KZBlog

For the past two weeks, there has been quite a bit of coverage on TV and in the print media about the increases in prices of bread in Central Asia. This week, in Kazakhstan the issue came to a head and was brought to the government’s attention. Some report that in Shimkent a leposhka (flat Uzbek bread) which used to cost 35 tenge or about 25 cents can cost up to 100 tenge or 80 cents. Already the Communist Party, Ak Zhol, Auyl and Rukhaniyat (all opposition parties), as well as the Social Democratic Party have released statements calling on the government to intervene. The leader of the Trade Union Federation also weighed in saying that in general, increases in food and utility prices have outstripped inflation, and that further the government underreports the rate of inflation.

I know the Western reader is wondering how the price of bread could possibly be a serious problem. The Western reader has never been to a cafeteria here where people pile 4 or 5 slices of bread onto their tray. Where construction workers buy shopping carts full of bread loaves to lunch on. Where most snack food consists of some variation on meat-filled pastries. Let us not forget that beshbarmak, the national dish served at almost every celebration or formal dinner, consists of wheat-noodles. In short, bread is a staple food in Kazakhstan, eaten with every meal and eaten by some in substitute of a meal. It is also the sort of thing that people find hard to accept as being expensive. Therefore sharp rises in prices impacts people strongly and also will be hard to explain away. It is precisely the sort of thing that could lead to serious protests against the government, overturning the official claim that the economy is strong and people live comfortably.

The Prime Minister has spoken on the issue, condeming those who would politicize it. However he admits that the increase in bread prices over the past two weeks has reached 30% (while inflation is quoted at 8.2%). Finally he proposed that the increase was due to abuse of monopoly and that the State would consider nationalizing bread companies:

[Prime Minister Masimov] further warned that although the government is “market-oriented” and recognizes “that bread prices should be determined by the market,” this was “an unreasonable rise in the prices” driven by “somebody in the production chain…abusing their monopolistic market position.” Masimov then added that he
does not exclude introducing a state monopoly over bread production “if we do not see specific measures and cooperation over the next week.” The country’s largest trade-union association recently warned that it will demand the government’s resignation if it fails to alleviate the effects of the recent sharp rise in the prices of basic foods and utilities

At the same time, the head of the Agency for Regulation of Natural Monopolies has announced price controls of about 39 tenge or 32 cents will be imposed.

Many causes have been cited. Of course, there are those who say the whole thing was engineered by the government in order to make an excuse for taking over the bread industry. Others say the opposition engineered it to disgrace the President. Others say that the company that produces the majority of bread in Kazakhstan has some financial issues and had to raise prices. The fact that the crisis has affected the whole Central Asia region and all wheat products would seem to weigh against these theories. In fact, even Russia is not immune facing a similair crisis in July. And Italy suffered a pasta strike earlier this year due to increases in prices. Most experts cite a worldwide shortage of wheat due to droughts in Australia and other wheat producing countries.

What still gives people pause is that Kazakhstan is a major wheat producer and exporter for this region, which should give the country some immunity from world shocks in prices elsewhere. Perhaps nationalization will allow the government to more efficently distribute what should be abundant assets to the people. Or perhaps not, depending on how you feel about government management.

One of the most interesting answers to why this crisis is occuring however came from the Atamken business union who spoke before Parliament yesterday. They cited poverty as the problem, not rising prices, presumably meaning that ideally people’s income should have increased enough to be able to absorb the rising prices. A more interesting challenge to the government than trying to hold down prices of leposhka.