Prime Minister Tigran Sarkisian on Thursday raised the alarm over rising inflation in Armenia and instructed the government to crack down on local companies abusing their de facto monopoly on imports of wheat and other basic foodstuffs.
According to official statistics, Armenian consumer prices rose by an average of 6 percent in the first four months of 2008, surpassing the government’s full-year target of 4 percent. The government and the Central Bank of Armenia already failed to meet that target last year, even if Armenia posted one of the lowest inflation rates in the former Soviet Union.
The consumer price index appears to have been primarily pushed up by the increased cost of key food products such as wheat, cooking oil and butter in world markets. Armenia is heavily reliant on imports of those products which have been monopolized by a handful of companies belonging to wealthy government-connected businessmen.
Echoing the opinion of many independent analysts, Sarkisian implied that the existence of those monopolies has been responsible for “very high” inflation in addition to global market trends. “Prices in the Republic of Armenia go up quite drastically but their subsequent decrease takes place slowly,” he told a weekly meeting of his cabinet. “Unfortunately, we have been unable to restrain inflation without state intervention.”
In particular, Sarkisian pointed out that the international prices of wheat and rice have fallen significantly over the past four weeks after months of rapid rise. He said government bodies must now make sure that there are corresponding reductions in their retail prices in Armenia.
“The government will keep this issue at the center of its attention, and we will in the first instance investigate and inspect those companies where the price level does not reflect international trends,” Sarkisian told ministers. “Especially when it comes to those commodities that are fully or partly imported from international markets.” He said that should be done not only by the State Committee on the Protection of Economic Competition but also tax authorities.
The committee already stepped in earlier this month to limit the knock-on effects of a 50 percent surge in the price of Russian natural gas for Armenian households and corporate consumers. Gas is widely used, liquefied and pressurized forms, by public transportation means and personal cars. The few companies selling it in the local market are also owned by government-linked entrepreneurs.
(Photolur photo: Tigran Sarkisian.)