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Anti-inflationary regulation: Government proposes measures to reduce prices for food, gasoline and housing

Tuesday, 07 September 2021, 11:24:22

Anti-inflationary Response Package was considered at the government session chaired by Prime Minister Askar Mamin. Minister of National Economy Aset Irgaliyev, Chair of the National Bank Erbolat Dossaev, Chair of the Agency for Protection and Development of Competition Serik Zhumangarin, First Vice Minister of Agriculture Aidarbek Saparov, Vice Minister of Trade and Integration Yerzhan Kazanbayev presented their reports.

According to the Minister of National Economy Aset Irgaliyev, the global pandemic has become an unprecedented macroeconomic shock, putting pressure on inflationary processes around the world.

Influenced by such trends as a gap in supply chains, structural changes in demand, expansionary monetary and fiscal programs to support the economy, etc. today, inflation is rising all over the world. As a result, international financial institutions predict an acceleration of inflation worldwide to 3.9% in 2021.

“In Kazakhstan in August 2021, the monthly growth of inflation amounted to 0.5%. Under the influence of seasonal factors and the effect of deferred demand, the contribution of rising prices for paid services and non-food products increased. In this regard, the rise in prices for paid services amounted to 0.8%, for non-food products — 0.6%, for food products — by 0.1%,” Irgaliyev said.

On an annualized basis, inflation in Kazakhstan for 8 months amounted to 8.7% and, according to the historically established structure, more than 50% of it falls on the rise in prices for food products.

In order to curb the rise in prices in the country, a draft package of anti-inflationary response measures for 2021 - 2024 has been developed. The project of the Package of Measures consists of 70 measures in 2 directions — operational and medium-term measures.

These measures provide for restraining price increases, as well as systemic measures aimed at maintaining inflation rates within the approved target band.

The first direction is to implement operational measures for 2021.

For expanding product offer, it is planned to implement 16 measures

Including, the organization of purchases of types of socially significant food products and the determination of the needs of producers, within the framework of forward contracts and a "turnaround scheme».

For analytical and organizational measures, 7 events are planned

This is a list of events that provides for screening, digitalization of trade processes, monitoring and analysis of underutilized and idle food processing facilities. In particular, institutional strengthening of control over the coordination of prices for socially significant food products is envisaged.

10 regulatory measures will be implemented

Including, if necessary, restrictions will be introduced on the export of raw materials and materials for which there is a shortage or an increase in prices in the domestic market. Also, the introduction of a ban on the export of petroleum products by road for a period of 6 months and the approval of complex tariffs for medical services.

9 antimonopoly measures are envisaged

Measures will be taken to monitor the validity of trade markups, identify signs of price collusion and restrict access to trading.

Within the framework of the second direction, 28 medium-term measures are planned until 2024. These measures include measures to ensure the utilization of the stabilization funds, the implementation of import substitution projects, as well as the transition from administrative price regulation and the implementation of a disinflationary monetary policy.

In order to effectively implement anti-inflationary response measures and monitor their implementation, it is proposed to create a permanent operational headquarters under the Ministry of Trade and Integration, which will include deputy chief executives of central and local executive bodies.

The Chair of the National Bank Erbolat Dossaev noted that in order to fulfill the instructions of the Head of State to return inflation to the target corridor of 4-6% in 2022, the National Bank supports the adoption of measures aimed, first of all, at stabilizing non-monetary factors within the framework of the Anti-inflationary Response Package.

“Following the results of 8 months of this year, the main contribution to the acceleration of inflation was made by the rise in food prices, which reached the level of 11.4%. To reduce it to 8% by the end of this year in accordance with the Package of Measures, the Government and akims will take prompt measures to eliminate seasonal shocks and imbalances in certain markets, not excluding effective temporary regulatory measures and antimonopoly impact,” Dossaev said.

To achieve the medium-term goals of stabilizing inflation set by the Head of State, the Government will implement initiatives to fully saturate the domestic market with strict adherence to the balance of production, export and import of goods, increase the productivity of the agro-industrial complex and develop an effective distribution system. This will reduce food inflation to 6% in 2022 and 5% in 2023-2024.

For non-food products, the main potential for restraining price increases is possessed by the fuel and lubricants market, which, in addition to the direct effect, has a significant indirect effect on other goods and services.

“In agreement with the Government of the Republic of Kazakhstan, we expect a decrease in non-food inflation to 5% in 2022 and 4% in 2023-2024,” he informed.

According to the head of the National Bank, it is especially important for regulated services to introduce a predictable and balanced tariff policy on a medium-term basis.

“We consider it expedient, starting from 2023, to begin the transition from administrative regulation of prices to targeted support of socially vulnerable segments of the population. This will help stabilize service inflation at 4% in 2022-2024. The effectiveness of the proposed measures will largely depend on the coherence and coordination of work in the regions,” Dossaev said.

In a number of regions, a consistently high rise in prices has been observed since the beginning of this year. So, in August of this year. in 5 regions inflation was above 9%. In this regard, the National Bank proposed to adopt special plans to stabilize inflation for these regions and to carry out targeted work with the regions.

In addition to the Package of Measures in the medium term, a sustainable reduction in inflation will also be facilitated by the effective implementation of the Agreement between the Government, the National Bank and the Agency for Regulation and Development of the Financial Market on the Coordination of Macroeconomic Policy Measures for 2021-2023.

According to Dossaev, the main areas of joint work are further reduction of the non-oil budget deficit, an increase in the volume of non-resource exports of goods and services, as well as a decrease in the share of imports in the consumption of food products.

As part of its powers to reduce excess liquidity in accordance with the Monetary Policy Strategy until 2030, the National Bank intends to step-by-step completely withdraw from state programs to support the economy until 2025.

“The National Bank will continue to pursue a disinflationary monetary policy to ensure price stability. In case of effective implementation of the measures proposed by the Government to reduce non-monetary factors of inflation, the National Bank confirms its readiness to make decisions on easing monetary conditions, taking into account the achievement of price stability,” Dossaev emphasized.

Since the beginning of the year, prices for socially significant food products have grown by 9.9% — Kazanbayev

“At the same time, due to the saturation of the domestic market with domestic products, over the past two weeks, prices have decreased by 0.5%. In particular, since the moment of the peak growth, prices for potatoes have decreased by 34% or 71 tenge, carrots — by 41% or 122 tenge,” said Vice Minister of Trade and Integration Yerzhan Kazanbayev.

Also, according to him, over the week, cabbage and onions fell by 0.4% and 0.1%, respectively.

The largest increase in prices was recorded in the Turkistan region by 11.6%, Kyzylorda — by 11.3% and Kostanay region by 11.3%. The smallest price growth was established in Almaty by 9.5%, Almaty region — by 9.6% and Karaganda region — by 9.7%.

In order to fulfill the instructions of the Head of State given at the extended meeting of the Government of the Republic of Kazakhstan dated July 10, 2021, the Complex of Anti-Inflationary Response Measures includes operational and systemic measures to curb the rise in prices for socially significant goods.

In addition, in order to implement the Address of the President of the Republic of Kazakhstan dated Sep. 1, 2021, it is proposed to determine the Ministry of Trade and Integration as the main responsible state body, which will carry out unified coordination in matters of curbing the rise in prices for socially significant goods. The ministry also developed a draft regulation on interaction between sectoral state bodies and organizations of state bodies on the stabilization of food prices, which requires approval at the next meeting of the Government of the Republic of Kazakhstan.

In order to conduct a better and more efficient system of monitoring and forecasting flows and prices for food products, the following institutional strengthening has been proposed:

  • control over the observance of price caps and trade markups;
  • collection and processing of data using machine technology;
  • formation of forecasts for goods;
  • recommendations for the efficient distribution of the stabilization funds and the "circulating scheme".

“By now, an analytical trading platform has already been created, which is ready to be launched in a pilot mode. The platform will allow online monitoring of food prices and the formation of forecast prices. And with the help of integration with the existing databases of interested government agencies, the platform will allow building mathematical models that allow you to see the reasons for the rise in prices and ways to stabilize them,” Kazanbayev said.

At the same time, to carry out a comprehensive analysis of the state of the trade industry, to identify trends in the pricing of goods along the entire chain to the final consumer. This work will be carried out within the Digital Office of the Government.

Situation centers of akimats will also be connected to the platform, which will allow online monitoring of the price situation in each region.

The key task of state policy in the field of trade is to establish a trade and distribution chain from producer to consumer by building an integrated trade and logistics infrastructure.

As part of the first stage of the creation of the National Distribution System, a PPP agreement was signed, which was registered with the Treasury Committee. Now the design and estimate documentation is being drawn up. The modernization and handover of 2 wholesale distribution centers is planned until January 2022. The construction of the rest of the centers is planned to begin in January and be completed by August 2022.

At the second stage, it is planned to build 17 wholesale distribution centers. Together with a private partner, a marketing analysis was carried out, 70% of land plots were identified and procedures for their allocation began. The conclusion of a PPP agreement for the second stage is planned for April 2022, and commissioning — in August 2024.

To stabilize food prices, the work of stabilization funds will be revised — Saparov

According to First Vice-Minister of Agriculture Aidarbek Saparov, the draft Anti-inflationary Response Package for the Ministry of Agriculture of the Republic of Kazakhstan has 11 operational and 8 medium-term measures.

In particular, the adoption of measures to increase the acreage for priority crops for the production of socially significant food products, vegetable storage capacities.

For the development of the raw material base, a Roadmap for the development of feed production will be developed, which provides for the formation of a permanent fodder fund of grain on the basis of JS NC Food Contract Corporation, as well as the introduction of temporary quantitative restrictions or a ban on the export of coarse and grain fodder.

“In order to stabilize prices, first of all, it is necessary to revise the principle of operation of stabilization funds, so that on the basis of the forecast, buy exactly those types of goods for which the greatest increase in prices will be expected. During the off-season (from January to May), it is proposed to form in the stabilization funds a five-month supply of potatoes, carrots, cabbage and onions in the amount of 30% of the needs of the urban population and buckwheat, sunflower oil from the needs of the entire population,” Saparov noted.

According to estimated data, the volume of purchases of potatoes and vegetables in the republic will amount to 229 thousand tons, as well as buckwheat — 17.6 thousand tons and sunflower oil — 28.5 thousand tons.

To obtain finished products, the Food Contract Corporation will form additional volumes of sunflower and buckwheat in the amount of 10% of the planned stocks of stabilization funds, as well as about 4 thousand tons of sugar.

“At the same time, within the framework of the forward purchase, the Food Contract Corporation has already contracted 9,150 tons of sunflower and 691 tons of buckwheat. The rest of the buckwheat, sunflower, sugar will be purchased on the market by direct purchase,” said the first vice minister of agriculture.

AI-92 gasoline prices are stable — Zhumangarin

Chair of the Agency for the Protection and Development of Competition of the Republic of Kazakhstan Serik Zhumangarin reported on the work carried out to reduce and stabilize prices.

“On the grounds of anticompetitive concerted actions and abuse of a dominant or monopoly position, 60 notices of price reductions were issued. Of these, 50 were voluntarily fulfilled by reducing food prices from 5 to 10%. 8 investigations have been assigned,” he said.

Also, according to him, the weekly dynamics of growth in prices for socially significant food prices decreased from 0.6% to minus 0.2%.

As part of the execution of the order of the Head of State to investigate intermediary schemes along the entire pricing chain of food products, with an emphasis on wholesale markets, work is being carried out on 13 commodity items.

As part of the analysis of the retail market, a comprehensive check of the validity of trade markups was started. 25 facts of excess of 15% of trade markups for socially significant food prices were revealed, in connection with which materials were sent to local executive bodies for prosecution.

Response measures have already been taken against 10 retail chains based on indications of price collusion and abuse of dominance. Work in relation to retail chains continues.

The largest republican supermarket chain Magnum (LLP Magnum Cash&Carry) has undertaken to reduce the trade markup for socially important food products from 15 to 10%.

“Every month the Agency meets with representatives of associations and major food producers. At the last meeting, an agreement was reached on the absence of reasons for the rise in prices until the end of this year, with the exception of chicken eggs, the prices for which after the off-season will return to the level of the beginning of the year,” Zhumangarin reported.

As for the prices for gasoline, today the price situation on the market for the sale of AI-92 gasoline is marked by stability. The selling price of large chains does not exceed 175 tenge / liter.

14 notifications were issued to regional retail gasoline distributors and 3 large chains. All notifications have been fulfilled. In general, the decline in gasoline prices in the republic amounted to an average of 3%.

Currently, the selling price of diesel fuel from large chains does not exceed 200 tenge / l.

The Agency issued 19 notifications to regional retail sellers of diesel fuel and 4 large chains: Gazpromneft-Kazakhstan LLP, Petro retail LLP, Sinoil LLP and Helios LLP. All notifications have been fulfilled.

Meanwhile, it should be noted that from July 1, 2021, the excise tax on diesel fuel increased from 540 to 9,300 tenge / t, which affected the price on average to 8 tenge per liter.

Also, the Chair of the Agency for the Protection and Development of Competition reported on the situation in the housing construction market. So, at the moment, there is a decrease in the growth rate of prices for primary housing from 3% to 0.4%, as well as for secondary housing - from 5% to 1.1%.

As part of the execution of notifications, the group of companies RAMS-Kazakhstan has reduced prices for a number of residential complexes in Almaty by 15% or up to 90,000 tenge / sq. m, the company BAZIS-A has reduced prices for residential complexes in Almaty to 20,000 tenge / sq. m, BI Group reduced prices for primary housing in 51 residential complexes in Nur-Sultan by an average of 8%, in Almaty — by 11%, in Shymkent — by 3%, in Atyrau — by 4%. Other developers also complied with the notices and reduced prices by an average of 15-20%. The decrease in prices is on average 9%, the range of decrease is from 10,000 to 125,000 tenge / sq. m.

Seven acts of antimonopoly compliance were also signed.

Speaking about the situation on the building materials market, Serik Zhumangarin noted that the rise in prices for domestic building materials from the beginning of the year was 25%. At the same time, there is a tendency to change the rate of growth in prices for building materials.

The main increase in prices for building materials was due to the price situation in foreign markets. These changes affected the cost of fittings, cables, profiled sheets, glass, etc.

The rise in prices is based on objective factors, such as an increase in electricity tariffs by an average of 12%, fuels and lubricants by 15%, thermal coal by 10%, railroad transportation by 18%, which directly influenced the rise in prices for domestic construction materials. The share of these costs in the cost of building materials ranges from 15 to 30%.

In order to consider the validity of price increases and to establish signs of collusion, analyzes of the state of competition in the markets of building materials are carried out for 25 types of building materials — these are bricks, concrete reinforcement, cement, etc. 75 notifications were sent to eliminate signs of violations and the need to reduce prices.

42 companies complied with the notifications, including with a price reduction — 35 companies for reinforcement — 25%, cement — 10%, concrete — 10%, polyethylene pipes — 6%, cable from 5 to 14%, brick — 3%. 10 investigations are underway.

By means of antimonopoly control, it was possible to reduce the monthly trend of price growth in the republic from 4.2% in June to 1.7% in July 2021. 10 antimonopoly compliance agreements were concluded with manufacturers and suppliers of cement, brick, crushed stone, concrete and reinforced concrete products.

“In addition to the markets of socially significant food products, fuels and lubricants and building materials, these will be markets for services in the field of railway and public transport, education, cellular communications, Internet services, medicines, medical products, laboratory services, housing and communal services — intercoms, elevators, management companies, billing services. That is, in this way, the agency announces the start of a new set of verification measures for all socially significant commodity markets. Measures will also be taken to reduce prices for the services of payment organizations, especially when transferring funds for utilities, services of state monopolies, state and private operators,” Zhumangarin informed.

In connection with numerous complaints, all important operating trading platforms, including commodity exchanges for the sale of petroleum products, liquefied gas, and electricity, will be checked for price collusion and restrictions on access to trading.

Thus, large-scale work is to be done to comprehensively reduce prices in all commodity markets that are significant for the population.


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