Central Asia's Poorest States in Crisis

The governments of Central Asia’s poorest countries, Tajikistan and Kyrgyzstan, are concerned that this spring could see a further round of price rises, compounding the difficulties created by inflation last year and a winter energy crisis caused by exceptionally cold weather.

Through last summer and autumn, both countries experienced sharp rises in the prices of basic foods and services, beginning with bread and flour and extending to other products.

While the local populations were struggling to absorb this hammer blow, the two states faced a new shock when their neighbours sharply raised the price of natural gas. (See Uzbek Gas Hike Leaves Neighbours In The Cold, RCA No. 526, 11-Jan-08.)

Tajikistan has been hit hardest by the simultaneous rise in food and energy costs. Now plunged into crisis, it has appealed to the international community for aid.

Neighbouring Kyrgyzstan is only slightly better off, and is also increasingly concerned about whether it will have enough food to feed its population this spring. (See Cold Snap Wreaks Havoc on Central Asian Power, RCA No. 529, 31-Jan-08.)

In contrast to Kazakstan, Turkmenistan and Uzbekistan, all of which are blessed with reserves of oil or gas, the two mountainous Central Asian states have only hydroelectric power as an energy resource. But neither has been able to exploit anything like the full capacity of its electricity industry, and they remain dependent on gas imports from Uzbekistan, with Tajikistan also reliant on electricity from the same country over the winter months.

It is in Tajikistan that the effects of sharp price rises and an unexpectedly cold winter have been felt most severely.

In early February, the government sought international aid as it struggled to cope with freezing temperatures.

Zlatan Milisic, the World Food Programme mission chief in Tajikistan, said the country was in the grip of a serious food crisis. His organisation estimates that at least half a million local people are now unable to afford even minimum food purchases.

According to the Tajik National Bank, prolonged power cuts have dealt a severe blow to the economy, costing it at least 250 million US dollars).

At a recent meeting with international organisations and financial institutions, President Imomali Rahmon’s economic adviser, Matlubkhon Davlatov, reported that almost all industrial plants and the service sector had stopped working owing to the lack of gas and electricity.

The electricity shortage was aggravated by Uzbekistan’s decision to suspend exports to its neighbour because it too was facing spiralling domestic demand for power over the winter. (See Sparks Fly as Tajiks Endure Power Cuts, RCA No. 528, 25-Jan-08.)

The severe weather appears to have destroyed much of Tajikistan’s potato harvest and caused significant damage to market gardens and vineyards. The Ministry of Agriculture estimated that the sector has suffered losses worth more than 21 million dollars this winter.

In its international appeal, the Dushanbe government said it urgently needed diesel generators, flour, fuel, maternity care products and even soap.

While international aid agencies including the United Nations children’s agency UNICEF and the World Health Organisations, have responded by sending warm blankets, petrol and food, experts say the aid may not be enough to solve the food shortage.

Nor is the crisis likely to ease in spring. On the contrary, there are worries that the country may soon find out it has lost even more of its spring crop of fruit and vegetables, which form one of the country’s few exports.

“We could have problems with food products this spring, especially with spring vegetables, which have died completely [in the frosts],” Safar Mahmadiev, head of economics at the agriculture ministry, told IWPR. “We may have to import everything.”

Experts believe the devastation of agriculture will mean another round of steep price rises in the coming months.

“Prices are likely to go up several times over,” predicted Georgy Koshlakov, head of the department of economics and management at the Russian-Tajik Slavic University.

“Our early vegetables are not only important items for domestic consumption but are also a key export,” he told IWPR. “But this year we’ve lost them.”

Koshlakov said the government needed to take urgent steps to procure food for the coming months and could not just rely on foreign aid.

“This humanitarian aid is charity and it’s not clear whether this alone can cancel out the damage done by the energy crisis, which has made the food problem worse,” he said.

Parviz Mullojanov, an independent political scientist, agreed that prices are bound to rise again in the coming months, although he believes the government could take steps to alleviate the problem.

“We are surviving thanks to the migrants who consistently support their families,” said the expert, referring to the hundreds of thousands of Tajiks who work seasonally in Russia and Kazakstan and send back remittances.

“But the standard of living will drop,” he added. “Humanitarian aid may cushion people but it won’t solve the basic problem.”

Mullojanov stressed that the severe winter had simply exposed underlying flaws in the economy which dated back years and were not confined to Tajikistan.

“Practically all the states in the region are now experiencing problems because of failed agricultural reforms,” he maintained. “But this has been worsened in Tajikistan by the large debts run up by cotton growers.”

At a time when energy prices were rising worldwide, the crisis in Tajikistan called for a more comprehensive reform.

“We need to see more serious steps in the area of economic reforms and a revival of agriculture in particular,” Mullojanov concluded.

While Kyrgyzstan has not suffered the same prolonged power cuts experienced by its southern neighbour, its population is also suffering from a round of price rises in food and energy and is bracing for a worsening situation in the spring.

The National Bank of Kyrgyzstan has already predicted further price rises. Its inflation forecast is partly informed by the sharp rise in the price of gas imported from Uzbekistan and an expected hike in the price of electricity, too.

Kyrgyzstan generates its own electricity from hydropower schemes, but the imminent privatisation of large parts of the power industry, which it is accepted is needed in order to bring in much-needed investment, will mean higher prices for consumers.

Readying the country for unpleasant shocks, Prime Minister Igor Chudinov in early February said the government was monitoring food prices and preparing a programme to limit the risk of a food crisis.

The contingency plan includes setting aside reserves of wheat and purchasing agricultural equipment and seeds for distribution to farmers. (See Kyrgyzstan Unveils Food Security Plan, RCA No. 526, 11-Jan-08.)

An official from the agriculture ministry told IWPR that the programme would take effect as soon as parliament and President Kurmanbek Bakiev had approved it.

Ministry spokeswoman Jyldyz Mamytova said the creation of the so-called “Agro-Food Corporation” would help to counterbalance expected shortages and ensure stable supplies.

Specifically, she said the project entailed the establishment of a grain reserve of about 150,000 tons, three times the size of the current reserve.

“In case of shortages or unexpected price rises, this will allow us to intervene in the market,” she maintained.

While the Kyrgyz government claims it has the situation in hand, some members of parliament remain sceptical.

Jusupjan Jeenbekov, head of parliament’s committee on land and agricultural issues, said it was not clear to what extent the government was really taking steps or merely talking about them.

Like many experts in Tajikistan, he said this winter’s crisis had merely exposed years of neglect in agriculture.

“Wheat farmers have far too many problems today, such as shortages of seeds, equipment and fuel, while the irrigation system is in a poor condition,” he said.

Temirbek Madaliev of the Centre for Economic Studies at Kyrgyzstan’s Academy of Sciences said last year’s soaring prices had exposed the seriousness the problem of ensuring stable food supplies was.

He said it was vital to ensure the government acted on its pledge to build up grain reserves, so that the panic-buying seen last year did not reoccur.

“Ideally, the state needs to maintain a reserve of between 10 and 15 per cent of the country’s total demand for food,” Madaliev said.

Last year, he recalled, “in the midst of the price rises, it transpired that all the national reserves were completely empty”.

Parvina Hamidova is an IWPR contributor in Bishkek.