Institute for War and Peace Reporting | Giving Voice, Driving Change

Azerbaijan Stunned by Price Hikes

Government says unpopular move puts Azerbaijan into step with the world economy.
By Zarema Velikhanova
January 8 - the first working day of the year - is already being referred to as “Black Monday” by some Azerbaijanis, who were horrified at a steep overnight rise in utility prices.

“I nearly went out of my mind, when I heard about the new electricity rates,” said pensioner Salima Balakishieva, 65. “I’m already been spending half of my pension on utilities, all I can do now is turn up my toes and die!”

The poor are not the only ones affected. Elton Mamedov, 43, who heads a branch of a local computer-selling firm, said he could no longer afford to buy a kilo of meat and fresh fruit every week. “And I am far from being the poorest man in Azerbaijan,” he said.

The prices were raised by the Tariff Council, a government body authorised to fix the cost of all state-owned products and services. The price of electricity has tripled to 0.06 manats (around seven US cents) per kilowatt. Water rates and transport rates have gone up and the council also ruled that the price of standard AI-95 petrol should rise from around 46 to 68 cents per litre, making it more expensive than the same quality fuel in America.

The changes reverberated through the entire consumer market, causing the prices of almost all other products to rise sharply. The price of bread in Azerbaijan’s two biggest cities, Baku and Ganje, rose by 50 per cent. The Trade Unions Confederation announced that the cost of the national basket of goods had risen by 64 per cent and that the escalation was set to continue.

Currently, the cost of the minimum basket of goods in Azerbaijan is estimated at 64 manats (73.5 dollars), while the minimum salary is worth 40 manats (46 dollars).

The government has defended the increase on the grounds that they will bring the economy into line with world standards. Oktai Hagverdiev, chief of the economic department of the government, told IWPR that in a market economy domestic prices should correspond to world levels.

“I think salary levels will soon be revised upwards,” he added by way of reassurance. “This is being planned and will definitely happen.”

Salim Muslimov, chairman of the state social security fund, told a press conference that the minimum wage would soon be increased by 25 per cent to 50 manats a month, and next year it will grow to 60 manats.

So far, there have been no organised protests against the price rises, with the two leading opposition groups, Azadlyg (Freedom) and the Musavat party, saying they are scheduling rallies only for the end of January.

In the meantime, around 400 drivers from the Star private taxi firm staged a walkout on January 11 in protest against their bosses’ decision to increase the volume of their work. The company management called in police units, which tried unsuccessfully to break up the protest. After that, the management backed down and the drivers ended the strike.

“We buy petrol at a high price, but we cannot claim a higher fare, as people have stopped using taxis,” said taxi-driver Ragim Mustafayev. “Sometimes, we agree to drive for a price lower than that we asked for last year, just to earn something. They should reduce the plan for us, instead of increasing it.”

In another protest, signatures were gathered under a letter posted on the website (meaning “let’s not keep silent” in Azeri), registered in Holland. By January 13, around 500 people had signed the letter, asking the president to annul the Tariff Council’s decision. However, on January 13, the creator of the site Bakhtiyar Hajiev was arrested, and all providers in the country blocked access to the site. Hajiev was released the following day, but the site is still inaccessible in Azerbaijan.

The prices were raised, when President Ilham Aliev was on holiday in Switzerland and many citizens hope that he will abolish the decision once he gets home. Rovshan Ahmedli, first deputy chairman of the unregistered Islamic Party of Azerbaijan, said, “We demand that the head of state expresses his view about this injustice. He must revoke this inhuman decision. If this does not happen, we will start protest actions within the bounds of law.”

Ali Kerimli, head of the Popular Front Party, described the increase of prices as an “offence to the people” and called on the government to resign.

Government officials have been reserved, saying that economic issues should not be politicised.

Economic Development Minister Heidar Babayev told the APA news agency that Azerbaijan had been late in raising the prices on goods that consume energy and that the move would earn over 200 million manats (around 230 million dollars) for the country’s 2007 state budget. “We are implementing reforms,” he said. “And reforms are something that no country accepts universally.”

Economic experts differ, with most seeing the price rises as a necessary step while others criticise the way it has been carried out.

Economist Talat Abdullayev argued, “If we want to be a part of the world and enjoy normal trade-and-economic relations with other countries, we cannot have prices that differ considerably from the world average,” he said. “We do want a salary like that in the USA or Europe, and to ensure it we should have appropriate prices. All of this is a single mechanism.”

But economist Vahid Ahmedov, who is also a deputy in parliament, was doubtful about this. “The proposed measures to increase the pension and minimum salary are not a way out of the situation, but a trigger for a rise in inflation,” he said.

With Azerbaijan due to hold presidential elections in 2008, experts agree that any further delays in price rises would have been politically damaging for the authorities. “The government may try to restrain inflation, but that will impoverish an even greater part of the population. All countries building a market economy have to go through this shock sooner or later,” said Abdullayev.

Meanwhile, the population is experiencing the pain of the new measures. Salima Balakishieva and other poor Azerbaijanis are waiting impatiently for President Aliev to come back home, hoping he will cancel his government’s decision.

Zarema Velikhanova is a freelance journalist and regular IWPR contributor in Baku.

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