] “Coronavirus and Fruit Prices – Tajikistan has banned food imports from China, where Uzbekistan has not done the same yet.” EastFruit, 31.01.2020, https://east-fruit.com/novosti/koronovirus-i-tseny-fruktov-tadzhikistan-zapretil-import-prodovolstviya-iz-kitaya-uzbekistan-poka-net/
[8] “It will be tough now. 6 reasons why sugar prices have risen in Tajikistan.” Your.tj, https://your.tj/teper-budet-nesladko-6-prichin-pochemu-podorozhal-sahar-v-tadzhikistane/
[9] “It will be tough now. 6 reasons why sugar prices have risen in Tajikistan.” Your.tj, https://your.tj/teper-budet-nesladko-6-prichin-pochemu-podorozhal-sahar-v-tadzhikistane/
[10] “Tajikistani Somoni.” Trading economics, 18.01.2021, https://tradingeconomics.com/tajikistan/currency
[11] “Dollar deficit. What is to be done and what to do” Avesta, http://avesta.tj/2020/10/22/dollarovyj-defitsit-kak-byt-i-chto-delat/
[12] Najibullah, Farangis. “Meat and butter are “luxury”. The price spike in Tajikistan is driving people into poverty.” Azattyk Radio, 02.11.2020, https://rus.azattyq.org/a/meat-butter-considered-luxuries-as-tajiks-face-steep-price-hikes-/30922871.html
[13] “Emomali Rahmon discussed with members of the government” http://avesta.tj/2020/12/15/emomali-rahmon-obsudil-s-chlenami-pravitelstva-situatsiyu-s-energo-i-prodobespecheniem/
[14] “Tajikistan Economic Report Fall 2020.” World Bank, 23.12.2020, https://www.vsemirnyjbank.org/ru/country/tajikistan/publication/economic-update-fall-2020
[15] Najibullah, Farangis. “Meat and butter are luxury. The price spike in Tajikistan is driving people into poverty.” Azattyk Radio, 02.11.2020, https://rus.azattyq.org/a/meat-butter-considered-luxuries-as-tajiks-face-steep-price-hikes-/30922871.html
[16] “There is a sharp jump in COVID-19 in Kyrgyzstan. There are not enough hospitals, medicines are bought by relatives” BBC News, 17.07.2020, https://www.bbc.com/russian/features-53399416
[17] “High food prices. Response groups have been created in the akimiats of Bishkek ”24KG, 21.03.2020, https://24.kg/obschestvo/147433_vyisokie_tsenyi_naproduktyi_vakimiatah_bishkeka_sozdanyi_gruppyi_reagirovaniya/
[18] “Results of temporary state regulation of prices for socially significant food products” State Agency for Antimonopoly Regulation under the Government of the Kyrgyz Republic, http://antimonopolia.gov.kg/index.php?act=material&id=3702
[19] “Why are products becoming more expensive in Kazakhstan”, Forbes Kazakhstan, 10.12.2020, https://forbes.kz/stats/pochemu_dorojayut_produktyi_v_kazahstane_1/
[20] “Bulletin “Food Market Situation in Europe and Central Asia and COVID-19 Pandemic Response Policy” Food and Agriculture Organization of the United Nations,” 27.07.2020, http://www.fao.org/3/cb0450ru/CB0450RU.pdf
[21] Not only the pandemic is to blame for the rise in food prices, Radio Azattyq, 23.02.2021, https://rus.azattyq.org/a/31115867.html
[22] “Tajikistan: Beyond the Poverty Line.” Cabar.asia, 28.06.2019, https://cabar.asia/ru/tadzhikistan-za-porogom-bednosti
[23] “Tajikistan Economic Report Fall 2020.” World Bank, 23.12.2020, https://www.vsemirnyjbank.org/ru/country/tajikistan/publication/economic-update-fall-2020