Rising Inflation May Spark Unrest

Discontent with Kyrgyzstan’s high inflation may erupt in public unrest, say NBCentralAsia observers.



While Kyrgyz National Bank forecasts say inflation may rise beyond six per cent in the last quarter of this year, NBCentralAsia sources say that the actual rate of inflation has already reached 20 per cent.



Analysts warn that the public may rise up against the government if the price of essential items continues to spiral upwards.



Economic scientist Aiylchy Sarybaev believes that the current air of discontent could escalate into civil unrest unless urgent action is taken to tackle inflation.



Last year, in an effort to strengthen Kyrgyzstan’s national currency, the amount of cash in circulation was raised by 40 per cent. Inflation began to grow further as producers lifted their prices to keep a competitive edge.



Rather than directing adequate funds into domestic production industries to stabilise the economy, Sarybaev says that the government takes an erratic approach to state spending and releases too much cash into circulation for ad-hoc purposes.



“One of the reasons for inflation is the growth of unforeseen and unplanned expenses,” he said.



NBCentralAsia economists suggest that the government take money that is not related to domestic production out of circulation.



Director of the Bishkek Centre for Economic Analysis Sapar Orozbakov explains that the government’s anti-inflation policy fails to include the large amount of remittances from migrant workers.



Migrant workers have sent 800 million US dollars back to their families since the beginning of this year, but hardly any of it is channeled into production.



“Only sustainable economic growth [through greater domestic production] can influence the level of inflation,” he said.



High inflation in Kyrgyzstan’s main trading partners, Russia and Kazakstan, may also play a large part in the ongoing economic slide, according to economic scientist Djumakadyr Akeneev. The rate of inflation in both countries is currently ten per cent on average.



Akneev fears that the only way that the government can avoid a public outcry is to increase social spending.



“It is hard to find another way to make the process of inflation less painful for people,” he said.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)