IMF Predicts High Inflation for Uzbekistan

IMF Predicts High Inflation for Uzbekistan

The latest forecast from the International Monetary Fund sees inflation continuing to run at over ten per cent a year in Uzbekistan.

The IMF’s Regional Economic Outlook for the Middle East and Central Asia, released on November 11, estimated that year-on-year inflation was 12.9 per cent in 2012 and would be 10.7 per cent in 2013. This is the highest figure for any of the states in Central Asia and the Caucasus.

The Uzbek government disagrees. The latest quarterly report from the economy ministry notes “low inflation rates which strengthened macroeconomic stability". The report does not cite precise inflation figures, but says they remain “within forecast indicators", in other words seven per cent or less.

Economists in Uzbekistan say this vague phraseology suggests officials are reluctant to give details about the true situation.

An analyst at the Centre for Economic Research, speaking on condition of anonymity, said official statistics greatly underreported the real inflation level, using a less than transparent set of calculations.

"According to estimates by our analysts, the real rate of inflation in 2011 was over 20 per cent. However, the president [Islam Karimov] gave a figure of seven per cent,” he said. “Figures from the European Bank for Reconstruction and Development …put it at 13 per cent.”

The analyst said that both IMF and EBRD figures were on the conservative side as they too were informed by government data, taken together with independent estimates and then averaged out.

Dilmurad Kholmatov, a economist in Tashkent, said that if inflation was running at over 12 per cent as the IMF suggested, it was a reflection of failing monetary policies and a high volume of money in circulation.

"In a market economy, this volume of money should work… to stimulate domestic demand. However, the main inflationary cause in Uzbekistan is not monetary, but structural,” he said. “Inflation isn’t controlled by the market, but by government – that’s the essence of how the Uzbek economy works.”

A doctor in Tashkent said the low inflation figures cited by the government could not be true. Her family was living on the brink of poverty as food prices outstripped public-sector wage rises.

"The prices of bread, meat, dairy products, and utility bills have all gone up, undermining our family budget of 430,000 soms a month [about 170 US dollars] for a family of five," she said. "We are close to hunger, like many other families in Uzbekistan."

Kholmatov says inflation has two faces in Uzbekistan – one the changes in the market prices of consumer goods and food, and the other the rise of government-controlled prices for utilities, public transport and the like.

Another factor is that domestically-produced items are far too expensive because production methods are antiquated.

Kholmatov says that in the absence of a free market, the government tries to maintain balance through its monetary policy, but this amounts to printing money and pumping it into the economy, a classic cause of inflation.

Tashkent-based economic analyst Bahrom Abdullaev warns that the country is also vulnerable to external factors. Just at a time when it needs to earn foreign currency and import technology to develop its manufacturing base, it could run short of funds as the raw materials it mainly exports face uncertain levels of demand on the international market.

The IMF is forecasting slowed growth for oil and gas exporters in the region, including Uzbekistan.

"The Uzbek economy’s excessive reliance on exports of hydrocarbons and other natural resources does not make for stability. It only feeds inflation," Abdullaev said.

This article was produced as part of News Briefing Central Asia output, funded by the National Endowment for Democracy.

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