Bread Price Discontent In Azerbaijan

Azerbaijanis are complaining about a sharp hike in the price of bread, blaming the government for the rising cost of this essential part of their diet. Government attempts to stem the price rises by introducing tax-breaks have so far failed to have much effect.



The price rise has been caused by a disappointing grain harvest and an increase in the price of wheat imported from Russia and Kazakhstan. Suppliers have raised the price of one tonne of wheat from 210 to 280 US dollars. The market responded promptly, and bread prices began to go up across the country.



Rather than actually raising prices, however, many bakers have simply made their loaves smaller.



In a small shop in Baku, this correspondent, with the help of a shop assistant named Ali, tried to measure the weight of a number of loaves of bread that, according to regulations, should have been 530 grams. However, the electronic scales showed that three loaves weighed 340, 330 and 337 grams.



"Don't trouble yourself too much, I’ve been weighing them for a long time now,” said Ali. “You’ll never find one weighing more than 350 grams.”



Ali said that the price of a loaf had effectively risen by half, with the smaller-sized loaves selling for the old price of 20 gapiks, or 23 US cents.



Baku housewife Marina Alizade is one of many who are not happy. "You have to take home two loaves, not one,” she said. “It’s so light that I feel like I’m buying a roll, not bread. One loaf is no longer sufficient for us.”



Bread is very important in Azerbaijan as it is throughout the rest of the Caucasus, with consumption levels far higher than in Europe.



The government liberalised the bread market several years ago, allowing bakeries to be privatised and to set their own prices, while trying to retain some levers of control over the price.



The Azerbaijani opposition – which accuses the authorities not sharing the proceeds from the country’s new oil wealth properly with the poorest members of society - has blamed them for allowing prices to rise so steeply.



"We intend to organise a rally on a massive scale to demand that the price hike be curbed,” said Isa Gambar, head of the opposition Musavat party, and the defeated candidate in the 2003 presidential elections.



Former foreign minister Panah Husein, now an opposition member of parliament, told IWPR, "The authorities don’t understand that you can’t try people's patience endlessly. Bread is the last thing you should raise the price of. This price hike will lead to a series of massive price rises, which will have very sad consequences and could lead to a social explosion. It is clear that this country's democratic forces won’t keep silent if that happens.”



So far the government has tried to limit the price rises by announcing that from July 27, imported grain would be exempt from value-added tax, currently 18 per cent.



Oktay Hagverdiyev, former head of the cabinet department in the government, said this move should have some effect.



"About half a million tonnes of grain are imported by Azerbaijan annually,” he said. “This step by the government is the right one, and it will play a major role in preventing a [further] price rise, as higher bread prices have an impact on other products, too."



Qubad Ibadoglu, head of the Centre for Economic Studies, agreed with this view, noting the step would mean a loss of government revenue from the VAT.



"A tonne of imported grain used to cost 180 dollars, and with 18 per cent VAT added on, that took it to 200-210 dollars. Now one tonne of grain costs 240-250 without VAT,” he said.



"On the other hand, unstable weather and the reduction of the area being sown have led to a reduced harvest. It is because of this that a 25 per cent rise in the price of wheat is expected this year. The government should also use other instruments to prevent this happening.”



Some economic experts are more sceptical. A number of economists interviewed by the Trend Capital news agency, for instance, said that the government would need to abolish VAT on a much greater range of domestic transactions if it was to avert steep price rises.



Other economists point out that Azerbaijan consumes 1.5 million tonnes of grain for bread a year, of which only one fifth – 300,000 tonnes – is imported, so the VAT exemption on grain imports will not have a large impact on the market.



Independent economic analyst Samir Mirzoyev said most grain importers avoided paying VAT anyway.



"How important can 18 per cent VAT be if prices have risen by 50 per cent?” he asked. “Everyone knows that the lion's share of imported grain, as well as other products, comes in illegally. People give bribes to avoid paying VAT and other taxes.



“How can [the government] expect bread prices to fall when grain and flour prices are also rising in the foreign countries where these products are purchased?”



Aidin Agaverdiev, a discontented shopper on the streets of Baku, said he was at a loss to understand the increase.



“At the start of this year, they raised electricity prices, and now bread has got more expensive,” he said. “We are selling a lot of oil abroad. So why is it getting harder and harder to live every day?”



Boyukaga Agayev is a freelance journalist in Baku.